Evaluating Markets for Educational Programs
While many people believe that providing post-secondary education to more students will help our economy grow in the long term: in the short term, there are already more completions than job opportunities in the US. As shown in Figure 1, on average there are already 1.24 completions for every job opening.
Is Dental Assisting different? Sadly, no. As shown in Figure 2, there are now 1.55 completions for every Dental Assisting job opportunity. The field is 25% more “over-schooled” than the US average. How did this happen?
As you will see, a typical BLS analysis of job growth may have lead to over-building Dental Assisting programs. In addition, new competitors have emerged, but no-one shrank their programs as the new capacity came on-line. Most likely, no one really knew how many completions there were and that they exceeded employer’s demand for new employees. As a result, there is a glut–and a potential Gainful Employment problem, at least for accredited, Title IV competitors. Let’s take a look at the usual BLS information to see why companies pursued this space.
The BLS numbers for this program look great. Employment will increase from 297,200 to 388,900 in 2020 for an increase of 91,700 jobs. Combining this growth with replacement of existing workers, there will be 15,400 job openings every year. Unfortunately, everyone has access to BLS and uses it (among other tools) to select the programs they develop and offer.
As a result, the number of competitors and completions in this category have been growing faster than demand. Jobs have been increasing 3% a year, but completions have been going up three times as fast—9% annually since 2005. Recently, completions accelerated—increasing 25% in 2010.
Today, the number of graduates substantially exceeds the number of job openings. As mentioned above, BLS estimates that there are only 15,400 job openings in this field every year—but there are now almost 24,000 completions—a 1.55 completions to job opportunity ratio (CJO). The excess capacity almost doubled in 2010 alone–jumping from 3,700 extra graduates in 2009 to 8,500 in 2010. Who built this capacity?
Competition and Capacity: In Dental Assisting, the top five accredited, Title IV institutions added 1,500 completions since 2008. Kaplan alone added the 887 completions and gained two share points. However, as a group, the top five accredited, Title IV eligible institutions went from 37% of completions to 32%–a five point loss in share. So the smaller players added most of the completions. In fact, they grew by 3,200 completions in just three years. Some of these were not accredited–or eligible for Title IV; they can recruit and train students, whether there are jobs or not.
It could be that the sector is over-saturated at a national level, but has opportunities in specific local markets where there is less competition and the CJO is lower. Adding or growing a program in these markets might be attractive. On the other hand, there are markets where the competition and CJO are worse; in these locations, shrinking existing programs may be required.
Local Market Analysis: Importantly, GrayMatters includes local market data, so you can identify the competition, completions, gainful performance, and jobs in any city in the US. As an example, let’s look at the market for Dental Assistants in Cincinnati, Ohio. As shown on the map, five campuses offer Dental Assisting certificates within 35 miles of downtown Cincinnati.
Local Market Growth: Since 2007, the number of completions from these schools has grown from 36 to 149—or 33% per year. At the national level, most growth occurred in 2010, however, in Cincinnati, most growth occurred between 2005 and 2009, as three players entered the market.
Market Share: Ross Education is the share leader with 36% of completions, but they have been losing share since 2006. The new entrants have rapidly gained share; the largest, Dental Assistant Pro, entered in 2008 and now is the #2 player with 39 completions in 2010.
Job Saturation: Jobs for Dental Assistants have not kept pace with the rapid growth in completions. Through 2008, there were fewer completions (80) than jobs (102). In 2010, the new entrants, especially Dental Assistants Pro, added over 50 completions to the market. By 2010, the CJO ratio reached 1.46 in Cincinnati—almost 1.5 completions for every job.
Outcomes: This erosion in the CJO ratio is consistent with placement rates of 73% or lower for most players, including the market leader, Ross. Graduation rates vary widely, from a low of 65% to a high of 86%. Overall, one would expect potential issues with accreditation and Title IV in this market. In fact, Dental Assistant Pro does not offer Title IV loans, or appear to have accreditation. Nonetheless, their program is still attractive, since it is fast (10 weekends) and low cost ($2,650).
Interestingly, Delta Career Education is more than 10 times as expensive as Dental Assistant Pro, but it has an excellent on-time graduation rate (86%) and placement record (89%) for its 16 graduates. Delta’s estimated program revenue is five times larger than Dental Assistants Pro’s with 60% fewer completions. To us, it appears that this smaller, high-price, high-value program can compete effectively with a larger low-price program .
Funding: Title IV dental assisting schools are funded 50 to 60% by Federal loans with tuitions ranging from $15,000 to $32,000. Students attending these schools also qualify for state and federal grants. A strong contrast to the Title IV eligible institutions, the non-accredited schools provide dental assistant training for less than $3,000 and offer varying payment plans to students that allow them to pay per class in a 10 week course.
Overall, in our view, Cincinnati would be a poor location to launch or expand a traditional, accredited Title IV Dental Assistant program. At this point, it may be too late for a new non-traditional program as well. For the existing players, there will be a fierce battle to place graduates. For the traditional players, winning this battle will be critical to survival under the new Title IV Gainful Employment requirements and accrediting standards for placement. Non-traditional players avoid these constraints, while capturing share of students and completions with a low-price deal. It will be fascinating to see how this situation plays out over the next few years; in our view, whoever wins the battle for placement is likely to win the war.