The Chronicle: The Big Asset Was Accreditation: How a Company Gained Instant Legitimacy When It Bought a College
Two years ago, a group of Texas investors went looking for a college to buy. They planned to dismantle most of it and use what was left as a launching pad for a national for-profit college of education.
What the group, led by a Dallas merchant banker, Randy Best, found was Barat College, a struggling Roman Catholic liberal-arts college in suburban Chicago.
Barat had merged in 2001 with DePaul University, a large Catholic institution, but had continued to operate separately. Three years later, after spending $22-million on campus renovations, the college was still in the red, and DePaul decided to sell it. The university turned first to other nonprofit colleges, but soon opened the bidding to for-profit companies.When the deal with the Texas investors closed, in October 2005, the American College of Education was born. It was designed to remake the process of training public-school teachers. It may end up remaking higher-education accreditation as well.
The Dallas investors bought Barat’s “academic assets,” but not its 23-acre campus. What those assets were exactly is unclear; the terms of the deal have not been made public. The investors retained Barat’s library collection but did not keep its name, faculty members, or students. They scrapped its governing board and curriculum, and let go of all but one administrator, who works as the librarian at the new institution’s administrative center, in downtown Chicago. Of the nearly 30 programs that were offered at Barat, only one is available at the American College of Education.
But the new college did keep one element of Barat: its accreditation from the Higher Learning Commission of the North Central Association of Colleges and Schools. Now the American Association of University Professors is questioning the transfer of accreditation, two state boards of higher education have called the move unusual, and the U.S. Department of Education has denied the American College of Education’s application to continue offering federal financial aid, saying that the new institution is too different from Barat College.
Some higher-education experts say the purchase is no different from others that have taken place in recent years — most notably the 2004 sale of Grand Canyon University, in Phoenix, to a California-based group of investors. Those investors turned the Christian university into a for-profit institution and, within about a year, fired 17 faculty members, five of whom had tenure. So far, the institution has been allowed to keep its accreditation, also from the North Central Association.
Other observers, including some state officials, say the deal is different from any that have come before. They argue that in so thoroughly altering Barat College, the Dallas investors have created a new institution with, at best, only a tangential connection to Barat. Given that, the commission’s decision to allow the American College of Education to keep Barat’s accreditation is unprecedented, they say.
As more higher-education companies buy up nonprofit colleges, such precedents are important because when institutions get accreditation, they typically get access to federal financial aid, the right to operate in many states, and a nationally recognized stamp of legitimacy.
“They certainly figured out a way of shortcutting the system,” says Kevin Kinser, who studies for-profit colleges’ buying patterns as an assistant professor of educational administration and policy studies at the State University of New York at Albany. “It definitely changed the rules of the game.”
‘A Judgment Call’
The North Central Association’s decision to allow the American College of Education to keep Barat’s accreditation has come at a time when accreditors are under fire for not setting clear standards and not disclosing how they arrive at their decisions. The six regional associations that accredit most traditional institutions in the United States are private bodies that answer primarily to the institutions they accredit.
Lawmakers and policy makers have complained that the system is antiquated and inappropriate for the higher-education demands of an international economy. Indeed, a draft report released last month by the federal Commission on the Future of Higher Education called for a new national accreditation framework and more transparency.
But Judith S. Eaton, president of the Council for Higher Education Accreditation, an umbrella group of accreditors and colleges, says that, in the case of the Barat sale, the accreditation system worked. “The concern that I hear from folks is the conversion from nonprofit to for-profit is so substantive that there needs to be a thorough review,” Ms. Eaton says. She says that review happened as part of the North Central Association’s process of transferring accreditation.
Asked how an accreditor should determine whether a college has simply changed hands or whether a new institution has essentially been created, she says, “that is a judgment call.”
Thomas B. Evans, chief financial officer for the American College of Education, says the college followed all the rules set out by the North Central Association and did not buy Barat simply for its accreditation.
The education college’s executives say they were attracted to Barat’s history and what they saw as a good fit between the college’s legacy of public service, including tutoring inner-city children and running a nationally recognized program for students with learning disabilities, and their hope to transform the country’s elementary and secondary schools. “We really wanted to have a history and a tradition,” says Mr. Best, who developed the idea for the institution. “Being a new college and having a new name, that was very appealing to us.”
But some Barat alumni and former staff members see no connection between their Catholic liberal-arts college and a for-profit college described by its interim president, John Agresto, who was acting chairman of the National Endowment for the Humanities during the Reagan administration, as a “career and vocational” institution.
“Oh, heavens, I don’t think there’s any resemblance,” says Katherine C. Delaney, who was dean of Barat College after it affiliated with DePaul.
Comparing Missions
Barat was founded in 1858 as a women’s institution and produced Chicago’s first elected alderwoman and the city’s first female mayor. It became a coeducational institution in 1982, but remained committed to women’s and other social-justice issues.
Its mission statement from the late 1990s, before it affiliated with DePaul, said that the college “believes that the study of philosophy and religion, science, and the arts is essential to a complete education.” The statement on the American College of Education’s Web site states that its mission “is to be a leading national college of education that provides career-long education and training to schoolteachers and administrators.”
Yet last October, the North Central Association deemed the missions of the two institutions sufficiently similar to allow the American College of Education to take over Barat’s accreditation.
Typically, a new college would have to apply for its own accreditation, a process that often takes four or more years, and in the meantime, its students are not eligible for federal financial aid. But in the past few years, at least five other for-profit institutions have bought nonprofit colleges and been allowed to keep their accreditations. In March 2005, for instance, Bridgeport Education purchased Franciscan University of the Prairies, in Clinton, Iowa, taking it to for-profit status and changing its name to Ashford University.
While those for-profit companies all made changes in the colleges they purchased, the American College of Education appears to have undergone the most drastic transformation.
Steven D. Crow, executive director of the North Central Association’s Higher Learning Commission, says the American College of Education met the accreditor’s requirements for changing ownership. Under those terms, the institution must document that its “mission remains unchanged, that the academic programs will continue, that board governance continues to meet commission requirements, and that appropriate financial resources continue to support the organization,” according to the North Central Association’s written guidelines.
The commission was “told that Barat was being backed out of DePaul and that with it were going programs and their faculty,” Mr. Crow says. “It appeared to us that … they were going to continue it.”
But in a February 2006 review required to finalize the transfer of accreditation, the association learned that none of Barat’s faculty members had moved to the American College of Education. “They basically said, Everything didn’t happen exactly like we said it would,” Mr. Crow says. The commission determined the change was not drastic enough to warrant pulling the accreditation.
Government Officials Wonder
Accreditation is important because it typically makes a college’s students eligible for federal financial aid and, often, state aid.
The American College of Education’s executives had projected that about 10 percent of the college’s revenue — or $183,726 — would come from federal aid in its second year of operation, according to documents submitted to the Illinois Board of Higher Education.
But students at the college are not yet eligible for federal financial aid because the U.S. Department of Education denied the college’s application to continue offering aid as a result of its purchase of Barat College. The department determined that there was “a significant lack of continuity of academic programs, student population, faculty and staff, institution location and assets, institutional character, institutional name, and corporate structure,” according to a letter obtained this week by The Chronicle.
The letter, dated June 8, says the American College of Education “will be treated as a new institution” and will be eligible for aid when it can demonstrate it has been offering educational programs for at least two years.
Rena M. Pederson, college spokeswoman, says its executives are reviewing the decision. “It’s not something that will affect our students because our mission all along has been to price our programs to put them within reach of working teachers,” she says. Tuition at the college is $3,900 per degree program.
Mr. Crow, with the North Central Association, says he was surprised by the Education Department’s decision because it typically defers to accrediting agencies’ decisions on whether an institution is new or not. “It almost strikes me that this, in a sense, is their not accepting the decision we made,” he says.
Even if a new institution, like the American College of Education, is denied federal financial aid, it can gain a competitive advantage by speeding up the accreditation process. Accreditation, especially from one of the regional associations, is a stamp of approval that lends an institution credibility in higher-education circles and can be used in marketing its courses to students. In addition, many states, like Texas, will not allow an out-of-state college to offer classes within their borders unless it is accredited.
Documents from the Texas Higher Education Coordinating Board indicate that the American College of Education was, indeed, trying to speed up the accreditation process by purchasing Barat. Last fall, before the Barat sale had been completed, college officials approached the coordinating board about the possibility of expanding into Texas. In that meeting they conveyed that they were not “pleased with the time it would take to start up a new institution and guide that institution through accreditation,” if the sale did not go through, according to a memorandum that summarized the talk.
At the time the memo was drafted, the North Central Association had agreed to transfer Barat’s accreditation but had not completed the transfer because the sale was not yet final.
In the memo, David Linkletter, a program specialist at the coordinating board, said that the North Central Association’s decision to extend Barat’s accreditation to the new institution was “remarkable” because of the fundamental differences between the two institutions.
Mr. Evans, the American College of Education’s chief financial officer, says that its executives were interested in getting it up and running quickly, but that they did not take a shortcut through the system. “Did we gain an advantage in terms of time? I don’t know,” he says. “But the process was thorough.”
Gary T. Alexander, deputy director for academic affairs for the Illinois Board of Higher Education, which licenses colleges to operate in the state, says his agency considered the American College of Education a new institution because, under state law, colleges that operated in the state before 1945 that change ownership or location are treated as new.
Mr. Alexander says it is unusual for the North Central Association not to agree with his agency that a college is new. “It’s a peculiar situation,” he says.
James E. Perley, chairman of the American Association of University Professors’ committee on accreditation, goes a step further. “We’re terribly concerned about it,” he says. “The appearance is that the accreditation was sold to a group of people who were interested in profit.”
Mr. Perley says he wrote a letter to the North Central Association asking for justification of its decision to transfer accreditation. The association sent a letter back that provided no useful information, he says.
The accreditation committee, which has no enforcement power but whose opinions carry weight in academe, plans to meet in October to discuss what to do about the issue, which Mr. Perley views as a threat to the reliability of accreditation and the quality of higher education.
Mr. Crow denies that his agency allowed the American College of Education to buy its accreditation. “Clearly they wanted access to accreditation, but they told us that it was more than that,” he says. “There was a whole amalgam of things that at the time made it seem appropriate.”
What does Mr. Crow think now? After a long pause, he says: “It was an interesting judgment call. It remains to be seen whether it was a good call. My feeling is that it will be, but I understand how it looks.”
