Enrollment at the Suzanne Dvorak-Peck School of Social Work exploded after USC accepted an online degree program. The school is currently facing a budget crisis that could result in nearly half of the staff losing their jobs.
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A decade ago, USC was finding its way into online education, which promised a new influx of tuition money without the need for additional dorms and classrooms.
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Under Provost C.L. USC’s Max Nikias has signed on with an East Coast digital learning startup, and the university’s renowned school of social work will soon launch an online master’s program.
Enrollment is exploding. The student body grew from about 900 in 2010 to 3,500 in 2016, and the School of Social Work became the largest in the world.
This rapid growth, intended to ensure a stable future, instead left the school in disarray. As the Times reported in May, USC’s Suzanne Dvorak-Peck School of Social Work is facing a budget crisis so severe that nearly half the staff may lose their jobs.
While USC has yet to detail the full scope and causes of the financial crisis, several things are clear: Hiring teachers and administrators for online programs is proving costly. Fees for companies operating digital learning platforms account for more than half of online tuition revenue. More cheap programs are coming on the market. And the pressure to fill online classes led to the admission of less qualified students, a decision that many faculty say hurt the learning experience and the school’s reputation.
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Efforts are underway to restore admissions standards, but stricter standards mean fewer students and less tuition money for schools.
USC’s problems have spilled over onto Wall Street, where a startup the university partnered with years ago has become a publicly traded company valued at more than $2 billion. Maryland-based company 2U Inc. Now serves universities across the country and abroad, but it depends on USC for about a fifth of its revenue.
Industry analysts have repeatedly pressed 2U executives about the situation at the school of social work, and the company lowered its revenue forecast last fall, citing some volatility at the University of Los Angeles.
“We will continue to work with the school to bring about the best results possible,” 2U Chief Executive Chip Paucek said in a February earnings call. “We have to be patient here.”
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The company said it did not contribute to the social work school’s financial problems, saying in a statement to the Times, “2U has consistently met our financial contribution goals for the school.”
The university, which has a contract with the company until 2030, said the reasons for the school’s budget problems were “broader” than its relationship with 2U.
The seriousness of the school of social work’s problems is evident from the measures being considered to stabilize its financial situation. Part-time teaching positions were largely eliminated and professors were required to carry a heavy course load. A university committee has recommended retrenchment of up to 45% of non-teaching staff. A USC spokeswoman said in a statement that “all administrative costs” are being investigated for savings and that the human resources department “continues to work through the staffing impacts that will appear.”
2U deducts 60% of the online tuition from the social work program, and the contract contains stiff penalties if USC breaks the rules. People familiar with the deal told The Times that it has a so-called poison tail that requires the university to continue handing over its share of the revenue for two years after it is revoked.
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Paucek, the CEO, described the company’s agreement with the university as essentially “irrevocable.” In a statement, the company said the provision, called an “education” clause, was justified based on 2U’s initial investment of up to $10 million in new degree programs. The division also ensures that 2U students help recruit and enroll in promised services, the company said. Its statement noted that since it was founded in 2008, “the company has not had a client fail to renew a graduate degree program contract.”
Before commencement last month, the school told faculty and administrators they expected some attendees to have concerns about 2U. If parents or students raise the issue, the circular said, they should respond that there are no plans to end the partnership “at this time”.
2U, originally known as 2tor, began pitching to USC soon after its debut. It has no track record with the university but an interesting perspective. The founders, Princeton Review alumni and Hooked on Phonics, say they are committed to breaking down barriers to education. His motto is “No back row.”
With 2U, students attend live online classes where about a dozen students and a professor can see and talk to each other with minimal preparation compared to the game show “Hollywood Squares.” The experience is designed to be of a higher quality than other programs on the market that offer recorded lectures, e-mail tutoring and, for some, a sense of isolation.
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Nikias, who served as president from 2010 until last year, was concerned that virtual learning would diminish the diverse student experience of learning on the University Park campus, so he focused USC’s online efforts instead of graduate students. Many of them are working professionals who would benefit from the flexibility of an off-campus program.
USC’s Rossier School of Education launched a master’s degree in teaching through 2U in 2009. Started school of social work in 2010.
Marilyn Flynn, former dean of the School of Social Work, told the Huffington Post in April that Nikias explained that she wanted him and his colleagues to accept the online degree program.
“Our merit review will show our ability to do that,” said Flynn, who left USC last year following a criminal investigation into donations from local politicians.
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Asked if Nikias pressured his dean, a university spokeswoman said that while USC leaders support online learning, that decision is left up to the individual dean.
“Everything was perfect,” said Shona Shaw, 29, a single mom in Atlanta who works full-time and takes classes in the evenings when her son sleeps. The first time he set foot on the USC campus as a student was in May, when he received his diploma.
Flynn was so impressed with the technology that in 2015 he recorded a message for a Wall Street analyst praising the company as “the gold standard in online education.” He said the partnership left him with a “positive revenue stream.”
“I am the best person in the United States to talk about this company. And what you hear from me is what I think you can count on,” Flynn said.
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The company seems equally troubled. “You could argue that 2U wouldn’t exist without USC,” Paucek, the CEO, told corporate analysts in 2017.
As part of the contract renegotiation, the company donated $2.5 million to the School of Social Work to endow Flynn’s academic chair and made a separate donation to a $6 billion capital campaign led by Nikias. Pausek’s wife, Gabrielle, graduated from USC in 2012. enrolled in teaching in its online master’s program and later that year filmed a promotional video praising it as “the best program out there.”
USC offers more than half a dozen online degrees through 2U, including physical therapy, public policy, design and school counseling.
Trojan money poured into the treasury of the company. When 2U was announced in 2014, about 70% of its revenue came from just two USC programs: master’s degrees in teaching and social work. Last year, USC paid 2U at least $166 million, tax records show. As of last year, more than 20% of the company’s revenue came from universities.
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The relationship between 2U and USC is so close, Pausek once told an industry conference that the provost, Michael Quick, called him out of the blue and invited company officials to dream of offering a new graduate degree for the university. given
“Now, by the way, it’s a good day,” Pausek told the group. 2U, she said, opted for an online master’s degree in nursing that began in 2016 in the School of Social Work.
When asked about Paucek’s account, a USC spokesperson did not dispute it but said in a statement, “Ultimately, the dean and faculty of a particular school determine which online programs, if any, are offered. is done.”
Meanwhile, 2U pitched to other universities and eventually signed on to offer social work degrees at Simmons College in Boston, Fordham University in New York, the University of Denver and Baylor University in Texas.
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2U’s new social work program and other programs established at rival universities are significantly less expensive than USC’s social work master’s, which runs up to $116,000 for a two-year degree, and cheaper competition is reducing the university’s applicant pool.
2U has an aggressive marketing arm that uses social media to target prospects and employs a team of digital journalists to produce articles that raise the profile of its degree program.
Even with this effort, USC
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