Dive Brief:

• Zovio's long-sought conversion of its for-profit Ashford University to an independent nonprofit college, AU NFP, now has the approval of its accreditor, WASC Senior College and University Commission.
• The change, which was announced Monday and is expected to close during the third quarter, comes five months after the IRS signed off on the change of control. The U.S. Education Department is reviewing the change.
• Zovio will continue its transition from college operator to education technology services company, providing some services to Ashford.

Dive Insight:

Getting WASC's approval was critical, though it was expected to be a challenge. The accreditor twice deferred Zovio's request to spin off Ashford citing the need to review more documentation. The commission also voted to extend Ashford's accreditation for another six years. 

The move comes as Zovio, which changed its name from Bridgepoint Education earlier this year, presses on with its plan to become a service provider to colleges — including, but likely not limited to, Ashford. In recent months, Zovio has acquired a boot camp, a tutoring platform and told Education Dive it may add an online program manager.

"Zovio has deep expertise delivering innovative solutions using predictive tools and analytics to improve the likelihood of learning success," Barrington Research analysts wrote in a note Monday about WASC's approval. Recruitment, retention and the "learner experience" are areas Zovio expects to tap into. 

It and other for-profit college operators are going after that market in an effort to find cover from heightened regulatory scrutiny, the sector's tarnished reputation and more competition for its target students from nonprofit institutions. 

Some are spinning off their colleges as nonprofits in an effort to ensure they have a customer base from which to launch — aided by lax oversight at the IRS, critics say. Zovio's plan have drawn criticism from a watchdog group that noted the company announced its change of control plans shortly after a lawsuit alleging Ashford recruiters used deceptive practices.

Last year, Grand Canyon Education spun off Grand Canyon University as a nonprofit to which it now provides some services. And Kaplan struck a deal with Purdue University to sell its Kaplan University in exchange for staying on as a services provider with a revenue-share agreement.

Zovio, then Bridgepoint, announced in March 2018 its plans to merge Ashford with another for-profit, the University of the Rockies, and separate the resulting entity as a nonprofit.

In a call with investors last year, Zovio CEO Andrew Clark said the company would expect to get a 60% to 65% cut of revenue for the services it provides Ashford. That's a similar share to what GCE is getting from GCU.

Amid the change, Zovio has its sights set on attracting new students to Ashford, catering to students looking to advance their careers through skills training, and embarking on employer partnerships, a spokesperson told Education Dive earlier this month. 

Zovio's enrollment, through Ashford, fell 15% from 2016 to 38,000 in 2018 as its revenue decreased by about the same percentage for the period, to $443.4 million. In its latest annual earnings report, the company attributed the enrollment decline to a strong job market, increased regulatory scrutiny of higher ed and internal changes to raise its academic standards.

Reversing the enrollment trend would require attracting and retaining more students in existing markets and adding new academic programs, the company wrote. Barrington analysts expect improved retention to stem the decreases, and they are predicting a slight gain in new students.