The Shifting Impact of Regulatory Activities Targeting Online Education

The shift to nonprofit providers by looking at enrollment trends

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Last week I wrote about online learning increasingly becoming a focus of regulation by the US Department of Education (ED), its activist allies, and other regulators, including states and accreditation agencies. Not just OPMs and for-profit institutions, but online learning in general. One of the questions I got from a reader was about the extent to which this regulation activity is focused on nonprofit institutions as opposed to for-profit colleges and universities.

Phil is planning a post on the new regulatory proposals and what insight they give into the problems that ED perceives and its intentions, but first I can comment on the likely impact of this regulatory focus. The short answer is that if you look at fully online enrollments, the impact of the regulatory activity in question will be far greater on nonprofit institutions than on for-profit universities.

Where online learning is provided

Historically many people tend to associate fully online students with for-profit universities (for example the University of Phoenix). But this is an assumption not based in fact, at least not for the past decade or so. Over this time frame, the nonprofit sector has had more fully online enrollments (also known as exclusive distance education enrollments), and these enrollments trends are diverging - nonprofits up, for-profits down.  

These trends are shown in the chart below, with total enrollments by institutional control (public, private nonprofit, and private for-profit) from Fall 2013-2019, broken down into undergraduate and graduate programs. A quick note about data. In the charts we created below, we used data from 2013 to 2019. We have not included data from the pandemic years 2020 through 2022 (even though they are available) as these data are not reflective of longer lasting trends. Phil will have a post with the new Fall 2022 data early next week.

The differences between the trends in nonprofit institutions and those at for-profits is much closer for graduate programs than for undergraduate programs, but in both cases the absolute numbers of students studying fully online at for-profits have gone down. From 2013 to 2019 the number of undergraduate students in for-profit institutions went from 613,337 to 408,361. Over the same period, the number of graduate students studying fully online at for-profits went from 228,830 to 207,691. During the same time period, the fully online enrollments at both public and private nonprofit institutions continued to rise.

It is also worth bearing in mind that offering fully online programs is widely distributed in the nonprofit space and that distribution is itself becoming wider as more institutions begin to offer fully online programs. There are certainly a set of large providers like Southern New Hampshire University, Arizona State University, and the University of Central Florida, but there are a vast number of smaller providers including a growing number of community colleges.  

Change in fully online students over time

To get a sense of the dynamics of that change, it is interesting to look at Year Over Year (YOY) changes in enrollments of fully online students by institution type. The chart below shows the change in fully online student numbers by institution type for the same years 2013-2019, this time combining undergraduate and graduate programs.

From 2013 through 2018 the number of students studying fully online grew at both public and private nonprofit institutions while it fell in for-profit institutions in all but one year (2019) when for-profits saw a small YOY increase.

The charts tell us some additional interesting things beyond the overall shift from for-profit to nonprofit. Fully online enrollments at nonprofits are growing in absolute terms faster than for-profit fully online enrollments are shrinking, meaning that what we are seeing is the growth of the online space in addition to shifts in sectors. The variability of the YOY changes is also interesting. Neither the size of growth of online enrollments at the nonprofit institutions nor the shrinking of enrollments at the for-profit institutions is smooth or predictable, instead it’s bumpy. To me this indicates that there are several factors affecting these enrollments on top of broader trends in favor of fully online programs and growing awareness of problems in the for-profit sector. It suggests that there are specific events that triggered a surge in enrollments or a decline. On the side of the declining enrollments in for-profits these are likely to include closures in some large for-profits as well as regulatory actions against for-profits by the Obama administration.

Impact of enrollment growth and declines

The changes in fully online enrollments have different impacts on the nonprofit and for-profit sectors. The for-profit space was an early mover in online learning, and it constitutes a far larger proportion of its student body compared to private and public nonprofits, as shown in the NCES charts below.

Given the heavy reliance of for-profits on fully online students, the shift of fully online students toward nonprofits is likely to have a big impact on institutions within the for-profit sector. The University of Phoenix is a useful example here. In 2010 that university had an enrollment of 460,000 students.  By Fall of 2020 that number had fallen to 89,000. Since then, there have been moves to sell the university, first to the University of Arkansas and more recently to the University of Idaho.

The shrinking of for-profits is of course not only due to changes in fully online students. It is interesting to look at the example of law schools. These constitute a very small n, but a pure one as until recently there were no fully online law students (at least at the JD level). At one point there were six for-profit law schools. Currently only two remain, the rest having closed. Of the two remaining, one is in the process of converting itself to a nonprofit. These changes were a consequence of reduced demand and accreditation challenges. More broadly in the sector, increased regulation will no doubt place an additional burden on for-profit institutions.

Even though online learning is a smaller part of the nonprofit sector, as I discussed recently, some institutions have come to rely on fully online students as an important source of revenue. Given funding realities this is not likely to change soon, and I predict that absent debilitating regulatory changes, more nonprofit schools will enter and expand the fully online space in pursuit of either revenue or to increase access or some combination of the two.

Parting thoughts

As I mentioned, Phil is planning a post for next week looking more directly at recent regulatory activity, how that is targeted at online learning in general, and some likely implications from these actions.

any new regs on online learning will primarily affect large numbers of nonprofit providers and not be limited to for-profits.

From Harvard to Central Piedmont Community College and everything in between, fully online learning is an important and growing part of most nonprofit college and university portfolios. The answer to the question in terms of impact is that unlike Gainful Employment, recent regulatory actions are aimed at all institution types, and unintentionally or not, the impact on nonprofit institutions will be larger than at for-profit institutions due to the size and enrollment trends of various sectors.

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