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Deal with online giant threatens Pennsylvania colleges, Moody’s warns

Southern New Hampshire lures community college students with discounted tuition and easy credit transfer policy

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If you want to understand how online degrees are shaking up traditional colleges and universities, look at Pennsylvania. In January 2020, the state’s 14 community colleges signed an unusual agreement with a private nonprofit university far outside Pennsylvania’s borders to encourage students to complete their bachelor’s degrees online.

As part of the agreement, Pennsylvania community college students who are enrolled in two-year associate or shorter programs can automatically transfer up to three academic years’ worth of classes (90 credits) to Southern New Hampshire University and pursue bachelor’s degrees. That’s a significant gift to students who often struggle to transfer their community college credits to four-year institutions. In addition, Pennsylvania students will receive a 10 percent discount off the tuition at Southern New Hampshire University, making the out-of-state online degree cheaper than what they would likely otherwise pay at a public university in the state.

Southern New Hampshire University used to be unknown outside New England but it’s quickly grown since the 2008 recession to become a national online degree giant with more than 130,000 students. When a behemoth like that moves into Pennsylvania looking to grab market share, analysts pay attention.

Moody’s Investors Service rates the bonds of many universities around the country and it issued a report on Jan. 27, 2020 calling Southern New Hampshire’s incursion into the Keystone State “credit negative” for all of Pennsylvania’s four-year colleges, from Penn State to Temple University. Moody’s said students who might have otherwise transferred from a community college to an in-state institution might be enticed by the cheaper tuition, the convenience of online learning and the easy credit transfer policy and enroll at Southern New Hampshire instead. Each year, 25,000 Pennsylvania community college students transfer to in-state colleges to pursue bachelor’s degrees, according to the Moody’s report. Losing even some of them is going to hurt Pennsylvania colleges, which are already struggling with declining numbers of high school graduates.

Moody’s also said that the entrance of a large online player will make it harder for Pennsylvania institutions to operate their own online degree programs, which many were hoping to expand to offset enrollment and revenue declines. Just as in other industries, like retail, the economies of scale online enable big players to generate more profits, charge less to customers and become even bigger.

“We’re saying that the business conditions have become more challenged in Pennsylvania because there’s a competitor that’s coming in that has demonstrated success in growing online programs at a cost-effective rate and it could shift enrollment that would have gone to those colleges,” said Susan Fitzgerald, who leads the higher education and not-for-profits ratings team at at Moody’s. Although Moody’s negative analysis doesn’t affect any college’s current ability to borrow, Fitzgerald explained, it’s a warning that colleges are going to be facing additional market pressures.

Pennsylvania is one of three states that have signed statewide agreements with Southern New Hampshire University; the others are Kentucky and Massachusetts. Moody’s hasn’t explicitly highlighted the business risks for universities in those other two states but it says it expects big online providers to continue to cross borders and extend their reach around the country. Moody’s analysts said they’re also paying close attention to online degree programs run by Purdue Global and Arizona State University. Arizona State is entering into agreements with many companies, such as Starbucks, which is another way that online giants are steering students away from traditional public colleges. The U.S. Navy is also opening its own online college, which could entice officers and enlisted personnel away from state and local institutions, Fitzgerald added.

“It points to increasing cross-border competition in higher education in a way we haven’t seen before because technology permits that,” said Fitzgerald. “It’s a dynamic, challenging environment.”

Related: Weakest students more likely to take online college classes but do worse in them

The competition could be a good thing for students. The 10 percent discount at Southern New Hampshire boils down to $288 per credit hour, or $864 per course. A traditional full-time academic year of 30 credits would add up to $8,640, which compares favorably with the public universities in Pennsylvania. According to Pennsylvania’s State System of Higher Education, at a group of 14 public universities in the state, such as Kutztown and West Chester, average tuition and mandatory fees exceed $10,000.

Transferring credits is a major obstacle for community college students. Often the courses they’ve already taken at their community college don’t meet a four-year institution’s requirements. For example, a basic health class at Harrisburg Area Community College, “Foundations of Cardiovascular Medicine,” doesn’t transfer to Lock Haven University, a public four-year college in Pennsylvania.*  Sometimes the psychology department will accept credits from a class that the nursing program won’t at the same university, forcing a student retake early classes, such as algebra. That adds time and cost to a bachelor’s degree.

There’s a website to help Pennsylvania students figure out which courses transfer. It’s mind bogglingly complicated. After a few minutes on it, I wanted to raise a white flag and surrender. In their defense, these are separate colleges with separate faculty. They’re entitled to set their own requirements for their graduates and maintain their high standards. But it’s not easy for transfer students to navigate.

I talked with Elizabeth Bolden, the president and CEO of the Pennsylvania Commission for Community Colleges who signed the agreement with Southern New Hampshire, to understand why she chose to partner with an out-of-state giant that could harm the health of Pennsylvania’s colleges. She explained that Southern New Hampshire approached her and that the proposal met the criteria of being in students’ best interests. One of the missions of community colleges, she explained, is helping their students  transfer to four-year schools to get their bachelor’s degrees and helping the state meet its goal of getting 60 percent of Pennsylvanians ages 25-64 a post-secondary degree or industry-recognized credential by 2025.

“There is nothing I would like more as a Pennsylvanian than to strengthen transfer pathways within the state of Pennsylvania,” Bolden said. But she explained that no in-state college or university had yet given her a proposal for a simple statewide transfer of community college credits. “My students cannot wait for those offers to arrive on my desk. So while I wait, I will continue to ensure that our students have the opportunities they need to get a degree, get a job and move their families forward.”

Bolden says she’s received additional proposals from out-of-state online providers that the community colleges are considering.

One important drawback to the new agreement is that what appears to be in a student’s immediate best interest — quicker degrees and lower costs — isn’t always the best education. A lot of research has shown that students learn more in person than they do online, especially the kind of lower achieving students that community colleges serve. It’s noteworthy that the graduation rates are higher at many of Pennsylvania’s public four-year institutions than they are at Southern New Hampshire. For example, 54 percent of Southern New Hampshire’s full-time students obtain a bachelor’s degree in six years. At West Chester University, 75 percent of the students graduate within that time period. Incentives for students to learn online could leave many Pennsylvania transfer students still falling short of their ultimate goal.

* Clarification: An earlier version of this story noted that credits from “Fundamentals of College Writing I” do not transfer to Lock Haven, but that remedial course, below a 100-level, doesn’t earn college credits for students at the community college either. 

This story about transfer credits from community college was written by Jill Barshay and produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.

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Jill Barshay is a staff writer and editor who writes the weekly “Proof Points” column about education research and data. She taught algebra to ninth… See Archive

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