Outside report finds UA Global Campus makes money, is ‘sustainable’

UA’s “future online operations are well-positioned to be financially sustainable and generate surplus for the university,” the nearly 45-page report says.

Despite that, the six-year completion rate for UAGC students is in the 15-20% range, well below the UA’s rate, which is in the 60%-70% range, and the online school has consistently seen a shrinking annual headcount of about 14% since it was acquired by the university.

The report, made public Friday, was conducted by the outside consulting firm Ernst & Young, hired by the UA in February to evaluate the UAGC project.

The UA acquired the online school, previously privately owned and run by Zovio and known as Ashford University, in 2020.

UA officials previously said UAGC would take a couple of years to stop operating at a loss as it is folded into the UA’s operations, but according to both the report and the university this week, UAGC actually has more days’ worth of cash on hand than the overall university does.

In fiscal year 2023, UAGC banked $246 million in net revenues and faced $241 million in operating expenses, for a profit margin of about 2%, the Ernst & Young report says.

Despite that positive outcome, the report notes that many of its not-for-profit peers such as Southern New Hampshire University achieved much stronger margins of 12%.

The report also says UAGC’s technical infrastructure has “significant modernization needs.”

Big part of UA’s headcountThe consultants’ primary recommendation is the combination of UAGC into Arizona Online, which is the UA’s formal online college.

Arizona Online and UAGC combined make up over 40% of UA’s total student headcount, according to the report.

In a snapshot of total enrollment starting this fall, the report says there are expected to be 44,000 students enrolled at the UA, 24,000 enrolled at UAGC and 9,000 enrolled at Arizona Online.

Though UAGC currently has more students enrolled than Arizona Online, its market performance has “declined in recent years, particularly as it faces regulatory constraints on program portfolio growth,” while Arizona Online is seeing “strong enrollment growth.”

According to the report, UAGC’s 12-month headcount has “fallen steadily over the past several years.” Before it was acquired by the university in 2020, it was falling at an annualized rate of 7%. Since it’s been acquired, the rate UAGC’s headcount has fallen has doubled to a 14% annualized rate.

This is while other similar online schools, like Arizona State Online and Southern New Hampshire University, have seen steady growth.

For its part, Arizona Online’s fall headcount has “nearly tripled over the last five years,” at an annual rate of 26% over the last three years, almost double its peer median of 15%.

The UA agreed in 2020 to buy Ashford for $1, rebranded it as UAGC, and integrated it into the overall UA, gaining thousands of online students while adding $265.5 million to the UA’s operating costs.

The agreement specified that Zovio, Ashford’s management company, and Ashford retained all liabilities associated with Ashford’s operation prior to the sale, it says.

However, in August 2023, the Biden administration cancelled $72 million in student loans for borrowers who say they were cheated by Ashford. The U.S. Department of Education is seeking to recoup the money from the UA, which says it should not be held responsible because the actions occurred well before it acquired the school.

Highlights of the Ernst & Young report’s 15 recommendations released Friday include:

— Combine UAGC and Arizona Online into a single online brand with two pathways. Pathway one includes term-based, longer courses with college-led faculty, for a “same degree, but online” feel. The other pathway would be more similar to UAGC’s, with an emphasis on associate faculty who are “active practitioners in their fields of focus.”

— The core academic structures of UAGC would be transitioned into an “Academic Unit X” within the UA, that would operate online programs previously offered by UAGC.

— UAGC’s online and go-to-market capabilities could be integrated with those within Arizona Online to create an enhanced service center equipped to support the UA’s comprehensive online enterprise. The service center would help students decide between the two pathway options and would help with enrollment management.

— Credits generated in “Academic Unit X” could be transferrable to main campus colleges (and vice versa), though a cap on transferable credits (total volume) could be considered.

— “Academic Unit X” could strategically maintain several differences from UA’s colleges and their online programs including term structure, price points (it could be priced separately from the UA standards), admissions standards, and degree awarded.

— UAGC could formally be incorporated into the UA by an initial target date of July 1, 2025 with a special merger process and U.S. Department of Education approval.

— Pre-merger operational set-up of the Arizona Online service center and “Academic Unit X” could occur. This could “potentially” include consolidating personnel, consolidating IT, evaluating and aligning career-track faculty and compensation and title realignment for positions formerly held at UAGC that are integrated into the UA.

— Existing UAGC contracts could be rationalized, with only certain contracts prioritized for renewal. Overall, UA could assess opportunities to consolidate contracts where there is overlap between UAGC and the UA.

The report identified total potential annual savings of between $12 million and $21 million.

That includes consolidating IT (savings of $1 million to $2 million), rightsizing UAGC finances ($1 million to 2 million), rightsizing UAGC’s operation and compliance function ($200,000 to $600,000), subleasing land UAGC has in Chandler ($3 million to $4 million), rightsizing and optimizing marketing ($ million to $6 million) and compensation realignment ($2 million to $6 million).

Arizona Online is a platform and online services provider that the UA developed in-house to support its colleges in building, enrolling and delivering online programs for undergraduate and graduate students.

It operates as a “cost center” for colleges seeking to build programs online, meaning Arizona Online offers and/or facilitates marketing, corporate partnerships, enrollment management, program operations and student success for colleges at the UA that seek to enroll and teach students online.

Through Arizona Online, services such as admissions, financial aid, registration, instructional design and digital production, program delivery and academic advisory are all conducted through the UA’s own offices. For example, to be admitted to Arizona Online, prospective students are routed to centralized undergraduate or graduate admissions to formally apply and receive acceptance through the university.

Arizona Online itself is not an academic unit and does not enroll students, it merely facilitates students when they choose to enroll in a college or program at the UA online.

UAGC, on the other hand, is its own separate entity, with separate professors. It maintains and manages its own finances as a distinct budget unit. Unlike Arizona Online, UAGC has its own separate admissions and financial aid process, for example.

Another difference is when school starts. Arizona Online operates a “term-based calendar” with three terms and six start dates each year. UAGC has the highest number of starts and is considerably above the peer median of starts. It has 31 total start dates each year.

Arizona Online allows students to take multiple courses at a time, each lasting between 7.5 and 15 weeks. UAGC operates at a “one-at-a-time course-taking model,” with shorter, five-week courses.