The Business of Branching Out

Maryland college's payment of per-student fee to contractor in Taiwan raises questions about when practices unacceptable in the U.S. are permissible (or not) abroad.
September 18, 2007

As the number of U.S. branch campuses continues to grow – increasing from 24 in 2002 to 82 last year, according to a report from the London-based Observatory on Borderless Higher Education – concerns about questionable business practices at these potentially lucrative overseas outposts grow as well.

“If one starts looking under the rocks of this whole international business, one will find lots of sleazy things under there,” said Philip G. Altbach, a professor and director of the Center for International Education at Boston College. “A lot of this stuff exists because it is overseas and it’s a non-regulated environment and therefore both institutions in this country and also the other sponsoring countries, the Brits and the Australians and so on and so forth, can do things that are not watched very carefully and that might not be acceptable at home – but are somehow acceptable overseas,” Altbach said.

A Monday Baltimore Sun article highlighted what the reporter called “a case study of the lightly regulated trend’s promises and potential risks.” The article, which was hotly contested by university officials, described a contractual relationship that the University of Maryland University College has entered into with ST International for the recruitment and administration of its doctor of management program in Taiwan. A spokesman for the university confirmed Monday that the company, STI, receives 25 percent of each student’s tuition dollars -- an arrangement that wouldn't seem to pass muster if the program were based in the United States, where federal law bars colleges from paying recruiters based on how many students they enroll.

To minimize the university's financial risk, the 69 Taiwanese students also are required to sign an upfront contract committing to the cost of the three-year program (valued, according to the program’s executive director, Bryan Booth, at $45,600) -- unlike their peers enrolled in the program domestically.

The part-time doctor of management program has 189 students enrolled stateside, and is designed to offer practical business training with dissertations based in literature and theory but still tightly tied to actual industry needs, said Claudine SchWeber, a full professor in the domestic program. Recent dissertation topics include “A CIO Decision-Making Framework for Technology Investments in Higher Education” and “Improving the Quality of Information Technology (IT) Security Audits for Federal Agencies."

UMUC’s president, Susan C. Aldridge, stressed that ST International, which initially approached the university about the possibility of offering its management program on a pilot basis in Taiwan, is compensated not just for student recruitment, but also for the support services, infrastructure and logistical assistance that it offers. Essentially, the contractor provides the infrastructure and the logistical support -- including pre-screening applicants for the university, which makes the admissions decisions -- while UMUC provides the academic content and the faculty.

“It’s a mistake to say that this dollar amount is strictly for recruitment -- it’s not,” Aldridge said. “The amount that’s paid covers classroom space, covers computer labs, covers all the equipment, lunches and meals for students, logistical and on-the-ground transportation for the faculty when they’re there, making hotel arrangements for the faculty, office space for the faculty and Internet while they’re there, as well as recruitment,” Aldridge said.

However, critics have raised questions about whether the same arrangement, if implemented in the United States, would violate federal law by tying the compensation of a company that engages in recruitment (among other services) to the volume of students in the program -- and wonder why such an arrangement should be tolerated overseas, regardless of the inapplicability of federal laws there.

“If an institution is engaging in practices [overseas] that would either be illegal or outright unthinkable or unacceptable here, it’s a problem,” said Barmak Nassirian, associate executive director at the American Association of Collegiate Registrars and Admissions Officers. “You can’t have that kind of straightforward commission deal here in the U.S. for Title IV participating institutions,” Nassirian said, a reference to accredited colleges where students are eligible for federal financial aid funds.

“You have to believe that revenue has something to do with this. Why else would an institution engage in these kinds of practices? It’s certainly not academically justifiable,” said Nassirian. "My sense, very vaguely from afar without naming names, is that certain regions of the world are perceived as offering good business opportunities, and the temptation therefore is to simply plant a flag there and occupy a space that you might be concerned might go to someone else.”

“It’s in our mission as a university to serve students around the world,” said Aldridge, UMUC’s president. About 50 percent of the university's students are located overseas, thanks in part to the institution's historic role in maintaining contracts with the U.S. military. Domestically, about 85 percent of students are distance education learners. “We take the responsibility very seriously. We take the integrity of our academic programs very seriously.”

But at the same time, Aldridge added, referring to the risks of operating a program abroad without a knowledgeable third-party vendor, “We must ensure in these environments that we are fiscally prudent and that we safeguard the university. That does mean that we may have to put in some restrictions and constraints that we don’t have here because they are so far away.”

“The [ Baltimore Sun] article tried to make some point, ‘Well, the federal government doesn’t allow this in the United States.' That’s a completely different matter because the law is very explicit that this is to prevent inappropriate recruiting of students who are eligible for federal financial aid,” said William E. Kirwan, chancellor of the University of Maryland system, of which UMUC is a part. "The federal regulations are for a very appropriate purpose which don’t seem to me to apply in the case to overseas students, all of whom have master’s degrees, and they’re certainly not eligible for federal financial aid.”

While federal laws of course don’t apply overseas, and experts decry a lack of oversight of branch campuses and programs operating through the auspices of U.S.-based institutions abroad, they are subject to some degree of scrutiny through the accreditation process. Judith S. Eaton, president of the Council for Higher Education Accreditation, said that federal regulations stipulate that the addition of a branch campus constitutes a “substantive change” (in accreditation-speak) for an institution and therefore any new locations would be subject to review.

However, the regulations also provide some flexibility -- so colleges with established track records abroad may not be subject to the same scrutiny. Accrediting agencies don’t play the gate-keeping role when it comes to federal financial aid funding for campuses or programs overseas, but a home university’s accreditation status could theoretically be jeopardized by substandard operations abroad, Eaton said.

“The commission in the past has said when something isn’t meeting the commission’s expectations, ‘Basically fix it or get rid of it,’ ” said Barbara E. Brittingham, director of the Commission on Institutions of Higher Education at the New England Association of Schools and Colleges and a former dean at a university in the United Arab Emirates. (The New England association does not accredit UMUC).

President Aldridge’s former institutional home, Troy University in Alabama, also had a relationship with ST International that, while currently dormant, officials are looking to possibly restart. Tom Davis, a spokesman for Troy, said that while STI was paid to recruit students and provide administrative support, the company did not receive per-student payments.

Back at UMUC, Aldridge said officials would be evaluating the doctor of management program in Taiwan, still in its pilot phase after opening in 2006, to determine its long-term viability. The third cohort of students just began the program after spending an orientation in Maryland, and the university has committed to stay in Taiwan for at least three more years while those students complete their degrees.


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