Dear Colleague: Emerging Education Models and Their Potential Impact

Memo: Emerging Education Models and Their Potential Impact

To: Colleagues 

From: Michael Clifford (MKC) 

Subject: New Education Models in State and Private Institutions 

Overview

A new operational model is rapidly emerging within state institutions, with some private institutions also adopting this approach. This memo aims to provide insight into this trend and its potential implications.

Key Elements of the New Model

1. Outsourcing Operations: Institutions are outsourcing every operational aspect while retaining faculty governance. This arrangement involves adjunct faculty on their payroll and a structured agreement for faculty governance.

2. Cost Structure: The only expense for these institutions is maintaining their accreditation. The model is based on cash payments with no involvement from the Department of Education.

3. International Partnerships: State universities are currently outsourcing to China, including all operational functions. They get paid for the accreditation and granting the degree, receiving 20% of the tuition with zero costs. We believe this is a mega trend in the early stages. Two more are adopting a similar model in India.

CFOs Emerging Control

Partner organizations initiate these deals by approaching the institution's CFO. The CFOs, under significant pressure and with the authority to implement changes, are key to the success of this model. The academic leadership will not, nor has ever, paid attention to the financial viability of their institutions. Savvy CFOs are taking control with the support of their Boards.

Financial Impact

1. Surplus Generation: The pitch to CFOs includes projections of generating a $1 million surplus in the first 12 months, $2 million in the second year, $3 million in the third year, and continued scaling thereafter.

2. Cash Flow and Revenue: This model is attractive to university auditors as it involves cash inflow from external sources with no outflow. Although it functions as a revenue share (with the university receiving 20% of the revenue and no costs), it is structured to show only positive cash flow.

The Trump Factor

And then there is the Trump Factor. Leaders are not paying attention to serious ramifications of his mandate to close all 5,000 accreditation commissions and the Department of Education in February 2025. MKC is creating strategies to take advantage of these new policies, which will lower available Title IV funding by two-thirds for schools.

Accreditation Challenges

It appears that the current six regionally accredited commissions are crumbling under their own self-imposed regulations around the closing of a school. With an estimated two closures per week, they can't function effectively. The big state schools ignore them now. I was in a meeting with the Provost of Stanford and the Provost of the UC system with WASC when they told them they don't need WASC. Most private schools are now just "advising" the accreditors of what they are doing versus asking permission. Times are changing rapidly.

Conclusion

CFOs are finding this model beneficial due to the new surplus cash generated without related expenses. This emerging trend could significantly impact how educational institutions manage their operations and finances.

Just a heads-up on this evolving model and its potential to transform our sector.