Education Exports

Trying to Make the Grade in Germany

Iserlohn PR
The American way in Germany.
  • Why it matters

    Why it matters

    Germany has free university education but private, state-approved universities continue to pop up around the country, often controlled by American education conglomerates unfamiliar with local education structures.

  • Facts

    Facts

    • Apollo Education Group, Inc. currently holds $3.6 billion in debt. Laureate International Universities is in debt to the tune of $4.7 billion.
    • Laureate operates more than 80 institutions, both campus-based and online, in 28 countries.
    • Former World Bank president Robert Zoellick is on Laureate’s board and, for a fee, former U.S. President Bill Clinton was the company’s “Honorary Chancellor” from 2010 until 2015.
  • Audio

    Audio

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The Business and Information Technology School, or BITS, a private university in Iserlohn, a town in western Germany, is a cog in a bigger machine, belonging to Laureate Education, an education conglomerate with over 80 universities worldwide.

And it is part of a flock of corporate-run education models recently imported to Germany, a country better known for its history of state-subsidized university education.

Recently Apollo, another American education company set up shop, and a subsidiary of Apollo Education Group now owns the International University of Bad Honnef-Bonn and its holding company.

This reflects the increasing allure of the German college market to investors. However, insiders told Handelsblatt that the academic newcomers are coming up against a very different education culture.

Two sources close to BITS told Handelsblatt that a culture clash was in full swing and criticized the private university’s fixation with numbers, its frequent and unrealistic goals, and the fact it gave little leeway to those in charge.

But BITS Rector Stefan Stein rejected these claims, arguing that the institution he runs is ambitious and has goals: “BITS would be a badly-run corporation if it didn’t have a strong business plan,” he said.

He also refuted talk of a “hire and fire” policy at BITS, a reputation generated by the exit of both the university’s chancellor and its managing director last year. But Rector Stein, who filled the top post shortly after, played down the changes as “strategic decisions.”

BITS insiders argue that the waning number of students reflects the university losing its foothold in the region.

Similarly, the Berlin University of Art and Design’s Hamburg campus (BTK), which Laureate bought in 2011, has also just lost its managing director. “As in any business, there will be occasional changes in leadership,” said marketing director Andrea Lentfer.

Laureate’s German subsidiary company has a new managing director, Haris Hassabis, formerly the firm’s managing director for France and Morocco. It remains to be seen whether he has done his homework on BITS and the nuances of the German market.

And Laureate has played up its plans for Europe’s largest economy. In 2012, its managing director for Germany said that the company’s purchase of the BTK and two other academies in 2011 would not be their last. But the pledged shopping spree never happened.

Rather they boosted the number of students and invested in their existing establishments, in particular expanding their locations in Berlin and Hamburg. One year ago, Rector Stein outlined his aim to double the student body at the BITS in Iserlohn “from the current 1,500 to 3,000 students in the upcoming five years.”

But, in reality, contrasting signals are emerging from the company, not least its statement dating from December, where the BTS said would axe ten jobs. Today, the private university admits that the job losses reflected the university’s decreasing enrollment.

When the first graduating class completed the German Abitur, the end of high school examinations, in 2013, there were double as many freshmen entering universities, as students could do an accelerated Abitur exam, taking eight rather than nine years. Three years later, however, enrollment is expected to drop.

But rather than blaming demographics, BITS insiders argue that the waning number of students also reflects the university losing its foothold in the region.

According to Germany’s official Federal Register, the profit-driven BITS broke even in 2014, after three years in the red. Laureate however declined to comment on its current financial state as it intends to go public in the United States.

In the United States, however, its problems are piling up. At present, Laureate is $4.7 billion in debt. According to papers filed with the SEC for the company’s planned IPO, the Baltimore-based company made $2.2 billion in the first half of 2015 but remained in the red to the tune of  $171 million. The education conglomerate hasn’t turned a profit since 2010.

Laureate founder Douglas Becker snapped up 50 universities and other educational institutions around the world since 2008, mostly in South America. All in all, the network has over one million students in 28 countries and an impressive list of directors to boot.

The former president of the World Bank Robert Zoellick is on the board and, in exchange for a few million dollars, the former U.S. President Bill Clinton became the company’s “Honorary Chancellor” in 2010, a post he held until 2015.

Walden University in Minneapolis is one of Laureate’s flagship institutions. A quick look at the statistics shows that Walden’s student debt amounts to $9.8 billion, according to a study by the Brookings Institution, making Walden University the institution with the second highest student debt burden in the United States, second only to Apollo’s University of Phoenix.

 

Stefani Hergert reports on education for Handelsblatt. Thomas Jahn is one of Handelsblatt’s New York correspondents. To contact the authors: hergert@handelsblatt.com, jahn@handelsblatt.com

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