A New Normal, A College Undone By Greed

Concordia University in Portland is closing.

There are a few “Concordia”s out there. This is not the unaccredited diploma mill that awards degrees based on life experience. Or the for-profit nursing school. This one in Portland is, was, an accredited degree provider with a fairly long history – a private, non-profit Christian college affiliated with the Lutheran Church out of Missouri.

That’s what the school is.

What the closure is not, is evidence of the coming apocalypse of college closures. That probably is not going to happen at all and, even if it did, this isn’t related. Like most of the college closures that have happened in the past few years, it’s an anomaly.

If you needed to squeeze the Concordia closure into a trend, it’s that Concordia is a religious school. More than half the colleges that have shuttered since 2016 are religious schools. But that was not Concordia’s undoing.

Instead, as this outstanding reporting by The Oregonian lays out, the school was eaten alive, devoured from the inside by a for-profit company it hired to run its online programs.

The Oregonian report is worth reading but here are some highlights. School leaders “bet the college’s future” on a deal with a company called HotChalk. In the deal, HotChalk would manage many, even most, of the details of the college’s online programs, specifically their graduate programs in education. Things such as marketing, recruitment, enrollment, course design and delivery would all be handled by the outside company. In exchange, HotChalk would get a cut of the tuition revenue.

According to The Oregonian, things were going well for a time but when growth slowed, the bills to HotChalk – “tens of millions of dollars” – kept coming. The school paid the company $62 million in 2014, representing “nearly half of all tuition and other revenue” the school took in, according to the paper.

Had the school not closed, by 2024, Concordia would have been able to keep just one of every three dollars it took in. The rest would go to the private, for-profit company. An internal college document said the school could owe HotChalk $400 million if it closed or broke the agreement, The Oregonian reported.

That this school was essentially forced into bankruptcy by greed is tragic.

But the problem is that hundreds and maybe even thousands of other schools have similar, perhaps even more onerous deals, with similar companies. Even many public schools are sharing revenue with, shoveling hundreds of millions of dollars to private, for-profit companies to “manage” their online programs.  Some of those agreements call for the private company to take 50, 60 even 80% of student tuition.  

Not too many years ago, these deals between colleges and online program managers (OPM) were raindrops in a downpour. The rush to get college online was highly competitive and a handful of companies came in, offering turn-key solutions with zero investment. They’d run everything, even find the students and float the money for ads in exchange for a commission over ten, even twenty or more years. That these companies were driven by profit was sold as a good thing. Since they shared the revenue, they’d be highly motivated.

These OPM contacts have diverted literally billions of dollars every year from federal education funds and student tuition payments into private dividends and venture capital returns.

At HotChalk, for example, three of the six “senior leaders” listed on its website previously worked for Apollo Education, owner of the infamous for-profit, largely online, University of Phoenix. One of those was former President at DeVry University, another for-profit college that, like University of Phoenix, has seen its enrollment shrink and reputation battered. Most of the non-Apollo leaders have close ties to Bertelsmann, which invested $230 million in the company in 2015.

In the years since the online college land rush, as the wave of online students crested, these old contracts have driven up the cost of online learning and cost colleges fortunes in lost revenue.

It was all alarmingly predictable.

Which brings us back to Portland’s Concordia. Much of the heartburn over the closure there has been focused on the decision by school leaders to move ahead with a local fundraiser when they knew the school may close, to wait until after the ‘drop’ deadline to tell students, to have handsomely paid administrators while the school cratered, and to have signed such a bad deal with HotChalk in the first place.

On most of that, fair enough. But the deal with HotChalk was not a “bad” deal in terms of terms. It was not unusual at all. What was bad was signing a revenue-sharing deal with a for-profit company in the first place.

HotChalk is a for-profit company, it cannot be blamed for trying to make money.  But the school should have known better. When investors showed up offering a deal that sounded too good to be true – unlimited growth, lower costs, no up-front money – the Concordia sin was not seeing that it was.

And here, Concordia is by no means alone and probably will be only the first to college to be undone by the shared greed of rushing into online education with profit-motivated partners. There is no question that other schools are being bled as badly, or worse. Now that the private companies have cashed their checks, the Concordia students and community will pay the price.