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Strayer U.’s Discounts Reflect Shifts in For-Profit-College Sector

With enrollments still falling and costs for recruiting students still rising, companies that run for-profit colleges continue to scramble: Some are offering bigger scholarships, some are instituting selectivity in admissions so they enroll students more likely to graduate, and some are holding the line on tuition increases for current students to deter them from dropping out.

For Strayer Education, the approach seems to be “all of the above.”

As it reported last week that its new-student enrollments were down 14 percent from the same period a year ago, the company also announced the creation of a new Graduate Completion Fund, which will allow Strayer undergraduates who complete three-quarters of their courses to receive the final quarter of their courses free. The company also announced that it would freeze tuition for all current undergraduates (at $1,700 a course, its charges are at the high end among those in the for-profit sector), and impose no tuition increase for 2014.

Strayer, which also offers graduate programs, enrolls about 46,000 students.

“Affordability had just become a large issue for our students,” said Robert S. Silberman, Strayer’s executive chairman, in an interview.

The university also announced that it would no longer allow first-time college students who need remedial mathematics or English classes to enroll online. Some institutions, most notably California State University, are proposing to offer remedial classes via MOOCs and other online formats. But Strayer officials said their research showed that such students—who typically account for about 25 percent of the university’s entering classes—don’t fare as well in online courses as they do in face-to-face classrooms.

Similarly, the Graduate Completion Fund is open only to students who don’t skip more than one term, because Strayer’s research showed lower graduation rates for students who took off for more than one term. (And, of course, the stipulation also limits Strayer’s expenses for the program.)

Stock analysts say the moves are emblematic of changes many for-profit-education companies are making in an attempt to attract students who will persist. Some of this is driven by tougher regulations on student-loan-default rates. And some of it, said Jarrel Price, of Height Analytics, is driven by how the market has changed.

Competition from nonprofit colleges and the ban on paying recruiters based on the number of students they enroll mean the cost of recruiting a student, especially a quality student, has gone up. “They can’t churn and burn anymore,” Mr. Price said. ”It’s uneconomical for them.” Now, he added, “there’s a financial incentive to focus on retention.”

Others say the moves reflect a recognition by Strayer that its prices were just too high. For a student entering Strayer with no college credits, a bachelor’s degree would cost $68,000 before the new persistence discount. Its prices were “out of line with the markets they were serving,” said Trace A. Urdan, an analyst with Wells Fargo Securities.

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