Education on the Cheap

Publicly funded online schools run by private companies have been controversial with teachers groups and some education advocates since they started to take off a few years ago. But the concept of educating kids by computer has a strong appeal—not just among lawmakers but also among portfolio managers and investors. The two biggest companies offering online education—K12, Inc. and Connections Academy—are both for-profit, and until recently K12 had been a stock-market favorite. But an article this week on Seeking Alpha, a major investment website, casts doubt on the long-term profitability of K12 in light of poor student results.

In the past few years, school districts and charter schools have increasingly subcontracted out certain operations to either Connections Academy or K12, Inc. In many states, lawmakers embraced the idea, which promised to bring private-sector efficiency to education. Online education also offered an idyllic image: Kids can take classes anywhere, at times that work for them. Students with special needs can have tailor-made classes.

But poor student performance has plagued these programs. The K12 virtual academies in several states show high "churn" rates—students enrolling and then leaving the schools. According to some reports, teachers sometimes teach up to 70 students, which delivers bigger profits but poor test scores. The increased scrutiny has left some lawmakers concerned about the policies around online education and less eager to expand existing programs. That's a big problem for companies that rely on public dollars for a big portion of their profits.

"The growth of the student bodies themselves are a clear testament to the popularity of the school choice and charter school movement, as well as K12’s comprehensive online marketing and enrollment advisory efforts," writes Roddy Boyd in the Seeking Alpha story. "Just as evident, however, is another reality: the fact that these cyber schools might as well have a turnstile as their logo for the volume of withdrawals they experience."

Boyd is hardly the first person to notice the disturbing "churn" rates at K12 schools. A New York Times story last year excoriated the effectiveness of K12 schools, noting particularly the retention problems. “The kids enroll. You get the money, the kids disappear,” said one professor in the story who had studied for-profit "education management organizations," the technical term for companies like K12. The Times story focused on the problems in Pennsylvania. Boyd further notes that the K12's virtual academies have the same problem across the country. K12-run Ohio Virtual Academy, for instance, has a churn rate of over 51 percent.

Connections and K12 put a lot of resources into public relations. K12, Inc. spends millions on lobbying efforts while Connections Education's Mickey Revenaugh, the executive vice president for sales and marketing, also serves as the private chair for the Education Task Force at the American Legislative Exchange Council. ALEC is the powerful, Koch-funded organization that helps connect conservative lawmakers and corporations, and has had a major role shaping policy, particularly at the state level.

What's heartening in this case is that it appears that K12's poor results may have investors taking note. Either the company will improve its program at their behest, or policymakers will start shutting the door on the company. Either way, these companies probably won't have much luck if they continue to offer shoddy educations while raking in profits.

It may be easy, then, to say use this as an example of free-market capitalism improving the education system. But you also have to wonder if the emphasis on turning a profit, rather than delivering an optimal education, wasn't the problem in the first place.


This is no big surprise that these for-profit companies are "raping" public education and the legislators they "paid off" are allowing them to do it for campaign contributions. They "falsify" their results and win on wall street but the children are the ones who lose out. Around the country especially in In Iowa, LRN made an aggressive push to enter into the Iowa school systems. It has already contracted with a school district and begun signing up students. Unfortunately it came to light that the service that K12 offers (virtual online education at home) is prohibited under Iowa state law, which states that "telecommunications shall not be used by school districts as the exclusive means to provide any course which is required by the minimum educations standards for accreditation." In short, LRN contracted with the school districts but the school districts do not have the authority to sign such a contract. K12 had expected as many as 300 students to sign up by March 1, but reportedly has "fewer than 50 so far. In Mississippi (another big push state for LRN), the state's recent education bill expressly prohibited online education. Sen. David Blount gave the amendment to pull the provision out, saying Mississippi does not need to experiment. "There's just not the evidence there that virtual charter schools have been successful," said the Democratic senator in the state senate.

In Arizona, writer David Safier updated his 2008 findings about LRN outsourcing student papers to India for grading. After the practice was uncovered in 2008, K12 quickly discontinued the practice and noted that it was limited to the Arizona schools only.

Safier recently presented his findings that the practice of outsourcing papers to India extended to 10 of LRN's schools, which incidentally are the largest of the company's schools and account for a majority of the students. The outsourcing practice extended beyond Arizona to Colorado, California, Ohio, Pennsylvania, Chicago, Minnesota and Washington. In other words, Safier makes the case that outsourcing student papers to India was not an isolated oversight, but was an institutional decision.

In Texas, The Texas Observer recently described in detail how one K12 school was effectively shut down due to underperformance only to reopen after partnering with a new school district. The net effect was that the previous school (and its poor track record) was eliminated, and a new school (with a new identification number and no track record) was created. The new school would employ the same teachers and enroll the same students. It is certainly a very novel and creative solution to the problem of having one of its school close, but it seems to indicate that K12 is more concerned about maintaining enrollment than it is in fixing the problem of chronic underperformance.

The list of scornful local press coverage goes on much longer. But the recent article from deserves some attention of its own. The main focus of the article is "churn." Although K12 has been increasing its enrollment numbers at a notable clip, the dropout rate is downright alarming at 25% to 50% per year. This compares to a typical dropout rate of around 5% per year for brick and mortar schools (i.e. an 80% graduation rate over four years). This raises two very troubling prospects. First, until such time as they are coded "withdrawn" these students continue to generate revenue for K12 from state tax dollars. Second, it creates a massive incentive (a necessity in fact) for K12 to aggressively court new students to replace the dropouts. This has given rise to a host of critics who assert that K12 is a fantastic marketer but, as described in the New York Times, a dismal educator.

You need to look at HOW we educate our children and don't sell their futures to Wall Street or a slick talking, suit wearing person like Ron Packard who never had a child in PUBLIC SCHOOL but pays his children's tuition on the backs of our children.

Education for all inherently means that it should be driven by compassion not greed. So, for-profit edtech companies have got it all wrong, conceptually. And that is why the OER movement is sweeping the digital revolution in education. They have heralded a new paradigm in education, offering new opportunities no not just bring down the costs of education, but also in some cases, like CK-12 FlexBooks, improve the quality of the content and its delivery. No wonder it’s a part of big state projects like Utah Open Textbook project, California digital textbook initiative etc. CK12 is just one example. An entire OER movement is silently but surely making its mark on the education landscape, unapologetically and assuredly!

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