Capella Education gains U.S. approval for self-paced degree track

Capella Education Co. unveiled a new style of self-paced online education that it said could save time and money for students, and allow them to get degrees faster.

On Monday, the U.S. Department of Education approved Capella's FlexPath degree track, which is based on self-learning and demonstrated competency rather than on time in class or credit hours.

The company submitted the program for review after the department in March notified educational institutions of its interest in promoting what has become known as "competency-based" education.

As a result, the Minneapolis-based company's main service, called Capella University, will begin in October to offer FlexPath options for two of the 47 college degrees it offers, the bachelor of science in business and the master of business administration, or MBA.

"The traditional theory of higher education is that if you spend enough time on a subject, learning occurs," Capella CEO Kevin Gilligan said. "But that's a fallacy, because learning time varies. Some people learn faster than others, and for those people the extra time in school won't help them."

Capella's students are largely working adults who turn to its online courses for undergraduate and graduate degrees. The company is the second in the country, following the College for America program at Southern New Hampshire University, and the first for-profit education firm to receive government approval for the competency-based approach.

The innovation comes even as nontraditional colleges continue fighting to demonstrate their value and overcome other criticisms. A year ago, a U.S. Senate committee produced a report that said many students of for-profit colleges leave without getting a degree and are saddled with high costs. A trade group of for-profit universities called the report flawed and unfair.

The company has been working on regulatory approval since the government's March request and investors have been anticipating it. Jerry Herman, an analyst with Stifel Nicolaus in Baltimore, said in a July report that FlexPath "could help improve affordability, time to completion, flexibility and return on investment for learners."

The big difference between FlexPath and regular Capella classes is that there are no official timelines and no scheduled classes, said Chief Academic Officer Deb Bushway.

"Assessments are provided by the faculty, but learners can take as little or as much time between assessments as their time and expertise allow," Bushway said. "They are not on a calendar, and there are no seat-time requirements."

Under the FlexPath program, students wouldn't "test out" of classes to get credits, as college students have done for decades, Gilligan said. Instead, they would write papers and demonstrate to faculty members that they had mastered concepts, such as how to read and use a balance sheet.

While Capella officials are convinced that FlexPath works as well as regular college classes, they say they can't prove it yet because only about 400 Capella students have tried it during a test phase. Kinney said more time is needed before the effectiveness of FlexPath can be proven.

The executives hope that FlexPath will help Capella reignite its growth. The company's revenue fell 2 percent last year to about $420 million and continued to drop at a similar rate through the first two quarters of this year.

"In 2010, the market began to change dramatically with demand becoming flat and not growing," Gilligan said. "As a result, we needed to change our business model to compete."

Kinney said it's unclear how big the market is for the FlexPath concept but added, "There are pockets of students out there for whom traditional higher education and traditional online education are not working."

FlexPath is just one of the steps Capella has been taking to regain the ground it lost during the recession, when many would-be students lacked the funds for school or questioned whether an advanced degree was the key to getting a better job.

The company tried to step up its marketing as well as its academic program, Gilligan said. In marketing, it tried to switch from direct marketing to using social media and TV advertising to build brand awareness.

One such venture, called Sophia, is a social learning experiment in which Capella provides free YouTube-like tutorials for high school students and teachers. A pay ­version offers videos that enable students to earn college credits.

Capella also has ventured into business training courses. And it is offering courses through a partnership with Knowledge Delivery Systems Inc., a New York-based provider of online certification training, that help K-12 teachers keep their teaching ­credentials current.

"The innovations outside of Capella University allow us to experiment without constraints, because within a university there are requirements imposed by accreditors and regulators," Gilligan said. "And, if we want to be a growth company beyond the next five years, we must have some new businesses ­developing."

Steve Alexander • 612-673-4553