Strayer, Capella merger continues conversation about for-profit colleges

Strayer Education Inc. and Capella Education Company announced Oct. 30 the two for-profit universities will merge. This all-stock merger will result in the operation of both universities under the Strayer name. 

Robert Silberman, executive chairperson of Strayer, said in a press release that Strayer has admired Capella’s online education strategies for years. 

“We are delighted to have the opportunity to combine Capella’s capabilities with Strayer’s 125-year heritage of educating working adults,” he said. “This transaction will enhance our collective ability to deliver better academic outcomes, to more working adults, at more affordable prices.”

According to the press release, the merger will allow the two schools to increase the scale of their operations at a lower cost to students, allowing students greater flexibility to transfer credits between schools and cut costs for both Strayer and Capella.

Steve Gunderson, CEO and president of Career Education Colleges and Universities, a lobbying group that advocates for-profit universities, said in an email statement that Strayer and Capella are two of the more financially stable institutions within the sector. 

"This initiative speaks volumes to the economic realities facing many schools,” the email said.

For-profit universities differ from typical nonprofit universities in that they are owned by shareholders and thus must turn a profit in order to continue operation. These schools usually have some kind of national, rather than regional, accreditation. 

For-profit universities tend to be more expensive than non-profit universities, but their appeal is the accessibility to non-traditional students by offering more flexible programs, including more online options. 

For-profit universities faced strict criticism from the Barack Obama administration, but U.S. Secretary of Education Betsy DeVos has sought to loosen regulations on them. 

"Finally, we have an administration that is willing to look at these transactions on their merits, not based on ideological beliefs,” Gunderson said. 

The Associated Press reported the U.S. Department of Education is considering ending an Obama-era program that offers total forgiveness of student loans for students who were defrauded by for-profit universities that did not meet gainful employment criteria. 

“We are deeply concerned to see reports that the Department of Education may be considering a change in policy that would provide only partial loan relief for students who have been defrauded,” said Rory O’Sullivan, acting executive director of Young Invincibles, a nonprofit organization that advocates for economic justice for young people, in a statement.

A school is considered to have defrauded a student when that student has paid for a degree but the school has not met the three criteria for gainful employment — putting the school at risk for loss of Title IV funding and accreditation.

A school has not met these criteria if less than 35 percent of its student borrowers are able to pay back their loans, if the ratio of the typical graduate’s debt to income is over 12 percent or if the ratio of the typical graduate’s debt to their discretionary income is over 30 percent. 

Graduates of the now defunct Charlotte School of Law in North Carolina are currently confronting this situation. The school lost its law certification last year, but students are still saddled with thousands of dollars of debt. 

"These students often have few job prospects despite owing thousands in debt," Sullivan said. "Getting relief from their loans may be the only lifeline that allows them to get back on track."

@MitraNorowzi

state@dailytarheel.com