June 2010

1. Putting All The Pieces TogetherAnalysis of Adult Student, Continuing Education, Online & For-Profit TrendsContinuing & Professional Education Learning CollaborativeOnline Higher Education Learning Collaborative June 2010

2. What is our focus? How do we judge success/value? Across CPE-LC and OHE-LC members- continuing education units, other entrepreneurial units at nonprofit schools, entrepreneurial nonprofit schools, proprietary schools and online active schools- the common market focus is the adult student The adult student may be defined in various ways, is composed of various overlapping segments, and some of the non-age characteristics that define this market apply to portions of the younger market, but is the most helpful common denominator to analyze certain dramatic developments of the past decade The bulk of this commentary is focused on the for-credit market, partly because that is where growth and change have been strongest, but also because for-credit market data is far superior to noncredit data. Similarly, it is difficult to call out “continuing education” data on the for-credit side The aim is to provide an integrated view of various trends that are rarely juxtaposed, but which together help clarify developments and meaning. Much of this data is presented for the first time How do we judge success/value? Enrollment numbers? Growth? Completion? Fit with society/economy? Graduate satisfaction? These are tough questions, but beyond “more students” the metrics are limited, which is certainly a vulnerability, and perhaps an opportunity

3. Overview • Part 1: Making Sense of it All (1987-2009)- adult students, demand, supply, for-profits, online, continuing education, economy, targets • Undergraduate trends • Graduate trends • Part 2: Projections to 2019

4. Explaining Adult Undergraduate Participation: focus trumps demographics; economy trumps focus Source: IPEDS, U.S. Census and Eduventures analysis Headline Growth- adult undergraduates aged 25-44 up 9% (1987-1997), and up 34% 1999-2009 Online- c.30% of the adult undergraduate market is 80%+ online (2009) Recession Focus is Key? Adult undergraduate participation is strongly counter-cyclical, even during 1990s demographic boost. For-profit/online focus on adults in 2000s sustained growth despite weak demographics. In 2003, the age 25-44 HE Participation Index finally began to rise, after c.15 years of stagnation. N.B. Given even stronger growth among traditional age undergraduates, the total undergraduate market has actually trended younger over the past decade

5. Adult Undergraduate Growth Driven Strongly by For-Profit Schools Public 4Y- peaked, in terms of share and absolute numbers, in 1995 Growth (Market Share) 4Y 1987-2009 Public= 7% (71% v. 50%) Private= 28% (26% v. 22%) For-Profit= 1715% (2% v. 28%) Malleability of demand. Post-2001, for-profit and some entrepreneurial nonprofit schools “uncovered” new demand, which was not consistent with demographic growth, nor eating into absolute enrollments among nonprofits overall. While socio-economic change must account for a portion of the movement, institutional focus on adults, plus desire to grow and high marketing spend explain the bulk of enrollment growth Source: IPEDS and Eduventures analysis

6. In most states, among nonprofit 4Y schools, adult undergraduate enrollment has not kept pace with target population States where nonprofit 4Y schools did reports faster than target population growth in adult undergraduate enrollment typically feature one or more large entrepreneurial schools- e.g. AL, MD. See map on next slide Source: IPEDS, U.S. Census and Eduventures analysis

7. “Distracted” by Traditional Student Boom? Outdone by competition? Public 4Y Schools- Adult Undergraduate Enrollment 1993-2008E Source: IPEDS, U.S. Census and Eduventures analysis Net Loss- 69% (35 states) Net Growth OR Net Loss below 25-44 population loss- 18% (9 states) Net Growth above 25-44 population growth- 14% (7 states)

8. Massive increase in adult undergraduate enrollment; impact less clear Source: IPEDS, U.S. Census and Eduventures analysis How much is enough? Given that the bulk of adult undergraduate growth took place post-2001, it is too soon to judge to full impact on degree attainment. The next 5-10 years will gauge full impact. The speed of enrollment growth may drive up attainment significantly, in line with federal and other goals, but pace of growth may mean some misalignment with economy/employer capacity, both real and perceived, to make appropriate use of adult graduate volume. Equally, the impact expectations of adult graduates themselves may be misaligned with immediate opportunities. Lack of clear completion data by age hampers assessment of the degree attainment impact of increased enrollment

9. Overview • Part 1: Making Sense of it All (1987-2009)- adult students, demand, supply, for-profits, online, continuing education, economy, targets • Undergraduate trends • Graduate trends • Part 2: Projections to 2019

10. Explaining Adult Graduate Participation- strong momentum from small base; power of institutional focus and counter-cyclicality Source: IPEDS, U.S. Census and Eduventures analysis Headline Growth- adult graduates up 20% (1987-1997), and 41% 1999-2009 Online- c.27% of the adult graduate market is 80%+ online (2009) Recession Focus is key? The age 25+ graduate participation rate has jumped by 56% over the past 20 years- far above 27% growth at undergraduate level- and consistently above target population growth. This also reflects the much smaller graduate base. As at undergraduate level, most momentum occurred post-2001, driven by for-profit/online innovation, counter-cyclicality and demographic boom feeding bachelor’s degree volume . Like undergraduates, the overall graduate market has skewed younger in recent years

11. Source: IPEDS and Eduventures analysis Strong adult graduate growth across all sectors; for-profit contribution to date much more limited than at undergraduate level Age 25+ Graduate Students by Control 1987-2009E Growth (Market Share) 1987-2009 Public= 31% (66% v. 50%) Private= 96% (34% v. 39%) For-Profit= 16,000% (0.1% v. 12%) Distinct Graduate Market- Adult and mainstream graduate market significantly overlap, graduate prospects are more sophisticated higher education consumers, academic status is more pertinent, and nonprofit schools have typically been more willing to experiment with online delivery. The graduate market is also significantly smaller and less attractively funded compared to undergraduate. This, plus the relative immaturity of the degree-granting for-profit sector have limited for-profit impact to date

12. Overview • Part 1: Making Sense of it All (1987-2009)- adult students, demand, supply, for-profits, online, continuing education, economy, targets • Undergraduate trends • Graduate trends • Part 2: Projections to 2019

13. Some important assumptions… The ideal intersection between bachelor’s and above educational attainment and socio-economic well-being is ultimately irretrievably obscure, and subject to a range of value judgments At present, and growing over time, popular/media perception, professional ambition and federal/state policy have mutually reinforced the general notion that additional education attainment is desirable Growing cost, non-completion volume and concerns about a mismatch between degree attainment and economic need continue to place strain on the model, but there is no sign that the model is likely to change significantly, let alone collapse At both undergraduate and graduate level, among adults 25+, bases for enrollment and degree attainment remain relatively modest, suggesting plenty of room for further growth In recent years, the sheer pace and scale of for-profit/online adult student growth, and consequent draw on public funds, has caused policy concern about value. Proposed “Gainful Employment” regulation may temper enrollment growth, but may also prove a healthy stimulus for innovation around student experience/outcomes evidence

14. Source: IPEDS, U.S. Census and Eduventures analysis Projection 2019- demographic boost; economic recovery will slow adult undergraduate enrollment; online/for-profits will sustain positive interest Online- by 2015, c.50% of the adult undergraduate market will be 80%+ online Pause for Fit/Value? Eduventures predicts that the adult undergraduate market will grow 21% between 2009 and 2019, slowing down from the 34% growth over the previous decade. This partly reflects a larger base, but also forecasts limits to sustained enrollment growth far in excess of growth in the target population and the capacity of the economy to appropriately absorb heightened undergraduate degree volume. How might value articulation/innovation improve growth? The next recession will provide a predictable growth boost. Online/hybrid will become the norm for bachelor’s completion

15. Source: IPEDS and Eduventures analysis Projection 2019- business as usual will see continuation of established patterns Age 25+ Undergraduate Students by Control (4 Year Schools) Growth (Market Share) 4Y 2009E-2019P Public= 5% (50% v. 40%) Private= 5% (22% v.18%) For-Profit= 94% (28% v. 42%) Business as Usual? These projections assume that online delivery and a somewhat more adult focus will enable nonprofits to modestly increase adult undergraduate numbers, but culture, focus and execution will, in aggregate, not impede for-profit growth. Also, traditional age student volume, while slowing somewhat in the coming decade in terms of underlying demographics, will remain more than robust enough to “distract” many nonprofit schools. These projections assume that for-profit focus/marketing will continue to uncover demand, value evidence will improve or remain ambiguous, and no serious regulatory impediment will arise

16. Source: IPEDS, U.S. Census and Eduventures analysis Projection 2019- smaller base, plus upward pressure from bachelor’s volume and demographic boost will limit slowdown as economy recovers Online- by 2015, c.50% of the adult graduate market will be 80%+ online Strong Growth will Continue. Eduventures predicts that the adult graduate market will grow 39% between 2009 and 2019, only slightly below 41% growth over the previous decade. This reflects a smaller base, and strong upward pressure from demographics and bachelor’s volume following the demographic/participation boom in traditional age undergraduates over the past ten years. More so than the larger undergraduate market, the adult graduate market should be able to sustain long-term strong growth, as graduate study continues to evolve as a differentiator among bachelor’s degree holders. The next recession will provide a predictable growth boost

17. Source: IPEDS and Eduventures analysis Projection 2019- Healthy future for all; nonprofit academics powerful Age 25+ Graduate Students by Control 1987-2019P Growth (Market Share) 2009E-2019P Public= 20% (50% v. 43%) Private= 33% (39% v.37%) For-Profit= 140% (12% v. 20%) Tougher Market? These projections assume that growing for-profit ambition, diversity and sophistication, plus heavy use of online delivery, will see increased proprietary share of the adult graduate market. However, unlike the adult undergraduate market, nonprofits, both public and private, will see strong growth in absolute enrollments, and maintain significant distance from the for-profit total. Entrepreneurial private nonprofit schools, plus greater online delivery by private nonprofits generally, will ensure a healthy combination of academic status and adult market fit, edging closer to the public enrollment total. Public schools will benefit similarly, as 4Y nonprofits generally find a powerful niche in the graduate market.

18. What might change these projections? Only more of the same? Focus/profit motive/online delivery/marketing has “uncovered” significant additional adult demand, particularly at undergraduate level; this strategy will continue to pay dividends, but must recognize it’s limitations Additional innovation- around student experience and outcomes/value- may be necessary to sustain rapid growth in the adult undergraduate market beyond c.2015 “Gainful Employment”- if this or similar regulation is passed, for-profit growth may be tempered, and nonprofits may gain; but medium-term scenario is for-profit price/value innovation that may ultimately enhance competiveness. Moreover, underlying need for commercial capacity will remain; and sector will likely re-bound as occurred after HEA 1992 curbed for-profits after rapid growth in 1980s Nonprofits Assets- nonprofits may be able to attain additional growth if assets (e.g. price, setting, curriculum, faculty, brand) are better articulated to the market Delivery Mode- More robust commitment to online/hybrid delivery, targeting both adult undergraduate and graduate markets, will sustain nonprofits Emergence of a genuine alternative to the 4-6 year bachelor’s and 2 year master’s- that addresses cost, completion and value challenges. Unlikely to scale past cultural/accreditation norms, but disruptive possibility. N.B. Eduventures estimates, based on NCES data, that the non-credit market within postsecondary education is very large- c.16 million unduplicated over 12 months (c.70% of the for-credit total)- but operates as a complement rather than genuine alternative to degree options

19. Final observations… The Future is Bright- in 2010, the adult for-credit market has unprecedented scale and energy- driven primarily by for-profits at undergraduate level, and all sectors at graduate level. Demographic boost from 2010 Goals- growth is in line with federal goals to expand higher education attainment- and the coming years will clarify the extent to which enrollment growth translates into growth in degree attainment. Hitting federal/Lumina goals is as much about retention as enrollment “Continuing education”, meaning adult-oriented programming in nonprofit schools focused on traditional age students, remains a major source of adult student capacity, but faces unprecedented competition and brand challenges Promise/evidence gap- all schools, and for-profits in particular for scale/visibility reasons, are advised to take seriously articulation/demonstration of value Online Growth- online will continue to characterize an ever-larger share of adult markets, particularly graduate. The coming years will see a clearer split between online and hybrid delivery, as national players seize the former to serve mass markets, and local/regional schools use hybrid to secure “local” markets by geography, and use online/place combinations to appeal nationally. Niche/national online programs will remain viable for some schools. Above half 80%+ online adult market share may require a step change in the online student experience. Significance of elite school moves online Many “under-served” markets remain- men, certain ethnic/gender combinations, international, noncredit. Potential for nonprofit/for-profit partnerships Innovation and growth go hand-in-hand. Online/for-profit status are mainstream, and not by themselves innovative anymore… what’s next?

20. Thank YouPlease contact: Richard GarrettManaging Director Continuing & Professional Education Learning Collaborative Online Higher Education Learning Collaborative Eduventures, Inc.101 Federal Street, 12thFloorBoston, MA 02110617-532-6081rgarrett@eduventures.com eduventures.com