Education Business

Tuition-Free University Gains a Following


One of the higher education world's boldest experiments began in September when 180 students from nearly 50 countries around the world logged on to their computers for their first day of school at the University of the People. At first glance, the school has many of the trappings of a modern university: a provost, department heads, even an admissions committee. Yet there are glaring differences—namely, a the lack of a campus or physical classroom and just a handful of paid staff—that set it apart from its bricks-and-mortar counterparts.

Those are shortcomings the students, most of them from developing countries and without the means to pay for college, are willing to overlook, says Shai Reshef, an Israeli entrepreneur and founder of the school, the world's first global tuition-free online university.

"Education has become so expensive that not that many people can afford it, and in some parts of the world it just doesn't exist or there isn't a big enough supply," says Reshef, who has more than two decades' experience with Internet-based educational ventures and is chairman of Cramster.com, an online study community. "This is exactly why the Internet was invented. I thought: What can be done better with the Internet than helping people get an online education for free?"

Backed by the U.N.

It was just about a year ago that Reshef made headlines in the distance learning community with his announcement that he intended to start an online college program using open-source software that would be free to students all over the world, one of just a handful of tuition-free universities. The nonprofit venture, which he named University of the People, attracted attention not only because of its tuition-free mission but also because it had the backing of the U.N., a leadership team made up of academics from top educational institutions like Columbia University and New York University, and an innovative approach to distance education, with an emphasis on peer-to-peer learning.

Today, the online university is fully operational, with 300 students, a growing array of course offerings, and even a recently announced research partnership with Yale University. The school is tapping into a growing market: Nonprofit institutions account for 68% of the more the more than 2 million students enrolled in online education, according to the latest estimates from Eduventures, a higher education consulting firm.

There are still many trials ahead for the fledgling university, which is struggling to make inroads in the competitive online global education market. To stay afloat, the school will need to raise several million dollars in startup costs this year and introduce new admission and application testing fees, which could pose difficulties for students from developing countries. But perhaps its greatest challenge—and the one its success will hinge on—will be gaining accreditation, a step toward the school's goal of conferring bachelor's degrees to students. This would also allow the school to carve out a niche as a major player in a space that has so far been primarily dominated by schools like the for-profit Apollo Group's (APOL) University of Phoenix and Washington Post Co.'s (WPO) Kaplan University, both of which have broad online degree offerings, says Roger C. Schonfeld, the manager of research at ITHAKA S+R, a higher education strategy and research organization.

Business and Computer Science

"What the University of the People is offering to do is make education time- and space-neutral. They have a lot of ingredients there to be successful, and they certainly have quite a few superstars on their advisory board," Schonfeld says. Among them: a former dean at INSEAD and the current U.S. Ambassador to Bangladesh. "I think that their success from a business perspective may turn on their ability to become accredited," Schonfeld notes. "With accreditation, they have a good chance of an innovative model that might see some success."

For now, the school's academic offerings are limited. Students can pursue an associate's-degree or bachelor's-degree track in business or a bachelor's track in computer science. Those subject areas were chosen because they are professions that "are in high demand and areas where students will most likely be able to find a job," Reshef says. (A notice on the school's Web site reads: "These programs may in the future lead towards undergraduate degrees. However, no degrees will be granted until the university obtains proper authorization from relevant authorities.")

Obtaining accreditation is a top priority for the school, says Reshef, noting that the school is incorporated in Pasadena, Calif., making it easier for the school to work with American accreditation agencies. "We intend to apply for accreditation as soon as we can," Reshef says, though he declined to specify which accreditation body the school planned to work with.

"A Great Opportunity"

The school's unaccredited status does not appear to be a stumbling block for students like Deema Sultan, 27, who lives in Syria and was among the first cohort of students to matriculate at the University of the People this fall. She came across the school through a news story run on a Syrian Web site last summer and immediately became intrigued. "I thought, "Oh, this is a great idea, but I doubt it is true,"" says Sultan.

Her doubts were assuaged when she found the school's Web site and saw that she met the eligibility requirements. Now in her second semester, she is pursuing a business administration track. When not in school, she helps run her family's textile business. She hopes her education will help the business grow and help her become a more astute entrepreneur.

"This is a great opportunity for me because, even though I'm working, I could not afford to study in Syria or the U.S.," says Sultan, who takes classes from a computer in her parent's home or at Internet cafés, when the family's connection is down. "I'm very impressed by it so far and the level of education they are offering. I've been telling my friends all about it."

The University of the People has not launched an official marketing campaign, but word appears to be spreading quickly. In its first two semesters, the school received 3,000 applications from all over the world, the school says. Students enrolled in the current class range in age from 18 to 63; the vast majority have opted for the business program. To gain admission, students have to submit a high school diploma, have Internet access, be proficient in English, and be able to pass two mandatory courses in English and computer skills. The school has so far attracted students from 70 countries, including Afghanistan, Thailand, Sudan, Saudi Arabia, and Zambia, and expects to enroll several hundred more students when its third semester begins in February, Reshef says.

Peer-to-Peer Learning

Admitted students are placed in a class of 15 to 20 of their peers and given access to free online materials and social networking tools. There are five semesters throughout the school year, each lasting 10 weeks. The school is using Moodle, an open sourceware e-learning software platform, to deliver lectures, reading material, homework assignments, and tests to students, who work together in groups.

Every class is overseen by an instructor, but the school's educational model is based on peer-to-peer learning, meaning that students are expected to learn by interacting with their peers, posting and responding to questions on lessons and reading in their online classrooms. If students can't find the answer to a question through their classmates, they can reach out for help to an online volunteer community of university professors, graduate students, retired academics, and computer specialists.

The model appears to be working, the school says. A survey of students conducted in November by the school indicated that 90% of the class was satisfied with the classroom experience and would definitely or likely recommend the school to peers and family.

Some question whether the peer-to-peer learning model will work as courses get progressively harder and more complex. Schonfeld, of ITHAKA, says the model may work well for introductory classes, but he fears students may struggle later in the program. University of the People's model relies heavily on tests, so students may miss out on some of the more important elements of classroom instruction, such as writing essays or having exchanges with their peers mediated by a professor, he says.

"At the conceptual level, it seems possible to teach some 101-level information acquisition courses in the absence of live instruction," Schonfeld says. "But it seems to me that a bachelor of business administration program calls for some real seminar-style teaching combined with peer interaction, especially when it comes to classes like a business ethics course or one on negotiation or management. There are all sorts of courses that are part of a business curriculum that seem intuitively not to be suited structurally to peer-to-peer learning or other forms of low-faculty-contact teaching."

Wanted: Women Students

Reshef, the school's founder, says he is pleased with the progress so far but acknowledges that a number of challenges remain. One of the most glaring ones is increasing the representation of women students; the student body is made up of about 70% men and 30% women. In the coming year, Reshef says, he hopes to minimize that gap by reaching out to more women in the Middle East and Africa.

Meanwhile, the school is still trying to find the money it needs to keep operating. Reshef has donated $1 million of his money, but the school needs to raise an additional $5 million to keep running. He says he hopes to get the money through grants, foundations, and private donations. Although the school is run mostly by volunteers, it needs to cover the salaries of a small group of student support staff and classroom instructors. Plus, it needs to raise money for an advertising and marketing campaign.

"We'll be sustainable once we get to 15,000 students, but we don't plan on stopping there," he says. "We want to grow as much as we can and as much as the world wants us to grow. There are no upper limits."

Reshef says the university will remain will remain tuition-free, but students will be charged admission fees ($15 to $50) and test-processing fees ($10 to $100) starting in a few months. The money that will help cover the school's operating expenses, he says. The fees would be on a sliding scale, depending on a student's country of residence. Fees for a student from a developing country would add up to around $400 for four or six years of education, Reshef says.

A Question of Sustainability

Some education experts say they worry that the appeal of the school could wane for students once the admissions and testing fees kick in later this year. There are several high-profile examples of for-profit online university ventures that failed in the early party of the decade, says Arlene Krebs, director of the Wireless Education & Technology Center at California State University at Monterey Bay. For example, Columbia University invested $25 million in a for-profit online learning portal called Fathom that closed in 2003. Other for-profit online ventures collapsed around the same time, including ones at New York University, Temple University. and other top schools. It remains to be seen whether a nonprofit online university can become sustainable, she says.

"I've seen many great distance learning programs come and go. The fact that the University of the People is free right now is a very clever marketing arrangement, but I don't know what will happen thereafter," Krebs says. "I would hope that the people who would get involved would be able to sustain their involvement once they get charged these fees."

The testing fees don't appear to be too big a concern for Stephen Ezekiel Akinlolu, a 23-year-old student at University of the People from Lagos, Nigeria. Akinlolu, the son of a clergyman, spent five years trying to get into a Nigerian university but had no luck because of the scarcity of seats in the country's top schools. The University of the People is his only chance to get a top-rate and affordable university education, he says.

"It is quite hard because the competition for a space at universities here is quite high, so I was very, very happy when I got admitted to University of the People," he says. "I'm glad I don't have to worry about tuition, but even when I have to start paying, it won't be much compared to traditional universities here, so I think it will be very manageable."

Partnership with Yale

Students are not the only ones intrigued by the school's model. The university has attracted the interest of a virtual army of academics and subject enthusiasts around the world. In September the school announced a research partnership with Yale Law School's Information Society Project. The two schools plan to work together on research projects based around digital education, as well as advocacy and social networking.

In addition, dozens of professors have volunteered to help design courses for the school and provide students with academic support, many of whom are well-known names is U.S. academic circles. For example, the provost of the school is David Harris Cohen, the former vice-president and dean of Columbia University's Faculty for Arts and Sciences. Heading up the computer science department is Alexander Tuzhilin, currently a professor of information systems at New York University's Stern School of Business (Stern Full-Time MBA Profile), while the business administration department is being led by Russell Winer, chair of Stern's marketing department.

Winer, who also joined the school's advisory board in October, says he signed up as a volunteer because he liked the idea of being able to reach students in developing countries who otherwise couldn't afford a business education. His primary role is to develop courses for the school, but he's also helping the school with its accreditation process and other initiatives.

"In my career, I've been mainly teaching people who could afford to either pay for expensive MBAs or take out large amounts of loans and then hope to pay them back," he says. "The concept of the school really struck me as worthwhile because I recognized we could have a big impact on some individual who we would never see apply to NYU or any top business schools."

Winer's zeal appears to be contagious. There are more than 800 academics and subject enthusiasts around the world who have volunteered to help with the school, whether by assisting students with assignments or developing the curriculum, Reshef says. The outpouring of interest has taken Reshef by surprise. He who says he gets an e-mail almost every day from someone in the higher education community who wants to volunteer their time.

"It's a great feeling. It happened to be that we are here at the right time doing the right thing and people seem to love it, so we've gotten a great welcome," Reshef says. "I don't know how else to describe it, but the world is hugging us."

Damast is a staff writer for Bloomberg Businessweek.

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