Education – Page 13 – View From A Bridge – management, education and personal thoughts

Changing Perception of US Pathways

It’s been the quietest year for nearly a decade in terms of announcements about new pathway partnerships in the US, and the 2019 Inside Higher Education (IHE) survey of College and University Admissions Officers suggests a shift in perceptions by institutions. The closure of several centers in the past year and disappointing enrollments at a number of institutions have given plenty of reason to be cautious. But faith persists in some sectors.

In the Survey only 12% of public doctoral institutions strongly agreed that “Pathway programs will become more important to US higher education in the current environment.” In the 2018 survey that percentage was 22%. Among Private Non/Profit Doctoral/Masters institutions, the percentage of respondents agreeing or strongly agreeing to the statement fell from 60% to 51%.

Table 1 – Pathway Programmes Importance to US Higher Education (IHE, 2018)

Table 2 – Pathway Programmes Importance to US Higher Education (IHE, 2019)

However, there has been an almost Damascene conversion among Public Master’s/Baccalaureate institutions, where 28% now strongly agree in pathways’ growing importance, compared to 15% last year. This is mirrored in the Private Non-profit Baccalaureate section where 56% agree or strongly agree compared to 33% last year. While, at an aggregate level the survey shows declining enthusiasm for pathways it is clear that they still hold an allure for some institutions.

The real question for the new enthusiasts will be whether the private pathway providers have much appetite for non-doctoral institutions. The portfolios of the ‘big two’, Shorelight and INTO, contain universities offering doctorates some have quite limited offerings. Study Group have a mixed bag of institutions and recently some at non-degree level in Canada, and Navitas has some non-doctoral universities on the roster.

Potential for new, high-profile partners may become even more limited as stronger US institutions become increasingly comfortable with their capacity and capability to manage enrollments without resorting to a third party. While, to date pathway providers have been the more likely party to terminate partnerships empowered or disappointed universities might begin to question underperforming relationships or decide they can do better alone. The scene is set for more turbulence as people come to terms with the new global mobility conditions.

Furthermore, the UK’s move to institute a two-year Post Study Work (PSW) visa for students enrolled from 2020 may bring further pressure and undermine the US’s position as a favored destination for international students. After a 33% surge in Chinese undergraduate applications to the UK for 2019/20, the UK Home Office reported that the number of Indian students choosing to study in the UK increased 42% from June 2018 to June 2019. It is likely that following the PSW announcement, India’s numbers will continue to grow rapidly for the 2020 intake.

Alongside that, the US is heading for an election year where the future of global relationships, student visas and existing post-study options could be part of the political debate. Just as the financial markets dislike turbulence it is difficult to see why a student would choose to invest in an uncertain future. The relatively safe havens and emerging, quality options around the world could seem increasingly attractive.

For Study Group and Navitas any difficulties in recruitment to the US will be mitigated by increasing momentum behind their considerable portfolios in other parts of the world. INTO’s mix is more finely balanced but its recent focus has been on the US and it has just lost the University of Gloucestershire as a UK pathway partner. Shorelight is wholly US based and will face the full force of global headwinds.

It certainly seems likely that pressure on sales teams, cost of acquisition and other “promotional” tactics will increase. Local difficulties, such as those Shorelight are facing in Kuwait, will also impact on the ability to recruit sufficient students for existing partners let alone new ones. Life is unlikely to get any easier in the short term and may get a lot worse, which might seem to mitigate against continuing expansion, particularly with sub-optimal partners.

However, ‘doubling down’ is a popular phrase in the US and has come to mean ‘to strengthen one’s commitment to a particular strategy or course of action, typically one that is potentially risky.’ The IHE survey suggests that at least one sector of the market is increasingly interested if pathway operators have the appetite. But in terms of recruitment it might be worth remembering that, as the UK’s ‘Iron Lady’, Prime Minister Margaret Thatcher said in 1997, ”you can’t buck the market.”

Image by Gerd Altmann from Pixabay

PSW – The Morning After

There’s plenty of jubilation over the re-introduction of two-year Post-Study Work visas and congratulations are due to those who lobbied for it. But it’s worth remembering that Government’s rarely give something without wanting something in return and that every gift horse should be given careful scrutiny. In that context there are a few things to look out for over the coming weeks, months and years.

Drift, Detail and Design

A ‘popular’ announcement from a Government under pressure is often rushed out with detail and other policy intent still needing to be tidied up. The Home Secretary’s announcement that the new Graduate Route ‘will mean talented international students, whether in science and maths or technology and engineering, can study in the UK…’ was curious in the context of a scheme allowing all graduates to stay. It’s mirrored on the Home Office website and may provide cover for a later tightening of the rules to specific subjects.

A Step Forward But…

Some details of PSW are still to be announced but it seems slightly short of the Australian (two to four years) and Canadian (up to three years) schemes. It is not yet clear if families can join the PSW graduate as in Australia and it seems doubtful that there will be any room for promoting it as a route to permanent residence as Canadian institutions do. And there is always the potential for both those countries to step up their offer to become even more competitive.

Economic Conditions Can Change Policy

PSW was last introduced in the UK in 2002 when unemployment was 5%. It’s discontinuation in 2012 followed a rapid rise in unemployment to 8% between 2009 and 2011. Prime Minister David Cameron told the House of Commons, ‘Frankly, there are lots of people in our country desperate for jobs. We don’t need the brightest and best of students to come here and then do menial jobs.’

The economic direction of travel for the UK post-Brexit is uncertain but universities have been drawn very directly into discussions about employability and the value of a degree. It’s easy to allow PSW in an era of historically low unemployment, currently around 4%, but if recession hits and unemployment climbs it is equally simple to remove it. Trends in numbers and careers of home graduates may factor in that equation.

Table 1 – UK Unemployment 2000-2013

Grounds for Home Student Fee Reduction

The HE sector made an enormous song and dance about the contribution of international student fees but may find being granted it has unintended consequences. With increasing international students providing a major economic stimulus to universities there is fertile ground for populist and electioneering proposals to cut fees for home students and increase investment in school and FE. It’s probably helpful that international students also prop up the economics of many STEM courses and postgraduate study.

Limiting HE Investment to Support Other Priorities

Universities may hope the Augar Review has been buried but newspaper headlines about ‘low value’ courses, universities manipulating applications, grade inflation and VC pay are unlikely to have been totally forgotten. More importantly, more money from international students gives grounds to support more popular or political priorities. It was interesting to see Chancellor Sajid ‘I went to my local FE College’ Javid, Spending Round announcement include an increase for further education funding in the 2019 spending round and increasing ‘school spending by £7.1 billion by 2022-23, compared to this year.’

International Fees For EU Students

One of the arguments against introducing international fees for EU students post-Brexit has been that it will cause a significant decline in their numbers. A surge in traditional international fee-paying students attracted by PSW makes up those numbers and would allow EU students to work as PSW international students without a more complex arrangement with Europe. Making EU students ineligible for UK student loans would also eliminate headlines like ‘Thousands of EU students fail to repay loans.’

Never Mind the Quality Feel the Width

It is arguable that strong brands perceived as high quality or with potent strategies for recruitment have not been particularly troubled by the lack of post study work visas. Eight Russell Group universities each increased their first-year international student intakes by over 27% over the two years from 2015/16 to 2017/18. Even beyond that Group there are clear winners who achieved significant growth including De Montfort (+78%) and the University of East London (+90.6%).

For some universities these were grim years with five institutions each seeing their intake decline by over 300 students. PSW is likely to see such institutions making up for lost time and revenue by driving international numbers up but the quality of the intake may suffer. PSW as the driver for attracting less able international students to cash-strapped universities is not a particularly lofty ideal.

Competition for Places and Jobs

The potential for significant upturns in volumes of international students comes just as the upswing occurs in home student demographics with HEPI suggesting the need for up to 300,000 additional university places by 2030. This sets the scene for potential conflict between home students and international students – particularly if home fees go down and institutions are looking towards the economics. The OECD’s Education at A Glance 2019 noted, ‘there is a risk of squeezing out qualified national students from domestic tertiary educational institutions that differentiate tuition fees by student origin, as they may tend to give preference to international students who generate higher revenues through higher tuition fees”.

It’s suggested that in 2019 around 1,000 places were reserved for international students in Clearing and the economics may push institutions to favouring international students over home students just as home demand steps up. It is only a short step to stories about debt-laden home graduates being unemployed because universities are enticing increasing amounts of international competition for early career jobs. At that point the freedom of PSW may find itself subject to increasing scrutiny and Government intervention.

Conclusion

A benevolent PSW policy is to be welcomed where it builds on the reputation of the sector for quality and is part of a strategic approach to supporting higher education’s potential as a major contributor to global influence as well as the UK’s economic and cultural development. It is also possible that the recent announcement was carefully planned and is the start of a period of unprecedented benevolence towards higher education in the UK. But history and context suggest that things are rarely so simple.

Image by Gerd Altmann from Pixabay

Clear For Clearing

It’s a bit early to predict final international student (excluding European Union) recruitment outcomes from the UK undergraduate Clearing season but the first week often gives some direction. There’s also some anecdotal feedback on how institutional and student strategies might be shaping up and what it means for the broader sector. There’s a long way to go with the season largely defined by the last date on which international students can get visas to study.

Looking at international students who have been ‘placed’ there has been a slightly surprising decline in year on year (YOY) growth over the first week. On A-Level day (Day 0) 6.7% (2,120) more students had been placed than in 2018 and the number holding an offer was up 5.6% at 16,860. By Day 8 the placed YOY increase was only 5.2% at 1,900 although offer holders were up 9.5% at 12,120.

Table 1 – Year on Year Differences In Place Students

Source: UCAS

NB: Each bar reflects the difference on the year before i.e. bars for 2016 reflect the difference compared to the corresponding UCAS reporting days in 2015

The deeper context is strong growth in international student application growth measured at 8% at the 30 June UCAS deadline with a particular surge in applicants from China. There are suggestions that the growth in applicants has allowed institutions to be more selective which seems likely at a point where there is more demand than supply. An alternative, or perhaps complementary, take is that students are also being choosier and taking the opportunity to shop around before accepting an offer.

Plenty Still To Play For

While conversion tends to slow very quickly after the first week of Clearing the pool of 12,120 offer holders suggest that there’s plenty to play for. Trying to project numbers forward it may be reasonable to take last year’s outcome as a guide. In 2018 the pool of those holding an offer on Day 8 was 11,070 and by Day 28 of clearing the total number placed had grown by 18.8% of that number.

A similar result in 2019 would mean that Day 28 in 2019 would see 40,430 placed students which would be a growth of 5.5% YOY. It’s a rough and ready calculation and at Day 8 there were still a record number of over 30,000 students free to be placed in Clearing. Whichever way you cut it this looks like a good year for the sector.

Another factor is that the numbers published by UCAS only cover the main scheme applicants and do not reflect those who might have used a Record of Prior Application* (RPA) to bypass the system. As I noted in a blog in December 2018 this route has been growing quite rapidly, with just over 6% of the total number of students using the RPA route in 2018 compared to 3.9% in 2014 and just 4.8% in 2017. Further growth would bring even more upside in recruitment for universities.

A Good Year But Beware The Fog

There may be even better news for the sector because there is reasonable feedback from some pathway operators and sixth form colleges suggesting that they are having a bumper year. One commentary has suggested that students unable to get direct entry into well-ranked universities of choice are choosing to take pathway courses at those universities. Even more encouragingly the buoyancy seems widespread and there is likely to be welcome relief for some universities that have seen significant declines in international student volume in recent years.

The undergraduate numbers are the smaller part of the international recruitment picture but there is no reason to believe that postgraduate numbers are not doing at least as well and probably better. All this before the likely reintroduction of a more powerful post-study work option and the removal of international students from immigration statistics. It bodes well for the near-term future of the UK sector at a point when the US seems to be mired in difficulties that are unlikely to be corrected quickly.

Against this background experienced international recruiters will remember Clausewitz’s dictum that, ‘the factors on which action..is based are wrapped in a fog of greater or lesser uncertainty’ – it’s the basis for the popular phrase ‘fog of war’. Brexit continues to loom over the sector with no real clarity over long-term decisions on the fee status of European Union students. Concerns must also remain over reliance on one dominant source country when the rise in UG applications was substantially driven by students from China.

*Record of Prior Acceptance – where an application is submitted to UCAS by a provider, when an unconditional firm has been offered and accepted by the applicant. These are not recorded in the daily Clearing analysis and will be reported after the cycle has closed.

Image by PublicDomainPictures from Pixabay y

More Pathway Jeopardy

INTO’s joint venture with the University of Gloucestershire is under ‘strategic review’ with the possibility of closure. INTO is no longer accepting applications to start at the on-campus centre in 2019, which is understandable given the uncertainty but seems unlikely to improve future prospects. It is anticipated that the review will be complete in early July.

A number of ‘third party’ pathway centres in the UK and US have closed in recent years, including Navitas at Edinburgh Napier and Oxford International at the universities of Canterbury Christ Church and Bedfordshire. In the US four CEG OnCampus pathways are closing, and EC’s higher education business has shut down with partners moving to Study Group. INTO Gloucestershire offers some insights into the dynamics at play in the joint-venture model.

The centre opened in 2013 but has struggled to build enrolments or achieve operating profitability. The most recent published figures show average enrolments falling for two years and lower in 2017/18 than 2014/15. The University’s Financial Statements for 2017/18 noted ‘the highly challenging market’ and it seems unlikely that 2018/19 enrolments were much, if any, better.

Table 1 – INTO Gloucestershire Average Enrolments

Source: INTO Gloucestershire LLP Annual Reports

The University’s most recent Financial Statement concluded that the ‘financial performance of the JV entity combined with the net revenues from progressing students, continues to deliver a worthwhile partnership arrangement for the university which enhances the internationalisation agenda.’ With the UK likely to be heading for a good enrolment year this might seem to be a good moment to double down on the investment after weathering some difficult years. There’s also the possibility of even better times ahead if proposed changes to post-study work opportunities become reality.

But as the joint venture enrolments have slipped first year, full-time international enrolments have also stalled for the University. Published data doesn’t provide insights into progression from the joint venture but as UK universities have become more competitive for international students it’s possible that more are leaking away to better ranked or more favourably located institutions.

Table 2 – University of Gloucestershire Non-UK Enrolments with JV Enrolment Overlay

Source: HESA Data and INTO Gloucestershire LLP Annual Reports

A closer look at the financial story also suggests some reasons for caution on all sides. Recent Financial Statements show the University has written off £2.8m of debt from the joint venture over two years with INTO University Partnerships (IUP) writing off £3.8m of debt in the same period. Current financial year data is not available but the debtor balance owed by the joint venture to IUP at the end of 2017/18 was £1.77m.

Table 3 – INTO Gloucestershire LLP Debtor Balance to IUP and Written Off Amount

Source: INTO University Partnerships Annual Reports

The joint venture has been unable to operate profitably in its first five years of operation despite measures to make ‘changes to the model of paying for services supplied by the two respective parent organisations’. One ratio for pathway watchers to consider is that the joint venture’s cost of sales rose from 73% in the peak enrolment year of 2015/16 to 87% by 2017/18. Significant reductions in operating expenses have been unable to make up for the resulting decline in gross profit, but are likely to have reduced revenue to the partners for services they provide to the joint venture.

Table 4 – INTO Gloucestershire Turnover, Cost of Sales, Operating Expenses and Operating Profit

Note: Operating loss shown excludes exceptional items and interest Source: INTO Gloucestershire LLP Annual Reports

A university statement indicates that the strategic view was initiated jointly. Increasing levels of indebtedness, less revenue from the centre paying for services and little prospect of a significant shift in the ability to recruit students would certainly concentrate the mind. As the joint venture’s Annual Report notes – ‘the principal risk facing the LLP is the continued under-recruitment of students to its programmes.’.

The university have confirmed that ‘no decisions have been made’ and that ‘no compulsory redundancy notices have been issued to staff either employed by the JV, or employed by the University outside of the JV, as part of this process’ and it is to be hoped that INTO and the University of Gloucestershire can find a sustainable way forward . But if not, it would follow INTO University of East Anglia London and INTO St George’s University as the third of the company’s joint ventures to close. That would leave eight joint ventures and two wholly owned operations remaining in the UK.

Most pathway portfolios have partnerships that struggle to recruit and are likely to come under the microscope when times get tougher or business models are disrupted. That’s why there is likely to be more realignment, restructuring and portfolio shuffling as the sector matures. I once heard an industry leader comment that the trough between launch and profitability is becoming deeper and longer – the question is whether some vessels are too leaky to make it to the other side.

Image by Arek Socha from Pixabay

SEVIS With A Smile? Or ‘A Delusion, A Mockery And A Snare’?

Data-driven predictions of future international student enrollments can be very useful for international recruiters, university budgeting and potential investors in higher education. Recent commentary using Student and Exchange Visitor Information System (SEVIS) data shows how visa data can be characterized in a way that suggests the challenges faced by US higher education are overstated. But clarity around what this data source includes and where it might exaggerate or diminish trends is vital to avoid misdirection and poor decision making.

The increasingly user-friendly ‘SEVIS By the Numbers’ web-site provides good access to visa data complete with interactive maps and is a popular source. It claims it ‘illustrates trends and information on international students studying in the United States’ but it does not disaggregate between those enrolled at universities and those on student visas taking the Optional Practical Training (OPT) extension which allows for post-study work. Confusing or conflating the two is unhelpful in understanding the implications for the state of US higher education.

Executive action in 2016 increased the maximum length of employment under OPT for foreign students with STEM degrees to 36 months, which, along with a booming US economy, resulted in a material increase in the number of STEM graduates staying on to work in the US. While these students hold F-1 visas (and are reported in the SEVIS numbers), they are not tuition-paying students enrolled in a US university.

To give a sense of materiality of the OPT numbers, the Institute of International Education (IIE) Open Doors Report reports shows that the proportion of OPT students rose to 18.6% of ‘total international students’ in 2017/18 from 12.4% in 2014/15. When the IIE announced that the ‘number of international students’ increased to reach a new high of 1,094,000 in 2017/18, the growth in OPT numbers masked the reality that students enrolled in full-time study in US universities actually declined year-on-year and were lower than 2015/16.

Source: Institute of International Education, 2018, https://www.iie.org/opendoors

A better guide to the health and future of international student recruitment may be provided by IIE’s data which shows that both undergraduate and postgraduate new enrollments have fallen for two years in a row, and non-degree enrollments for three. Critically, between 2015/16 and 2017/18 the number of undergraduates and graduates enrolled fell by over 17,000 while the number of non-degree students fell by less than 5,000. While percentage falls in non-degree students can look high, the number of students is relatively low compared to the main body of academic students.

Master’s Level Enrollments and Students From India

Thinking of SEVIS data as a proxy for enrollments is particularly distorting at Master’s level and for understanding trends for students from India. SEVIS suggests that the number of Master’s ‘students’ grew by 27.7% between 2014 and 2017 while IIE data indicates that numbers actually enrolled in universities grew by only 8.4%. The difference is driven by the 69.1% increase in OPT numbers (83,175) shown in IIE data over the four years.

Source:
Institute of International Education, 2018, https://www.iie.org/opendoors and SEVIS data from INTO Corporate Blog

Note: The SEVIS data and the IIE Enrollment data is not synchronous.

The Pew Research Centre has reported that students from India are significantly more likely to utilise the OPT opportunity than other international students. IIE’s breakdown indicates that between 2016/17 and 2017/18 the number of students from India enrolled on Graduate programmes declined by nearly 10,000 while the numbers doing OPT increased by over 18,000. The increase in numbers doing OPT appears to be slowing which is likely to reflect emerging options around the world and the declining competitiveness of the US in retaining international talent.

At undergraduate level, which is unaffected by OPT, IIE and SEVIS both show a small growth in students from India year-on-year to 2017/18 but this should be seen in the context of growth in Canada which had 123,000 students from India in 2017 – 63% more than the year before. This was largely driven by an increase of 67% (86,900) going into colleges, presumably as a result of the opportunities for progression to university, work and citizenship. It will be interesting to see how far growth in Indian undergraduates in the US goes when these routes seem more straightforward and available in Canada.

The 1st Baron Denman coined the phrase ‘a delusion, a mockery and a snare’ in a legal context in the 1840s, and imprecise use or understanding of data has a similar potential to lure, deceive and trap the unwary. No source of information is without flaws and weaknesses but it is also foolhardy to take one source, view or instance as giving definitive guidance. In that respect there is plenty of evidence that competitors are challenging the US, that global student mobility is changing, that demographics are shifting and that technology is disrupting the established order.

Image by Gerd Altmann from Pixabay

BIG QUESTIONS FOR PRIVATE PROVIDERS

The past few months have seen Ardian purchase Study Group, Navitas on course to be taken private and, most recently, news of EC’s North American Higher Education division moving to Study Group. Between 2010 and 2014 the pathway market was characterized by over a billion dollars of private investment and a dash for growth in university partnerships. But as global competition, technological disruption and changing demographics bite there are closures, sales and realignment.

As the market becomes more challenging investors have some strategic decisions to make. Recent developments and news coverage gives some grounds for speculation on what that might mean.

Cambridge Education Group/Bridgepoint Capital

In 2013 Bridgepoint Capital paid ‘an enterprise value of UK £185m’ (around $241m) for CEG. One commentator suggested, “The pathways sector has delivered remarkable growth and profitability over recent years. Strategically the space is exciting..”. It seems possible that the future will be about excitement in other parts of the portfolio.

CEG recently confirmed the closure of its ONCampus individual pathway centers at Rochester, Rhode Island, CSU Monterey Bay and the University of North Texas. The relaunch of ONCampus Boston in fall 2019 and direct recruitment at Illinois Institute of Technology keeps a toehold in US HE. But with no further ONCampus developments in the UK since 2016 it looks like it has called time on pathways linked to individual universities.

But the Group has other options and is investing in the CATS College brand (colleges for 14-18 year olds) with the first China centers opening in March 2019. The two centers are in Shanghai and will provide a path for students to join CATS UK Colleges and other CEG options in the UK. In the UK the company’s digital delivery arm has also been growing and added Cass Business School and the University of Hull as partners in 2018.

It seems plausible that CEG is focusing on driving the CATS business and building a growth story around digital while putting pathways into a holding pattern.

INTO University Partnerships/Leeds Equity Partners

In 2013 Leeds Equity £66m purchase of a 25% stake in INTO valued the business at around £266m. Six years later the Sunday Times has ‘cautiously, put a £170m price on the operation’ (entry 876, Sunday Times Rich List 2019. Public filings show that in 2018/19 a preference dividend of £15m was paid for the first time, presumably to Leeds.

INTO added the medium sized, public, Illinois State University and smaller, private institution, Hofstra to its US portfolio in 2018. But data from Oregon State and Colorado State reflects the tightening of the US market and the possibility that new partnerships may erode the enrollments of existing partners. INTO hasn’t opened a new UK partner since 2016 and average enrollments at mature partnerships (five years or more) and wholly owned centers shows that overall recruitment in the UK is no greater than 2014/15 levels.

The company’s joint-venture model was a key differentiators in the early days but has been substantially replicated by a US competitor. INTO is focused on pathways but has the potential to build business as a recruiter of non-pathway international students for existing or new partners. If Leeds Equity are looking to move on this could be the moment where the business recapitalizes to buy out their 25% share and perhaps get some headroom to invest in new business opportunities.

Shorelight

Shorelight was six years old in January 2019 and is the only major pathway provider with no interests outside the US. The portfolio grew in the last twelve months with the additions of Cleveland State University (March 2019) and Mercer University (October 2018). Eighteen university partners mean that there are a lot of seats to fill at a tough time for the US market.

With the squeeze on international enrollment growth in the US, Shorelight probably needs to dominate pathway recruitment to deliver the results expected by partners. The growth in pathway options and degrees delivered in English around the world has made it a buyers’ market for students and recruitment agents. Any outperformance in recruitment is likely to come at a price and provoke a competitive response.

Declining markets, increasing costs and over-supply are not easy problems to solve and it may be time to look for new options to spread costs and risks. Given Shorelight’s recruitment infrastructure and evidence of success with some good universities in the US it could be productive to pitch for a high-quality university in the UK, Europe or Australia. A big name that doesn’t want to be part of the Kaplan, Study Group, Navitas or INTO portfolio might find a dedicated partner worth a conversation.

Study Group/Ardian

The purchase of Study Group by Ardian positioned the investor with the ambition to make ‘strategic acquisitions’, and a belief that pathway growth would continue to be ‘double digit’. It is difficult to see that organic growth in the US will be the main driver of the latter prediction. But taking on EC’s operations in the US appears to signal an intention to continue to build market share.

Other recent Study Group signings have been with sub-degree colleges in Canada providing a route to degree level study, post-study work and possibly citizenship. It may be a smart way of infiltrating a market where universities have seemed relatively resistant to the lure of pathways. In 2017, 41% of international students at post-secondary level, including a 67% increase in those from India, studied in colleges.

Study Group’s business is diversified geographically and has high-school/college options as well as pathways. The UK/Europe pathway business looks stable and recently announced a new partner in Aberdeen. In the US the Managing Director has just left and it may be a good moment for strategic review in the context of market conditions.

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More Pathway Recruitment Indicators

Detailed, consistent and up to date insights into pathway recruitment performance are often difficult to find. Some US universities give good data at a granular level and I reported on some of these in a recent blog. The completion of the reporting cycle for INTO’s Joint Ventures and wholly owned centres in the UK gives a comprehensive picture of their enrolments in the 2017/18 financial year.

For the ten entities – eight joint ventures and two wholly owned centres – that have been trading five years, total enrollments bounced back from the low point in 2016/17 but remain short of 2013/14 levels. This suggests that it’s probably still pretty tough going for the UK pathway market.

Table 1 – Average Enrolments for INTO Centres 2013/14 to 2017/18

Source: Annual Reports

At a detailed level the drivers of growth were Newcastle and City which bounced back after several years of decline and Queen’s. Long-term partners East Anglia seem to have bottomed out after three years of decline. Neither Stirling or Gloucestershire, the most recent partners in this group, have got over the 200 student mark after five years.

Table 2 – INTO UK Centres Average Enrolments 2013/14 to 2017/18

INTO centres split educational oversight between ISI and the Quality Assurance Agency with the former giving specific details on numbers enrolled and the latter being less prescriptive. While the annual reports noted above are averages across the financial year (August to July) in question, the ISI education oversight into three centres gives deeper insight into the most recent autumn intakes.

The distinction between EFL and FE used in the ISI reports broadly distinguishes between students on English Language only or Academic courses. Newcastle appears to have a significant number doing both.

Table 3 – Student Population of three INTO centres – November 2018

*Source: ISI Educational Oversight Reports*

The other INTO Joint Venture is Newcastle University London which had an inaugural intake in 2015 and offers both pathway and degree courses. At the time of launch the university indicated that ‘…..in collaboration with INTO, our London campus is expected to grow to 1,200 students’. Three years in the average numbers for 2017/18 were 381.

Recent UK pathway activity from established providers has largely centred on adding well ranked partners with Study Group, Navitas and Kaplan gaining Aberdeen, Leicester and Essex respectively. Newer players have generally picked up less well-known names with Oxford International adding Greenwich and QA HE with Southampton Solent. With the UK Government launching its new strategy for international student recruitment it remains to be seen if the cake will grow for everyone or if the strong will dominate.

NOTE: Table 2 updated 16 June 2019 to include INTO Glasgow Caledonian University 2017/18 enrolment

US INTERNATIONAL STUDENT ENROLLMENTS – PEER TO PEER AND PATHWAYS

Making sense of trends in US international enrollments presents real challenges due to the diversity among ~4,000 institutions. Looking at Oregon State University’s self-identified peer group of four other public universities is an opportunity to get under the surface. It also provides insights as to how private providers offering pathways and direct recruitment support to universities, are contributing to overall numbers and adjusting their programs in an increasingly crowded market.

It’s a small sample over a limited time but it may offer some pointers for universities considering how best to meet their recruitment needs*. Over a four-year period to fall 2018, one of the two public universities without private provider support was competitive in terms of overall international student enrollment. Where a new peer institution was added to the provider’s portfolio during the period it did better than longer-term partners.

Some universities have benefited significantly from partnering with a private provider to bring global recruitment expertise to both pathway and direct enrollment. But some have been less successful and new dynamics are emerging as the sector matures, competition increases and student numbers fall. Where a private provider services several universities with similar academic and ranking characteristics the potential for internal competition for students is likely to increase.

For the university this makes the task of selecting a provider more complex and the consideration of tighter commercial terms on target numbers and non-competing partnerships worth close attention. The lure of having a partner who offers to take all the up-front costs while returning more international students than the university currently has will always be attractive. But the prospect of signing a long-term contract to become a commodity product in an undifferentiated portfolio is less so.

A MIXED PICTURE IN TOTAL INTERNATINAL ENROLLMENTS AMONGST THE ‘ORANGE PEERS’

Oregon State University (Oregon State) defined four institutions as “Orange Peers” for the purposes of its Strategic Plan . Two, Colorado State University (Colorado State) and Washington State University (Washington State) are, like Oregon State, partnered with INTO University Partnerships. The others, University of Nebraska (Nebraska) and Oklahoma State University (Oklahoma State) do not have any private-provider pathway relationship.

A working assumptions of most private pathway provider relationships is that the university will benefit from students progressing from the pathway as well as direct applications as the institutions international profile is raised. Providers have also increasingly focused on recruiting students directly to the university i.e. not just through a pathway, with remuneration often coming as a percentage of tuition fees paid by the student. Looking at an institution’s total international enrollments is one way of considering how the partnership is delivering.

The four-year picture in Table 1 broadly reflects the overall slowing in the US since 2015. However, Washington State had year-over-year growth of 66 students and 46 in 2017 and 2018 respectively, which may reflect the early growth stage of the partnership with INTO which commenced in 2017. Both Oregon State and Colorado State, long term INTO partners from 2009 and 2012, respectively, saw overall enrollments decline in 2018.

Nebraska, which has no private-provider support had the strongest growth over the four years, increasing by 283 students or 11.2%, despite a dip between 2017 and 2018. Oklahoma State fared significantly worst with a fall of 236 students.

The IIE Open Doors report shows that between 2015 and 2017 (the latest comprehensive reporting available) US total international enrollments fell by 0.56%. All of the ‘Orange Peers’, except Oklahoma State, out-performed on that timescale. It will be interesting to see how 2017 to 2018 enrollments compare against the national trend.

TABLE 1 – ‘Orange Peers’ – Total International Enrollments Fall 2015 to Fall 2018

PATHWAY PROGRAMS REFLECT CHANGING CIRCUMSTANCES

Pathway enrollments help underpin direct recruitment to university programs. As global markets change in terms of major sending countries and the demands of students they need to operate flexibly to maintain relevance. As the number of pathways in the US has grown competition for students has intensified.

In June 2018 Inside Higher Education’s Elizabeth Redden took a deep dive into pathway performance as US international enrollments came under pressure. She noted, in particular, a steep decline in pathway numbers at Oregon State driven largely by falling numbers of Academic English students. Fall 2018 data shows that this has continued along with a decline in both Graduate and Undergraduate pathway numbers.

TABLE 2 – INTO Oregon State University Enrollments – Fall 2015 to Fall 2018

Source: Oregon State University Institutional Research

At Colorado State one response to the changing market conditions has been a notable increase in the number of pathway courses and the range of academic disciplines covered. In fall 2015 six pathway programs secured 152 students, an increase to 14 programs in 2017 drove a short-term increase to 163 enrollments, with numbers falling back to 142 in 2018 despite a further program being added.

Enrollments on the business pathway program have fallen sharply over the period with engineering enrollments also declining in 2018. New programs in computer information systems, computer science and finance have ameliorated the overall decline. These shifts demonstrate that traditional recruiting patterns are under considerable pressure and raises some questions over whether emerging courses will reach the same volume of enrollments.

Table 3 – INTO Colorado State University Enrollments – Fall 2015 to Fall 2018

Source: Institutional Research, Planning and Effectiveness Reporting

At the time of writing it was not possible to find any specific detail about enrollments in the Washington State pathway programmes.

FUTURE DIRECTIONS

US pathway growth continued after new international student enrollment growth peaked in 2016, with around 20 further partnerships by 2019. The ubiquity of pathways has seen an increasing duplication of academic offering and ranking status within each provider’s network. The recent closure of three of CEG’s pathways operations in the US suggests that some partnerships may begin to look sub-optimal over time and that restructuring is likely to happen in the future.

In this new world, well-placed universities looking for partnerships hold a great deal of power to dictate commercial terms or to choose to invest in alternative recruitment options. Locking out competitor institutions, contractually-binding performance criteria and understanding how to exit a failing partnership without penalty should all be considered as part of the commercial terms. There are still many opportunities for the smartest and most creative to do well.

*Data provided by universities is seldom wholly consistent and some provide greater granularity than others. Every effort has been made to make fair and consistent comparisons but any authoritative corrections or comments are welcome.

International Education Strategy – Less Haste, Less Speed

The UK Government’s recently launched ‘International Education Strategy: global potential, global growth‘ has received many plaudits. But those who believe the floodgates will be opened, with growth similar to recent years in Australia and Canada, should consider the compound annual growth rate implied. Getting from the 460,000 international students enrolled in 2017 to the 600,000 targeted for 2030 only requires a growth of just over 2% each year. A bit better than the 1.23% compound growth in enrolments from 2014 to 2017 but it’s hardly tearing up any trees.

A joined-up, Government backed strategy is not in itself a bad idea but this one raises lot of questions and is light on answers in key areas. The 460,000 number used is the aggregate of international fee-paying students (320,000) and current EU-fee paying students (140,000). It’s not entirely clear if the plan, and its £35bn target in education exports, includes EU students paying full international fees, staying with UK fees or replacing them with others from round the world.

Staying on the financial side, it was only in June 2015 that Jo Johnson, Minister of State for Universities and Science, said, ‘We are committed to increasing education exports from £18 billion in 2012 to £30 billion by 2020.’ One presumes that the 2020 target will be missed if the plan is really only to add a further £5bn by 2030. These things are easy to say and people lose track of the performance as easily as they lose track of the politicians who made them.

To add to the potential for confusion, the new Strategy lumps in trans-national education and includes ‘…education providers setting up sites overseas, and education technology solutions being sold worldwide.’ Given global demographics, the rise of English-language degree provision in emerging countries and the spread of technology, it will be interesting to see how effort is coordinated between the paths to revenue.

When people start talking about long-term growth and big numbers I am reminded of the song, ‘The Impossible Dream’ from Man of La Mancha. Visions of tilting at windmills, living with ‘unbearable sorrow’ and the inevitability of the Spanish Inquisition come to mind. It is likely to be tough to sustain international student growth over a decade or more and it seems to me that the real need is for more urgent action and targets.

It’s not as if we haven’t been here before and history does not offer good omens. In 2013 the Government published a strategy – International education strategy: global growth and prosperity – where the stated ambition to help the sector secure 3.7% enrolment growth from 2011 to 2020. On that reckoning the graph shown below suggests international student enrolment in 2017 should already be around 550,000 by now rather than 460,000.

Source:
*International education strategy: global growth and prosperity 2013 (p.41)*

This reflects another problem with long-term strategies. Those responsible for blowing the trumpets when they are launched are seldom around to answer for the failures or receive the plaudits. David Willetts MP (now Baron Willetts) was the Minister for Universities and Science launching the 2013 Strategy, but left the Government by 2014. It is difficult to see The Rt Hon Damian Hinds or Dr Liam Fox being around in 2030.

It is also not entirely heartening to see Action 1 of the strategy being the appoint of an International Education Champion. Perhaps this newly appointed Degree Czar will be able to develop and implement joined up policy which would be a good thing. But the 2013 Strategy document was also strong on the need for coordination that never quite happened as the Treasury called for growth and the Home Office battened down the hatches on visas.

It might have been better to see the long-term vision broken down into short-term targets. 5.46% growth per year in international enrolments for the first five years seems a good idea. It will not surprise the observant and mathematically minded readers that this would take the UK to 600,000 enrolments by 2022.

After that a different set of issues would begin to emerge as the global picture and the UK’s own demographics begin to change. By 2025, according to the ONS, the number of 18-20 years olds in the UK is likely to be back to 2014 levels and will continue to grow rapidly to 2030 which might bring very different pressures on the sector.

The tension between long and short term is very real and I am reminded that John Maynard Keynes said, ‘The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.’ Education is a long-term business but the needs of the sector are both urgent and important. It would be good to see the Government responses couched in equally urgent terms.

Brexit – University Challenge But Pathway Provider Opportunity?

Last Friday saw a pretty eye-catching announcement by the University of Surrey whose problems appear to demand radical cost-cutting action including offering all staff voluntary redundancy. One highlight was Vice-Chancellor Max Lu’s comment that ‘Some of the main financial challenges include reduced income due to Brexit….’. If that’s right a number of universities might be even more troubled.

In 2017/18 the average percentage of EU students (defined as EU domiciled but non-UK) in all degree awarding institutions listed by HESA was 5.94%. With an EU population of 9.9% Surrey was considerably above the norm but far from alone with Lancaster University and City University at 10.1% and 10.5% respectively. This might go some way to explaining Lancaster’s desire to set up a remote campus in Germany.

Leaving aside relatively narrow, specialist degree awarding institutions, Cranfield with 21.2% EU and University Colleges Birmingham with 20.6%, look to have a lot at stake. The broadly-based university with greatest exposure seems to be Aberdeen where 19.9% are EU. If the big brands and specialists are able to overcome any Brexit jitters the next most vulnerable English university looks to be Essex with 12.8% EU.

Table 1: Top 20 Universities for EU Students As A Percentage Of Total Enrollments (excluding specialist institutions) 2017-18

Of course, the spectre of Brexit may just be the University of Surrey’s way of getting impetus for restructuring. To be absolutely fair Lu’s comments continue, “… and an ever more competitive student recruitment environment, significantly increasing pension costs and a national review of tuition fee levels.”. That would be true for every university so it is interesting that he adds, “Our university also faces the not inconsiderable impact of a fall in our national league table positions.”

The potential for league tables to create such havoc with a University’s finances is troubling and needs consideration at another time. But the potential for a sharp fall in European Union recruits is certain to be a concern for those institutions with heavy representation and it would bring even sharper competition to the battle for UK and full-fee paying international students. In that respect the bigger brands have an inbuilt advantage and will be looking to take an even bigger share of the market.

As Brexit plays out it will also be interesting to see if more pathway operators are able to convert university nervousness about recruitment into opportunities for partnership. Navitas seem to have a head start in operating overseas campuses for partners, but QA Higher Education operates UK campuses with full-degree courses for several of its partners, and INTO have been doing the same for Newcastle University in London. It’s an interesting development area for pathway operators attempting to diversify and deepen their services.