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The New State U.

August 31, 2006

The University of Illinois is in many ways a classic state university system. Urbana-Champaign is a flagship, with a history of Nobel laureates and competitive admissions. The Chicago campus has been very much on the rise in the last 10 years, expanding research and graduate programs and attracting academic stars. Springfield has more of an undergraduate and liberal arts focus.

All three campuses have some distance education programs, but the university system is now getting ready to launch a whole new campus, creating an online division that could eventually rival the individual campuses in enrollment levels, operating in a very different environment. The University of Illinois Global Campus would be operated as a separate for-profit entity, have almost entirely part-time faculty members (and none with tenure), and focus on a relatively small number of degree programs.

The idea, according to Illinois officials, is to learn from a variety of models out there that are growing rapidly (UMass Online, University of Maryland University College, and the University of Phoenix), while also learning from some of the failed attempts of  the dot-com boom, when many colleges started online, for-profit spinoffs with much hype -- only to see them go nowhere.

"This could be extremely significant in the online landscape," said Trace Urdan, who tracks education ventures for the Signal Hill Capital Group. The Illinois effort reflects a number of key trends, he said: the continued growing popularity of online education, the desire of many adults to study not only online but with an institution they know well, and the realization of many public universities that they need different types of models to compete for these students -- while not promising the moon overnight, as some institutions did 10 years ago.

"This is part of a continuing trend where the traditional schools and state institutions are becoming much more competitive in the areas that have been dominated by the for-profits," he said. "Their online programs are becoming more relevant, and even the ones that aren't spending effectively have boosted the amount of money they are spending."

Richard Vedder, an Ohio University professor who has been an outspoken critic of traditional higher education and who is a member of the U.S. education secretary's commission studying higher education, has been praising the Illinois plan as a "bold innovation" that could shake up public higher education.

But not everyone at Illinois is in love with the plan, which is expected to receive final board approval next month. Faculty leaders from the three existing campuses are working on a letter to express concerns about the idea. One faculty leader who asked not to be identified said that the plan risked the university's values. "Tenure is a very critical concern because it is a hallmark of the academic freedom that is needed for intellectual inquiry," said the professor. "If people are all part-time and non-tenure track, is that a university? Is that a faculty? It's certainly the University of Phoenix, but it's not traditionally what has been the University of Illinois."

The Illinois plan was the result of nearly a year of work by a committee that included administrators and faculty members (while some professors question the direction of the plan, even critics praise the administration for having been inclusive in planning).

Chet Gardner, who led the effort as vice president for academic affairs and is now leading the drive to create the new campus, said that the committee came to believe that distance education needed to grow, and that it couldn't do so with existing models. Currently, online enrollments are about 6,900, or 2 percent systemwide "and that just can't scale up," he said. Under the new structure, Illinois wants to have 10,000 students enrolled in 5 years and up to 50,000 in 10 years. Programs would be limited -- largely business, technology, education and similar fields in which there is strong demand by adult learners. "This will not be a traditional university where you have 100 or more academic programs," he said.

By raising money privately -- about $15-20 million for starters -- Illinois plans to create the new university without state funds (which have generally been in short supply for the last decade for higher ed in the state). As a private, for-profit institution, without tenure, the new campus will seek independent accreditation, and expects to have the freedom to create (and discard) programs quickly. Courses will be starting every few weeks, not just on a traditional semester schedule. And while most students are expected to be Illinois residents, there will be no differential between in and out of state rates.

Despite all of those very non-traditional characteristics, Gardner insisted that this "isn't about profit," but is about the university's historic mission. "What's driving this is that we are a land grant university. It's our core mission to provide access to high quality education first and foremost to the people of Illinois," he said, adding that adult students who can't enroll full time on an Illinois campus "aren't well served today."

One contention of Illinois officials is that while the online market is in some ways national or international -- since anyone online can enroll anywhere -- there is increasing evidence that online customers still want to root for the home team. UMass Online is one of the entities Illinois has studied -- and its figures suggest a strong desire to enroll at a local institution online. During the last academic year, the institution's enrollments increased by 23 percent, to 21,682 -- in a state with no shortage of colleges and where many experts have warned that students could become scarce as the U.S. population shifts out of the Northeast. Revenues from those students were up 32 percent, to nearly $23 million.

Only 28 percent of UMass Online students are from out of state.

"There is a lot of regionalism in online education," said David Gray, CEO of UMass Online. "I think Illinois will find a lot of receptivity in its own backyard."

Peter Stokes, executive vice president at Eduventures, an education research firm that has advised Illinois on its plans, agreed. "State sponsorship is very positive" as potential students are considering where to enroll -- in person or online, he said. Whatever people imagined about the worldwide market for distance education, "most enrollments are local."

Stokes said that the Illinois plans reflect a maturation of the way traditional universities are thinking about starting new online ventures, some of them with for-profit models. "Everyone knows the failures of NYU Online or Fathom," he said. "I think that going back, universities thought they could access a tremendous amount of venture capital," and then ended up "putting their own money in, without real business models in place for the time."

The survivors of that era -- he cited eCornell as an example -- are "more modest in focus."

Stokes said it was significant that Illinois was talking about raising serious amounts of money, but not outrageous sums, and that its emphasis was on serving its own state. "The motivation to go for-profit today isn't to raise capital, but to free themselves from constraints of traditional university governance. With traditional governance, it's hard to make the kinds of quick decisions you need."

Several other major public universities are currently considering an approach similar to what Illinois is planning, Stokes said, although he declined to name them. While places like UMass Online, the University of Maryland University College, and Penn State World Campus have a head start, not to mention the advantages the University of Phoenix enjoys, Stokes said that there was probably room for more players -- provided they maintain a focus on their states.

Urdan of Signal Hill agreed. "The opportunity to be as big as Phoenix is gone," he said. The opportunities that remain for state university systems are closer to home.

Not all supporters of online education, however, favor the for-profit model. UMass Online is "firmly nonprofit," Gray said, even though it is making plenty of money. It turned over $8 million in what would have been profit to the university system last year, and Gray said he expects that to rise to $10 million this year -- even with extensive growth in programming.

Gray said that UMass Online's success relates to a degree of independence it does enjoy -- while it works with individual faculty members and professors at UMass campuses, the online program can add offerings or eliminate them quickly, set up marketing efforts, and generally "operate on its own schedule," Gray said.

"I think there was a recognition here that we needed independence to pump some energy into this initiative, that something very distinctly different had to be done," he said.

So why stay nonprofit? Gray said that another key to success has been faculty support. New offerings are designed and taught by regular university faculty members. He said that any move to for-profit status would put that support at risk. "We never got into the arguments about profit-making," he said. "We needed engagement to occur for this to work, and this model isn't threatening. We got the engagement we needed because we didn't spend a lot of time on the arguments about being a commercial enterprise."

Gray said that there's no doubt that "some things can be easier by adopting a for-profit model," but he said that university leaders need to remember that "there are tradeoffs."

Pat Langley, chair of the Campus Senate at the University of Illinois at Springfield, said that her campus is providing a model of how distance education can work well -- and that she's skeptical of the new model being proposed. Springfield has received support from the Alfred P. Sloan Foundation to put traditional liberal arts courses online, and Langley said that professors have embraced the idea. "You always find computer science and business being offered online, but we're working to get philosophy and English up as well," said Langley, a professor of women's studies and legal studies.

The reason faculty members like the program -- which has resulted in Springfield having a larger share of its enrollment online than the other Illinois campuses -- is that quality is the same, Langley said. "We received a commitment that the people who would teach these courses would be the people who teach them on the ground, and as a result, the quality is indistinguishable online or in the classroom, and the professors are enjoying teaching these courses," she said.

Is a new model needed to offer more courses? "It depends what your goal is," Langley said. "In our model, students are getting a very high quality education and I'm sure that it's at least as good as if they were sitting in the bricks and mortar classroom," she said. "We don't think the model needs to be changed."

Some faculty members are supportive of the new online effort -- with a few conditions. Elliot Kaufman, chair of the University Senates Conference of the Illinois campuses, said that while "a lot of faculty are concerned, I don't share those concerns." Kaufman, a professor of biochemistry and molecular genetics at the Chicago campus, was on the committee that prepared the plan.

He noted that the university uses part-time faculty members now and that the quality of instruction by adjuncts can be very high, provided they are adequately supported. "We can't scale up what we are doing right now with the existing model, and I think we need to use adjuncts," he said.

"The trick is to make sure everyone is highly qualified and trained," Kaufman said. "I understand the concerns some people have about this model, but I don't think we should say we don't like this model. We should say we'll do this, and do it well."

 

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