No Easy Pathways – Even Before the Pandemic

As a relief from the global pandemic, it was interesting to take some time to look a little harder at recent developments from the Study Group, Shorelight and INTO camps.  It’s a further reminder of how the US pathway sector was climbing a mountain even before the pandemic brought new challenges to international student enrollments.

Study Group

Study Group looks to be adding to last year’s closures in North America with pathways at both Royal Roads in Canada and the University of Vermont shutting down.   Both institutions are still featured on the Study Group website but there is hard evidence in once case and strong rumour in the other.  As ever, I’m happy to accept an authoritative response and correction if this is incorrect.

Minutes from Royal Roads Board of Governors meeting dated March 31, 2020 state: “The Study Group partnership was entered in 2011 to deliver preparatory pathway programs and expand international student recruitment into university programs. Following a formal review, a decision was taken to not renew the contract when it expires August 2020…….. A team will be struck in early 2020 to manage the transition to wind down the partnership by August 31.”

The change comes as Royal Roads posts some interesting statistics about its international student enrollment expectations.  From 577 international student FTEs in onshore credit programs in 2018/19 they are forecasting 1,012 in 2020/21 – an eye-watering 75% growth.  The expectation is spelt out very clearly “…with revenue increasing by $4.5M (35%) from $13.0M in 2019/20 to $17.5M in 2020/21.”

While there’s no institutional announcement, strong feedback from the market suggests that the Study Group relationship with the University of Vermont will come to an end later this year.  The partnership started in early 2014 with the stated aim to ‘recruit approximately 140 international students per year with a two-term pathway sequence’.

The University doesn’t give exact details on the Study Group contribution but over the five years total Fall international enrollments rose to a peak in 2017 and fell back below 2015 levels in 2019.  Non-degree international enrollments peaked at 171 in Fall 2015 and have declined since to 88 in 2019.  It’s a story that’s been hear all around the US but it’s worth remembering as a sign of the times that this is a University ranked 121 by US News in 2020.

This follows Study Group’s announcement of three pathway partnerships closing in 2019 at the universities of  Roosevelt, Widener and Merrimack and the closure of the Oglethorpe University pathway earlier in 2020.  For those trying to keep up here’s the list (with closures highlighted in red) which includes DePaul and Hartford taken over from EC Higher Education in 2019. 

Shorelight

Shorelight’s website suggests that since its first partnerships in the US in 2014, it has grown to 19 partners.  The relationship with UMass Boston does not appear to be a traditional pathway (which seems to rest with Navitas).  The American Collegiate (DC and LA versions) do not appear on the list of traditional, full-service partners and appear to be short summer programs along with a year-long undergraduate level course through UCLA extension. 

Huron Consulting Group Inc. is a long-term investor in Shorelight Holdings LLC (the parent of Shorelight Education) with an initial investment of $27.9m in 2014 and 2015.  Huron’s recent Form 10-K filing showed that in the first quarter of 2020 it invested a further $13m.   The initial investments were zero coupon convertible debt instruments maturing on July 1, 2020 but that maturation date has been extended to 17 January 2024 which matches the date the new investment matures.

The pathway sector has seen a significant amount of investment in the potential of a strong US portfolio but the growing tensions are stark.  In a recent Boston Globe article, Ben Waxman, chief executive officer of International Education Advantage, argued “International enrollment is going to plummet like a rock” due to the pandemic.  In the same article Shorelight’s cofounder, Tom Dretler, said the company is still seeing increased interest from foreign students in enrolling in US colleges for summer and fall programs. He noted that universities will have to offer these students a more engaging online experience. Time will tell.

INTO University Partnerships (INTO)

Growing global and in-country competition were probably factors undermining the growth of early INTO success stories like Marshall University.  The pathway at Marshall closed earlier this year and leaves INTO with 11 partners in the US.  As noted in a previous blog, enrollment to both the pathway and directly to Marshall had been falling for several years.

A look at INTO’s most recent published accounts for the year to 31 July 2019 show that there may be more dark clouds on the horizon.  Taking US pathways that have been open five years or more (including Marshall) it is noticeable that the level of debt owed by the joint ventures to INTO has grown from under £5m to nearly £15m.  Colorado State University (CSU) and Drew are at or above the same levels as Marshall. 

It’s probably a bit early to see the direction of travel for new joint ventures Hofstra, Suffolk or Illinois State.  But St Louis University’s level of indebtedness has remained at around the same level for four years, and the University of Birmingham Alabama has moved from owing £895k in its first reported year to £4.96m in 2019.  Washington State University has seesawed with a first-year indebtedness of £1.74m followed by a recovery but then a rise back to £1.34m in the latest accounts.

None of this has stopped company founder Andrew Colin from moving up 133 places year on year in the Sunday Times Rich List published this month.  What’s interesting is that the Sunday Times valued the business (based on 2017/18 information) at £200m which would suggest that Leeds Equity’s 25% stake was worth £50m.  That’s after a £66m investment made in 2013.

Of course, all of this is before the coronavirus and a global pandemic that has created havoc with traditional student choices and may alter global mobility forever. The US was in decline as a destination of first choice for several years before the virus, and there is little to suggest it has risen to the competitive threat. A recent IDP survey showed the US lagging behind on key measures as students are making their decisions.

There is already evidence that Canada and Australia are responding more aggressively to support international student recruitment after the peak coronavirus period.  Even the UK had done more to revive its flagging fortunes and was looking towards a bumper intake in 2020.  It leaves pathway operators and universities in the US in a very tough place.

 Image by Arek Socha from Pixabay