September/October 2011 The College For-profits Should Fear

By offering adults an education that is faster, cheaper, and better than the likes of Kaplan, Phoenix, or Capella, the nonprofit Western Governors University just might eat their lunch.

By John Gravois

Western Governors, by contrast, found its model particularly well suited to degree programs that feed directly to an official test of proficiency, such as the Praxis national teachers’ exams. Such external tests dovetail naturally with the school’s system of competency assessments, and in some cases are essentially folded in among them. For example, before he graduates with his MBA in human resources, McKinnon—the North Carolina expastor— will have to pass the national human resources management certification exam. In an online education sector plagued by accusations of low quality, Western Governors can show that its degrees are backstopped by the official guardians of various professions. (It also helps that WGU students tend to score higher than the national average on such professional exams.)

Western Governors attracted students at a steady clip through the mid- and late 2000s—but so did everyone else in the online degree bazaar. The economic crisis of 2008 and the ensuing waves of unemployment were pushing ever more Americans into the market for “retraining,” where a gold rush was on. As public television’s Frontline pointed out last year, some of the for-profits were spending more money on advertising than retail giants like Tide detergent and Revlon cosmetics. Western Governors enjoyed better press than its competitors, but as a nonprofit institution with a modest marketing budget it remained a relatively quiet presence.

Then, in 2009, with the arrival of the Obama administration, the earth began to shift under the for-profits’ feet. After a decade of regulatory inactivity under Bush, Washington began to focus a widening beam of scrutiny on the industry, whose business model had increasingly come to consist of vacuuming up federal student loan dollars with little regard for the academic success of the students who brought them. In 2010, for-profit schools derived three-quarters of their revenue from federal grants and Title IV loans. Though for-profits accounted for just 9 percent of the nation’s enrollments, they attracted 25 percent of the available federal aid money— and wore out plenty of shoe leather doing it. News accounts, most notably by Bloomberg’s Daniel Golden, described for-profit college recruiters bringing their hard sell to casinos, homeless shelters, and military barracks that housed veterans suffering from traumatic brain injury. To many observers, their practices were reminiscent of nothing so much as the tales of subprime mortgage brokers circa 2007, hustling lower-class Americans into adjustable rate loans for houses they couldn’t afford. (See “The Subprime Student Loan Racket,” November/ December 2009.)

2010 was a year of reckoning for the industry. In April, President Obama’s deputy undersecretary of education, Robert Shireman, gave a speech comparing for-profit universities to the Wall Street firms that had brought down the economy, and the stocks of Apollo (Phoenix’s parent company), DeVry, Strayer, and others dove promptly. That summer, Senator Tom Harkin of Iowa, the chairman of the Health, Education, Labor, and Pensions (HELP) Committee, called a series of withering hearings stressing the for-profits’ dropout rates, their accelerating loan defaults, and their degrees’ shoddy performance in the job market. Among those who testified was the hedge fund manager Steve Eisman—who had served as the bluff, de facto hero of Michael Lewis’s nonfiction account of the financial crisis, The Big Short, because of his prescience about the subprime mortgage market. “Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive as the subprime mortgage industry,” he began. “I was wrong.”

The chief regulatory threat to the for-profits coalesced in the form of something called the “gainful employment rule.” The federal Higher Education Act states that, in order to be eligible for federal aid money, career-oriented schools must “prepare students for gainful employment in a recognized occupation.” And so the Education Department set out to define “gainful employment” as a ratio of student loan debt to income. If students weren’t earning enough in the workforce to service their debts after leaving a school, the idea went, then the school should not be eligible for aid. The very premise of the rule shook the foundations of the for-profits’ business model. Their stocks dropped to four-year lows. New enrollments started to plunge as waves of bad press reverberated through the market, and as schools began reengineering their models away from the old boiler-room recruitment schemes. The entire industry was suddenly pitched against a ferocious headwind.

Western Governors, however, continued to grow. The school’s enrollment was verging on 25,000 students— up from just 500 in 2003—and its yearly revenues had climbed from $32 million to $111 million. And if 2010 was the worst of years for the for-profits, it was among WGU’s best—not least because of a remarkable announcement made by Indiana’s governor, Mitch Daniels, that June. With the stroke of a pen, he declared that he was creating a new state university: WGU Indiana.

With a decimated manufacturing sector, high unemployment, and college completion rates trailing the rest of the country, Indiana was desperate to graduate more students. (Hand-wringing about the value of a college education aside, the numbers are clear: bachelor’s degree holders earn $20,000 a year more, on average, than high school graduates, and enjoy 50 percent lower unemployment.) Daniels saw WGU as a way to expand the state’s raw higher education capacity, and also to catch Hoosiers who had dropped out of college years ago, giving them a clear route to finishing their degree as working adults. In practice, the creation of WGU Indiana was a wave of the legal wand; it simply meant that students could apply state financial aid toward a degree at Western Governors. But the deal also gave the school the credibility of state backing, along with some free TV spots featuring Governor Daniels himself. Enrollment in the state immediately shot up to twenty times the rate in the rest of the country. And for its part of the bargain, Indiana paid almost nothing. Startup costs for the venture were covered by the Gates and Lumina foundations.

A few months later, the state of Washington signed on to a similar deal, creating WGU Washington. Rumors of talks with more states followed.

Suddenly, WGU had begun playing a role not unlike the one it was designed to play. The economic crisis of 2008 reduced public universities to exactly the circumstances that members of the Western Governors Association had feared in 1995: with state budgets in high distress and populations surging, many universities are capping enrollments, and most are passing more and more of their costs on to students. Western Governors was launched with a set of $100,000 down payments from the states in the Western Governors Association, plus an infusion of $20 million from the federal government and $20 million from industry donors in the private sector. Thus, for a little over $40 million—or the price of a nice new building on a single campus— Western Governors is providing states with a low-cost means to satisfy demand for higher education. “WGU was developed by states, for states,” said a very pleased Mike Leavitt in a recent interview, “for just exactly this type of circumstance.”

John Gravois is an editor of the Washington Monthly.


  • George on March 12, 2008 8:22 PM:

    does WGU accept students right out of high school ?

  • Texas Aggie on August 29, 2011 1:35 PM:

    What do they do for those courses that require hands on experience? What about those courses in nursing that require knowledge of how to set up an IV drip, do injections, etc.? Or student teaching experience? And I imagine that in information technology there are requirements for actually being able to do hands on stuff?

  • John Robinson on August 29, 2011 2:56 PM:

    Hey there, Texas Aggie, that's a great question. I presented that dilemma to the admissions office when I contacted WGU, and the university has representatives all around the country. Someone will be present for a majority of my student teaching, and also in constant communication with the teacher(s) that I will be interning with.

  • In the Know on August 29, 2011 2:58 PM:

    Good question, Texas Aggie. Students at WGU do have hands on experience. For example, in the teacher's college, the students have to do demonstration teaching in the classroom (WGU has partnerships around the country to facilitate that). Nurses also have hands on practicums in hospitals around the country. These hands-on opportunities are required for proving competency and are the reason why WGU's individual programs have accreditation. You specifically asked about I.T. as well. In those programs, students have to not only do lab simulations and hands on projects, but they have to pass very difficult industry certifications by Microsoft, Cisco, CompTIA, CIW, etc. to pass courses.

  • tom abeles on August 29, 2011 5:11 PM:

    It's not just the "for profits". Remember that Phoenix started out with only adult learners. Today both Phoenix and DeVry now package high school courses which they deliver to charter schools and other public schools which do not have enough students to hire their own teachers. And they delivery in a cost effective manner.

    The other factor is that the "For Profits" are profitable which means that they have room to compete against the traditional institutions and the flexibility to adapt to models like WGU faster than traditional universities burdened by infrastructure and/or external policies as any mature industry which has difficulty in adapting to competition.

    The medallion institutions, like designer clothes, sell a different product/service. But the public, non-research I or high ranked institutions, are the ones who need to worry as more states, like Indiana, invite WGU to become the equivalent of a "state" university.

    Additionally, there is competition from other quarters such as Straighterline or the equivalent of the University of the People. Or, internationally, from the Open Access courses now recognized for credit by internationally recognized universities.

  • BDB on August 31, 2011 11:37 AM:

    what about the community colleges?

  • Ron Mexico on September 01, 2011 8:44 AM:

    The WGU model does sound interesting, although I'm not surprised that someone could test out of a bullshit course like Business Ethics. If the only purpose of higher ed. is to serve corporate interests, I'm sure there are many "inefficiencies" that could be eliminated along the way.

    Also, Illinois has not had a governor in living memory who knew shit from shinola, much less could be relied on to determine which academic programs were "underperforming." Usually that's politician-speak for "subjects I stunk at in college or for which I can see no useful purpose." Perhaps other governors are more enlightened?

  • Ron Mexico on September 01, 2011 8:48 AM:

    To add, I've taught hundreds and hundreds of students the modern US history survey, and have had 1 (!) student who might have been able to test out.

  • Eli Rabett on September 01, 2011 11:24 AM:

    Empire University, a branch of SUNY has been doing this for over 30 years


  • Barbara on September 01, 2011 11:33 AM:

    I am a big proponent of more effective and efficient vocational training whether in addition to or instead of traditional university education. I have no opposition to WGA, but I think it foolish to present it as monolithic alternative -- the pastor who is going for the MBA knew so much about ethics because he learned it in his prior college experience. Likewise, the mentors available to WGA students are "subject matter experts" that are available. I have no doubt that they are graduates of 4-year college programs, and likely beyond. I talked with an instructor at a for-profit psychology program (psychology has credentialing exams, so fits this model), and his pedigree is what you would expect. The real issue here is how to provide desperately needed vocational training, especially to those who are in the position of needing to change careers or accommodate family life.

  • Phodphad! on September 02, 2011 1:22 AM:

    You should also see an educational networking site in India which brings college experience online phodphad.com

  • Gregory on September 02, 2011 4:53 AM:

    Indira Gandhi National Open University is another good example.
    Content matter experts write courses, they are delivered online and through a satellite TV station. When practical skill components are required by students or exams that require invigilation they are scheduled in hired halls in various cities and facilitated by some of the 1800 staff. They also have 3.5 million students.

  • petrova on September 02, 2011 10:43 AM:

    Who writes WGU's content? I hear it's a textbook company. What implications does that have? More standardization, maybe, what else?

  • Kaz on September 02, 2011 1:05 PM:

    The WGU model seems (from the picture painted in this article) like a great option for "non-traditional" students, and perhaps even some traditional-aged (18-22 y/o) students. I do not see where this article is trying to claim that the WGU model should be a replacement for all higher ed, but certainly the WGU model should be considered a viable competitor in the online education market from which the many, many people looking for a new degree can choose. Many brick-and-mortar colleges & universities have been offering distance-learning for quite a long time (20 years or more in some cases). WGU has taken their model and flipped it. Good for WGU.

  • Barbara on September 04, 2011 9:22 AM:


    Because my brother needs to switch career course as an adult, I looked at WGA's website and I quickly discovered the "secret" to its success: at least two of the tracks require that you already have a certification or a job or a degree in the field (in some cases more than one of these) -- and those are IT and health care. So if my brother wants to get even the "lowest" health care degree available from WGA he just has to figure out how to get a job in the health care field before being admitted. For IT, he has to be employed as an IT professional, have an associate's degree or some sort of current IT certification that they deem acceptable. If my brother had these things he wouldn't be unemployed.

    Maybe this is necessary for success, but to say that WGA is going to give other models a run for their money, be it the for-profit or the four-year traditional models, is, to say the least, quite misplaced.

    That the article didn't mention any of this makes me wonder if it did anything other than read the college's press releases. Come on: the degree to which WGA depends on its students having already navigated existing educational and career pathways is a GLARING omission.

  • Teachers Paddle on September 05, 2011 12:08 PM:

    Who teaches these courses, designs content of a particular course, and assesses the academic work of students?? How are the instructors compensated? What is a typical salary/benefit/job description?? All this article mentions is "mentors" and tests.

    I cannot fathom how this is a challenge to the state research university. However, WGU competes with vocational training, community colleges and a few distance education programs at traditional universities. classes off. But I cannot see how governors can postion this model as an alternative to the state research university.

    And I resent the framing of tenured research professors or defenders of humanities programs as out of touch snobs. The level of research experience and thoughtful pedagogy to offer advanced, professional training comes with a price: the price of good instruction.

    Finally, the governors are doing the public a great disservice for touting this model at the expense of the humanities. I can see the value of strong distance education in some fields. But Silicon Valley execs were just lamenting the lack of humanities experience in their undergraduates.

    Design an institution fully on a business model, and you get a very very narrow definition of what it takes to demonstrate 'competency.'

  • Barbara on September 06, 2011 9:27 AM:

    Teachers Paddle, look at the website and you will find as I did that WGU more or less expects and in some cases demands that its students already have gone through those "traditional" kinds of educational settings that this article demeans. I mean, this article is seriously misleading about what WGU is and who it can benefit. If WGU is the future then those who really do need the benefit of a low cost but rigorous voc-ed program that doesn't completely shortchange liberal arts should just lay down and die or look for work in the restaurant field or something, because their interests are not being considered by WGU.

  • Shelly on September 06, 2011 10:11 AM:


    I've been looking at WGU precisely because I already have a "job" in the IT field. I am a self-taught, self-employed website designer working from home. I support myself. But that is getting tougher to do everyday, and most job listings for IT-related work requires a bachelor's degree. WGU is more for people like me than for people like your brother. It isn't there to replace liberal arts colleges, but to help people who need a boost into the job market.

  • Barbara on September 06, 2011 10:33 AM:

    Shelly, yes, that is obvious, but you would never know that from this article. As I try to help my brother navigate what is available, I realize why so many people make such apparently inexplicable decisions about career training at for-profit colleges. There is literally NOTHING in the way of good information that helps to compare programs and educational opportunities. This article, which professes to provide information on an "alternative" institution that "really works" just adds to the misinformation, in my view. It just devoted untold resources to ranking four year institutions but seems content to get by with cut and paste jobs on the real, gaping hole in American education, and that is vocationally oriented education that isn't a scam or a complete waste of time and money.

  • Shelly on September 06, 2011 10:38 AM:

    Pardon me, I should have said it isn't there to replace vocational-technical schools, but to help people who need a boost into the job market. I thought the article was very clear about WGU's target market, people who already have some college or some training and who need certifications or a degree to advance their careers. It is what it is. A student who wants a liberal arts or a vocational technical education should look elsewhere. Neither the article nor WGU's website are misleading.

  • Shelly on September 06, 2011 10:42 AM:

    Hi Barbara,

    My 'pardon me' paragraph sounds snippy coming under your reply. It was intended to show up under mine.


  • Barbara on September 06, 2011 11:13 AM:

    Shelly, my brother has a four year degree from a highly regarded liberal arts university. He is well-educated. He has worked in a variety of jobs, mostly construction oriented, but including stints in some unusual settings.

    The article is VERY misleading. It says, and I quote: "the college for profits should fear." Why would for profit colleges fear a model that is so specific and picky about what students it wants to assist? Starting off by demeaning four year colleges just compounds the bias. If enrollment is declining at for-profits it is because for-profits are failing to deliver what they promise, not because WGU is offering an alternative that better meets the needs of most of the students that for-profits are serving.

    WGU is a narrowly focused institution that uses prior success as a proxy for selecting students. No other institution that serves a greater range of students needs to fear anything about it.

  • Chris on September 06, 2011 5:33 PM:

    Barbara, I think what is confusing you is what the author means by "for-profit" schools. These are not your community colleges or typical four-year institutions, but rather the U of Pheonix, DeVry, Kaplan, etc., who would offer your brother the same piece of paper at the end of it all, but with an enormous amount of debt. Especially when you look at the graduate-level programs. That is the market that should be wary of the WGU model, not Washington State University or Lewis and Clark.

  • Norm on September 07, 2011 10:13 AM:

    "The demand for higher education, after all, is as stronger than ever."

    Looks like the demand for basic proofreading, too ;)

  • Barbara on September 07, 2011 12:37 PM:

    Chris, I am not confused. The for-profit colleges offer many of the same degrees as a variety of other trade and technical institutions, including WGU for, as you say, a lot more money. Arguably, however, they don't show ENOUGH discrimination in selecting students, and will pretty much admit anyone, however unprepared or likely to fail or at least not benefit from the degree, if they should be so lucky as to receive it at all. This leads to unjustified debt for those who cannot benefit, and it leads to a highly devalued degree for those who were prepared and did benefit from the experience. Economists have, for years, known that one of the primary roles that elite colleges play is as a filter -- a signal to employers and others that students were competitively selected vis a vis their peers. Maybe the filter is too harsh -- but without any filter, for-profits are disserving their students as well because the variability of graduates is just too great.

    WGU bypasses the high failure rate by selecting for candidates that, essentially, already have certifications, degrees and professional experience -- that is, as another poster said, WGU gives students a marginal boost (and that margin might count for a lot for a given individual). Which leads to two conclusions: WGU simply cannot be what it is WITHOUT community colleges and four year institutions that do not by and large, use the same rather extreme filters WGU does in selecting students.

    Furthermore, for-profits have very little to fear from WGU's business model because most of the students they take in would never even qualify for admission at WGU. This leaves a tremendous gap for people who truly need training. No matter what this article says, WGU isn't the answer, not as currently structured.

  • Shelly on September 07, 2011 6:20 PM:

    You may not be confused, but you certainly are confusing. It's hard to pick out your actual beef. WGU is not for "people who truly need training". It is for people who need proof that they have training so that they can compete in the job market. It is not for your brother, the well-educated fellow with the four-year degree from the highly regarded liberal arts university who wouldn't be unemployed if he had vocational training. You seem to be frustrated because the article doesn't address your needs. Rather than get so worked up about it, go check out your local community college.

  • Barbara on September 08, 2011 8:05 PM:

    No beef with WGU. Beef is with this highly misleading article. Maybe you should check out your local community college and see how many have been cut to the bone.

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  • Joey on November 09, 2011 10:18 PM:

    WGU sounds like it has particular values to offer certain people. Nothing wrong with that, especially if it can accomplish it cost-effectively.
    My problem with the article is that it is one-sided. It appears that the story is "WGU vs. the world." That's just not accurate. WGU has some advantages, but this is not a B & W issue. Not only does the article not provide a balanced view of what WGU is, it completely fails in describing what other alternatives are. That's a serious disservice to readers.
    My comment to the author: when you're ready to tell the whole story, I'll give you another shot. Until then, I'm seriously resenting the 15-20 minutes I spent reading this one.

  • Benji on January 23, 2012 2:26 PM:

    Barbara, you are completely lost-in-the-sauce. There is nothing, whatsoever, misleading about this article or about WGU (which you VERY incorrectly referred to by you as 'WGA' after supposedly reading a six (6) page article about it.

    WGU clearly lays everything out on the front end. There are no surprises. A simple call to their admissions councilors walk the prospective student through all that is required and what you will receive.

    WGU is NOT out to supplant research universities. They are filling a niche that is underserved in the US: 36+ students who did not complete their degree the fist time around.

    It perplexes me how so many people who went to traditional schools and claim to know so many negatives about the WGU model...particularly the lack of critical thinking it offers (which, in fact, it does)...without knowing anything about it other than what they read in an article and a quick perusal of wgu.edu. Stunning.

  • Keith on May 14, 2012 6:40 PM:

    I was accepted in to WGU without prior college experience. I had to get a waiver from admissions and was told the intent(which I believe..btw)is that they wanted me to succeed in the program. They have been completely helpful, straight forward, and honest in all my dealings with them to date. I love this school and the opportunity it's affording me.
    The "for profits" should be scared...Traditional universities should be scared...WGU's model may not replace those institutuions, but they have people thinking out of the box about higher education.

  • Crystal on June 27, 2012 4:07 PM:

    Im a WGU SPED Teaching Student. TO answer some questions I saw. For hands on experience such as nursing clinicals or student teaching WGU works with you to find placement in facilities in your area. They find you a school or hospital to do your hands on work at and a nurse or teacher to supervise you. The supervising nurse/teacher has to fill out forms and reports and speak over the phone with your course mentors to monitor progress. Its just like with any other college.

    Barbara, for the record WGU accepted me and I have NO degree/ certification. I do have experiences taking online classes from my local community college while my family was overseas. WGU has a long screening process to determine if the college is the right choice for you. If the intake coordinator talks to you and looks over your intake testing scores and determines you are not a good fit, you wont get in.

    I am highly competent in my area of study and work hard to accelerate my program. WGU does not make it easy to accelerate. I have to prove through papers and exams that I know the content of course before I pass. If I cannot prove I know my stuff I dont get to piass the class til I do. Now, I have some classes such as Statistics and Probability that I passed in in 2 weeks. How? I am a whiz at math and love such problems. But, Natural Sciences has me at 6 weeks already and I am no where near being ready for the final. I take the quizzes and continue to study pages and pages of notes covering the 16 modules in INC1 til I feel I am ready. Then I take a preassessment to determine if I am REALLY ready. IF I pass the Pre-A, then and only then can I attempt the final.

  • Western Governors University on July 21, 2012 2:56 AM:

    I am wondering, what's happening there. Experience is the key to success, until unless a person got enough experience how can he become successful.
    I will be joining WGU in the next month.

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  • Jennie on November 29, 2012 4:28 PM:

    As a future student of WGU I suppose I am a bit biased. But I have done extensive research to determine the viability of this option for myself. I have found that for me, it makes sense. About twelve years ago, I began taking general courses at a community college with the intent to transfer to a 4-yr state university. My declared major was elementary education. I wanted to be an elementary teacher. However, after the birth of my son, I decided to stay home and raise my children. They're only little once. Now, my youngest is six years old and in first grade. The credits I earned will likely transfer, although I am still waiting for the review of my transcript to be completed. I had a 3.9 GPA so grades will not be an issue. I have 23 credits. The area I am in would make traditional college difficult but not impossible. But the real bottom line is this: Why should I sit in a classroom for a required number of hours when I can learn in half the time due to different experiences than the average student? I have three children. I have been a licensed foster parent, which required some training. I have been through an adoption, which required some counseling. Basically, I have more knowledge of children and what works than my would-be 18-20 year old peers. For that reason, shouldn't I be able to progress at a faster rate? The fact that WGU is accredited by NCATE, which is on the national level, a true distinction valued by employers makes it a solid choice that I feel I can make with confidence. That's just my .02 and maybe it will help someone. I start January 1, 2013.

  • ThisGuy on June 17, 2013 12:46 AM:

    I find it interesting that the people talking about WGU only admitting students with extensive certifications and/or experience--while a valid concern--apparently haven't actually read the website.

    The IT requirements, for example, list many things, but as single pre-requisites to admission. You don't need certifications AND programming classes AND years of experience AND...etc. You need one, any one, and a demonstrable ability to complete the coursework.

    WGU is an intriguing option, and I am glad it's there. The for-profit colleges have been allowed to be far too predatory, for far too long.