Computer repair phoenix

IN October of 1997, the New Yorker ran an article about the University of Phoenix. The piece was titled "Drive-Thru U," and all the familiar markers of a university-library, bookstore, campus-appeared in quotation marks to denote that they weren't quite the real thing. The campus, the author James Traub marveled, was more like an office building or industrial park: an "outlet," school officials called it. The bookstore carried only textbooks. The library was "wherever there's a computer." And the university itself was a subsidiary of a for-profit company called the Apollo Group. Phoenix proudly billed itself as "the largest private university in the United States," but to most of the magazine's readers, accustomed to imagining higher education as pastoral and ivied, not as a publicly traded company, it was a dangerous interloper.

The University of Phoenix had already been an increasingly profitable operation for a generation when the New Yorker happened upon it. Wall Street knew and loved the company: Between 1994, when it went public, and 1997, when the story appeared, its stock price had risen from two dollars to thirty-five dollars. Since then, the numbers have only gotten better. In 2002, 134,000 students were enrolled at Phoenix campuses across the country and online, and the price of the stock continued to rise, defying the recent bear market.

Meanwhile, other, lesser known for-profit schools have also been expanding rapidly. The American Schools of Professional Psychology, operated by a company called Argosy, award half of all psychology Ph.D.s in the country. Strayer University, founded in 1892 and the oldest of these institutions, has been singled out by Forbes and Business Week as one of the two-hundred best small companies in America. Kaplan, a profitable division of the Washington Post, is best known for its college and graduate school exam-prep courses, but it operates a number of colleges as well. In 1998 it opened Concord Law School, the first entirely online law school. Despite the American Bar Association's refusal to accredit online institutions, Concord now has the largest law school enrollment in the country.

The new for-profits

Proprietary schools have been an American fixture since the seventeenth century, when they taught illiterate adults in New Amsterdam to read, write, and do arithmetic. But until quite recently almost all of these schools were small, independently run operations--derisively called "matchbook schools" since they advertised inside matchbook covers. The best among them taught a useful skill like cosmetology or auto mechanics. The worst have been diploma mills--phantom operations whose degrees are literally not worth the paper on which they are photocopied.

The New Yorker story brought to light a transformation in higher education that has been occurring for a generation. A new breed of for-profit schools has been emerging from the shadows, less marginal and less disdained than its predecessors. Unlike the conventional proprietary schools, these are multi-campus operations that offer online as well as traditional classroom instruction. While some give short courses--for instance, preparing students for the Cisco or Microsoft engineer-certification exam--for the most part they enroll students in degree programs, from the associate degree to the Ph.D. level. These schools are also accredited, which gives them greater legitimacy and grants their students access to federal loan programs.

The reaction to these developments has been cacophonous. The market-minded, who often deride universities as flabby places filled with slackers and ideologues, have enthusiastically welcomed the arrival of the for-profit universities, while traditionalist opponents churn out articles condemning the transformation of the hallowed university into a mere marketplace. Indeed, profit-making schools often carry a taint. When William Durden was named president of Dickinson College in 1999, the fact that he had previously worked in the for-profit sector of higher education--"the dark side," as some professors called it--set off alarms at that tradition-minded school. Similarly, Richard Ruch, a dean at the University of Phoenix, "confess[es] that until a few years ago I thought that all proprietary institutions were the scum of the academic earth."

Despite all the hyperbole about the end of higher education as we know it, traditional universities have little to fear from the newcomers. Economists such as Gordon Winston have pointed out that for-profit schools still represent only a small segment of higher education, enrolling barely 2 percent of the college-going population. And in a head-to-head competition, nonprofit institutions have the immense advantages of endowments and direct public subsidies. There is no reason to believe that top-tier schools whose endowments allow them to subsidize their students heavily will lose students to places like the University of Phoenix, which must make money from tuition in order to remain in business.

But this isn't the league in which for-profit schools want to compete. Instead, they largely target working adults--the MBA, offered evenings, weekends, and online, is the bread-and-butter course at Phoenix. Yet if this is not the academic war of the worlds, neither is it a tale of peaceful coexistence. Schools Like the University of Phoenix and DeVry University are in a fierce competition with community colleges, regional state universities, and private schools.

The DeVry difference

Begun in 1931 to teach film and radio repair, DeVry University is today one of the largest for-profit schools in the country. Its corporate heads, Ronald Taylor and Dennis Keller, have been a team since 1972, when they left the MBA mainstream, quitting fast-track jobs at Bell & Howell to start a business administration school in downtown Chicago for working adults. In 1986, they bought DeVry, which was then an 11-campus system, and took the company public in 1991. That move generated $10 million--and tied the fortunes of the business to the vicissitudes of the stock market.

Between 1991 and 2002, DeVry was a favored child of the investment community. Scores of business reporters at newspapers across the country sang the school's praises. Term after term, enrollment went up; year after year, profits went up. And though DeVry wasn't as spectacular a performer as the Apollo Group, which operates the University of Phoenix, it did very well on the stock market. The company ranks eleventh on Business Ethics magazine's "100 best corporate citizens list," which is based on how well a firm serves its employees, customers, stockholders, and the community.

In 2002, DeVry shares lost half their value due to the recession. Enrollment dropped an estimated 15 percent--something that hadn't happened in more than a decade--as prospective students became leery of high-tech careers, and their job-placement rate also fell, to 85 percent. "We are adapting," says Taylor, "placing technical people in non-tech-based companies." Despite the economic downturn, the school has continued its practice of adding two campuses a year. "If we were just motivated by the stock price in the short term, we could eliminate that growth, because there's a loss every time we open," says Taylor. "But we know there are cycles in engineering education. There will be a demand in the next few years, and we're positioning ourselves to meet that demand."

Among the for-profits, DeVry is second in enrollment only to the University of Phoenix. It has more than 50,000 students at 25 campuses in the United States and Canada, and annual revenues of $650 million. The institution, which is fully accredited, offers B.S. degrees in electrical engineering, telecommunications, and business administration. Its main rivals are regional public universities like Northern Illinois and San Jose State. Since DeVry is considerably more expensive than these schools (total tuition can run as high as $50,000 for some multiyear degree programs), in order to survive it must be superior--or, through its advertising and recruiting, it must persuade those whom it calls its "customers" that it offers a superior education.

"Reach for the sky, DeYry"

The TV commercials incessantly repeat the slogan: "Reach for the sky, DeVry." It's a cheesy message, complain students at DeVry's Silicon Valley campus in Fremont, California. (The campus administration handpicked a number of students to be interviewed for this article.) And it doesn't help that the ads run late at night, at a time when car dealers and bankruptcy lawyers are plying their wares. DeVry recruiters make a similar pitch, sitting in the living rooms of prospective applicants or talking with them on one of the 10,000 high school visits they make each year. "Come to DeVry for a career, not a job."