Purdue University recently acquired Kaplan University to help expand access to higher education.
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Indiana’s Purdue University recently made an interesting move. The public university decided to purchase Kaplan University, a for-profit university with a strong online presence and a nationwide reach. This decision comes after Kaplan saw a decline in enrollment and gained unflattering attention from federal and state regulators.

Creating an online presence

One of the main reasons Purdue bought Kaplan was to benefit from Kaplan’s position as a market leader in the world of online universities. Although it’s an unusual move for a public institution, Purdue wants to reach into online and adult education as it continues to evolve.

But if Purdue is buying Kaplan, what exactly is happening to Kaplan?

A new university

While Purdue’s plan is to utilize Kaplan’s online presence for its own benefit, it isn’t starting from scratch. Purdue plans to create a new university comprised of Kaplan’s 15 campuses, as well as their 32,000 students and 3,000 employees, and it will operate solely online. The theory is that Kaplan’s existing faculty and students will allow this new university to form a new, online tier of Purdue University.

Because Purdue University is a public institution and Kaplan is a for-profit institution, there have been questions as to what type of institution this new university will be and where the funding will come from.

For-profit to nonprofit

According to the corporate filing by the company that owns Kaplan, (the Graham Holdings Company) the for-profit institution will become a “nonprofit, public benefit corporation” that “will operate as a new Indiana public university.” The new university will remain a separate entity from Purdue and will rely on tuition and fundraising to pay for operating expenses. There are currently no plans to expand their physical locations beyond the current 15, and one benefit mentioned was discounted tuition for residents of Indiana.

The theory of this new university sounds like it could work, but the details of the agreement between Purdue and Kaplan explain how Kaplan will continue to play a role in the funding of the university.

Getting technical

The agreement between Purdue and Kaplan begins with Kaplan Higher Education LLC  transferring Kaplan University along with all of its academic operations and assets for $1 and a long-term support services agreement. For the first five years the new university is in operation, Kaplan Higher Education LLC (KHE) will guarantee $10 million per year to the university over its operating costs. If the university doesn’t accumulate enough money to cover the $10 million after expenses, Kaplan is essentially agreeing to cover the difference.

Takeaway

Overall, Purdue’s decision to buy Kaplan sounds like it will be incredibly beneficial for the public university as it will allow them to create an online presence for themselves while making higher education available for more people. The details of the agreement don’t seem to be beneficial for Kaplan at all, but considering the for-profit institution’s reputation was suffering, this may have been their only option.  

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Posted 05.01.2017 - 06:39 pm EDT