Changes are likely ahead at the federal level to ease mergers and acquisitions in the higher education sector, Education Under Secretary Nicholas Kent said earlier this week.
Speaking at the P3•EDU MAP Summit at George Mason University on Tuesday, Kent said he is seeing more conversations around mergers and other collaborative efforts among colleges as they navigate financial and demographic challenges. But some of those plans have been “sitting on the table for a number of years,” slowed by protracted regulatory processes.
“The work is burdensome, it takes too long, it’s too expensive and we want to make sure that, as we encourage institutions to move faster, be more adaptable to workforce needs and what students and families need, the department is following its own advice and that we have regulations that allow us to move a little bit faster, or a lot faster than what we currently can,” Kent said.
Under the current rules, mergers or acquisitions can take more than a year and sometimes closer to two years, depending on the complexity of the change in ownership. Such processes drag on due to overlapping approvals involving the Education Department, accreditors and state regulators. Critics have noted that Biden-era rules added further complexity to the merger and acquisitions process and slowed an already glacial pace. (Biden officials have said their changes were aimed at protecting students and encouraging institutions to plan ahead.)
Ultimately the goal, Kent said, is “to make it easier for these conversations to happen.”
Although he did not commit to a specific timeline, Kent said the Department of Education aims to begin “regulating on this either later this year or early next year.” Such action, he argued, is timely because colleges are increasingly seeking partnerships as they face difficult headwinds. And given the likelihood of closures, Kent said institutions need to find ways to work together.
“Depending on how you count them, we have 6,000 institutions of higher education in this country, and not all of them are going to make it out of the next decade. And quite honestly, not all of them need to make it out of the next decade, or should. And the ones that do are going to be the ones that adapt in a variety of ways. And so we’re very excited about this idea of how can institutions work better together to serve the needs of students and families moving forward,” Kent said.
While Kent signaled that ED would look to revise rules governing ownership changes, he did not announce policy specifics, emphasizing only that such regulations would be “rightsized.”
The under secretary noted that the department would be “agnostic when it comes to the tax status of partnerships and partners” between nonprofit and for-profit colleges. (Kent advocated for for-profit colleges before taking the lead on higher ed policy at the department.) Biden officials were particularly worried about deals in which for-profit institutions converted to nonprofits or acquired a larger institution or chain.
“Is it going to serve students better? Is it going to serve taxpayers? Is it going to reduce the cost of higher education? Is it going to accelerate time to degree? Is it going to reduce student debt? These are the things that we care about in partnerships,” Kent said.
Compared to his eyebrow-raising, headline-seizing remarks at the American Council on Education’s annual conference last month in which he argued that the sector needs a “hard reset,” Kent’s comments at GMU were a welcome tone shift for college leaders. While Kent blasted the sector over concerns about transparency and outcomes at ACE, his latest message reflected opinions widely held by many in the industry: that there should be an easier path to mergers and acquisitions with fewer regulatory hurdles and more accelerated timelines.
Shawn Daley, vice president of strategic relationships and dean of the college of education at George Fox University in Oregon, told Inside Higher Ed that Kent’s remarks touched on “a reality that many of us in the field already understand: There are more institutions than projected student numbers can sustain.” That imbalance, he noted, means more college closures are certainly ahead.
“If the Department of Education can meaningfully streamline merger and closure processes, it would be a net positive for higher education. The current regulatory environment is not built for the level of institutional contraction we are beginning to see,” Daley wrote in an email.
Daley, who was the chief of staff at Concordia University in Portland, Ore., when it closed in 2020, argued that “regulatory simplification is essential.” He wrote that “a clearer, more predictable framework would allow institutions to pursue mergers, partnerships and orderly wind-downs in ways that better protect students, employees, and communities.”
Ricardo Azziz, a principal at SPH Consulting, told Inside Higher Ed that the regulatory environment in recent years has been particularly difficult, and he welcomes new rules that could ease the process.
“It is time to help institutions find merger partners and make approval for mergers easier, as long as the financial equation makes sense for students in the community,” he said. “One thing that I think is important to note in this discussion is that mergers and consolidations of institutions should always focus on what is best for their students. Otherwise, we’re in the wrong business.”
But he also stressed that the Education Department, which has seen numerous layoffs, “needs sufficient manpower to actually be able to review these mergers in a timely fashion.”
Marjorie Hass, president of the Council of Independent Colleges, also spoke at the summit Tuesday morning, where she discussed the importance of mergers and other collaborative efforts amid challenges for the sector. Although she was not present for Kent’s remarks, she told Inside Higher Ed that “the regulatory side has definitely been a barrier” to such partnerships.
Hass said she welcomes the relaxation of the regulatory burden, which she said is “long overdue,” and she “would love to see a less expensive pathway for exploration” of mergers and acquisitions, a process she notes often requires colleges to hire private consultants and lawyers.
But Hass said one question looms large about ED’s plans for reform.
“This administration is very good at destroying things, but they have not proven to be very good at building them,” she said. “Along with the changes they want to make to accreditation, we need to see, can they build a better system, or can they only critique and destroy the system we have?”
Sara Custer contributed to this report.
