Purdue University Global Breaks Even for the First Time in FY2021

One of the biggest stories in postsecondary online education before the pandemic was the partnership between Purdue University and Kaplan University, where KU was transferred to Purdue and rebranded as Purdue University Global (PUG) under a 30-year contract. The high-profile move, announced in March 2017 and finalized in late March 2018, converted the 30k+ university from a for-profit into a public nonprofit under the Purdue brand while turning Kaplan Higher Education into a single-client Online Program Management (OPM) vendor, which has since inspired other instances of what I called instant global campus movement.

Since that time I’ve tracked PUG and its financial and enrollment performance, noting its loss of $43 million and $21 million in 2019 and 2020 as well as the massive investment in marketing ($132 million in 2019). In June I shared how PUG was getting closer to breaking even based on FY2020 data.

With last week’s release of the Purdue University Financial Report 2021 (pp 85-86), we now see that PUG indeed hit a major milestone and broke even in FY2021. The “increase in net position” for that year was $4.3 million. There are a few accounting notes needed to understand the financial report.

  • Total revenues include Operating Revenues, mostly tuition, and Non Operating Revenues, mostly grants such as Pell and US federal Covid stimulus spending through Higher Education Emergency Relief Fund (HEERF). These items are separating for accounting reasons, but I’ve combined them further below in the post.HEERF stimulus funding for PUG was $10.1 million in FY2021, but all of that went directly to students. This means the revenues and expenses include this offsetting $10.1 million amount.

  • To understand how much PUG made or lost each yet, the Increase (Decrease) in Net Position is the key metric.

  • The Kaplan deal included a somewhat complex distribution waterfall governing who gets paid in what order, further complicated by past-due balances kept on the books from prior years. For this reason the Net Assets is a key metric as it includes PUG assets and liabilities, with the largest liabilities being past-due amounts owed to Kaplan Higher Ed.

PUG FY2021 Statement of Revenues, Expenses, and Changes in Net Position

Looking at revenues and expenses we see that PUG finally had higher revenues ($327m + $64m) than expenses ($432m), leading to the $4.3 million Increase in Net Position. That is the headline and it is significant. Essentially Purdue University’s bet that they could reverse the Kaplan University long-term enrollment decline (and associated revenues and expenses) by creating a nonprofit school attached to Purdue University is moving in the right direction. Breaking even albeit with Net Assets of -$43 million.

Looking deeper at enrollments of this school (Kaplan University prior to March 2018 and PUG thereafter) compared to other Global Campuses, you can see the reversal of trends in 2019 and 2020, meaning that the reversal was in place prior to the pandemic. We do not have IPEDS data for Fall 2021 yet, so this view lags the financial reporting.

Total enrollment over time for global campuses, showing reversal of trend for PUG

To get a simpler view of the financials over time, I have substracted out accounting details like depreciation, investment gains, and the offsetting HEERF funds and expenses, while focusing on the key metrics.

PUG revenue and expenses over time
PUG financial and cash position over time

Overall, PUG hit a major milestone with a $4.3 million Increase in Net Position, but from a cumulative perspective the school has $43 million of negative Net Assets due to past years’ performance.