The Next Big Thing

Online Education, With a Low-Cost Twist


As a military wife, Michelle Mills got used to the itinerant lifestyle but could never quite accept the fact that she hadn't finished her college degree. Over the past decade or so, Mills, a 34-year-old mother of two, sank $30,000 into college coursework, earning more than 100 credits at three different colleges as she followed her husband, an Air Force fighter pilot, to military outposts in such places as South Korea, North Carolina, and Nevada.

"I was very frustrated," Mills says, "because I wanted to complete my degree, but every time I tried, a roadblock came up, whether it was an issue with kids or my husband's deployment."

Then she stumbled on a website that led her to Western Governors University (WGU), a nonprofit online institution. The school's reasonable tuition—just $2,890 for a six-month term—coupled with an academic model that lets students accelerate their completion of the degree based on prior subject knowledge, seemed at first "too good to be true," says Mills, who enrolled in the school's BS program in marketing management in the fall of 2008. WGU's unconventional structure was ideal for Mills, who earned her college degree in one year and, last year, received her MBA from the school.

"During one semester, I believe I submitted papers in six or seven different states and two foreign countries," she says. "No other university would have worked for me."

Real Students Through Virtual Doors

Western Governors University may not be a household name yet, but it is attracting students like Mills to its virtual doors in droves. Founded in 1997 by 19 U.S. governors from Western states and based in Salt Lake City, the university has grown from nearly 500 students eight years ago to nearly 24,000 students today. It offers more than 50 degrees in teaching, business, information technology, and nursing, from bachelor's programs to MBAs. The school's nationally accredited teaching programs are the most popular, drawing nearly 50 percent of students, followed by the business college, which accounts for about 26 percent of enrollment, according to the school's 2010 annual report. The virtual institution has grown at a rapid clip since it first gained regional accreditation in 2003, with enrollment increasing 30 percent each year, the school says.

The online institution was designed by the governors to be an affordable alternative to state colleges and for-profit online universities. It's geared toward older students—the average age of a WGU student is 36—who did not have the time, money, or resources to complete a college education in the conventional manner. Rural, first-generation, low-income, and minority students from all 50 states make up the majority of the school's population. Its success is attracting the attention of higher education policy makers, state legislatures, and public university officials around the country, says Joni Finney, a professor at the University of Pennsylvania's Graduate School of Education and director of the school's Institute for Research in Higher Education.

"It is gaining some credibility in higher education circles, and it really is one of the more affordable public institutions in the country," she says. "Their model allows them to do it because they don't have to employ full-time faculty with tenure and those sorts of things, so their chances of maintaining a reasonable cost are a lot better than other types of institutions that staff differently."

A Third to Half the Price

Another reason the school stands out in the crowded online education market is its nonprofit operating model, Finney says. The school is funded almost entirely through student tuition. Last year, the school's revenue was $110 million, with 2011 revenue expected to top $140 million, WGU President Robert Mendenhall says. The price of a bachelor's degree is about one-half to one-third the cost of a degree at a for-profit university. For example, a student at WGU who took four years to complete her BS in business management would pay $23,120 for her degree, as opposed to $66,000 for a comparable 120-credit degree at the University of Phoenix, the country's largest for-profit college.

"Our advantage is we are priced more like a local state college, but we give the student all the flexibility of a for-profit," says Mendenhall.

Unlike most universities, there are no typical professors, lectures, or required classroom time. Instead, students learn course material via textbooks, Web-based tutorials, simulations, and subject-specific online learning communities. Later, WGU uses technology-based learning to assess students' progress, measuring whether they've mastered certain concepts via their performance on tests, projects, and assignments. Each course typically has between two and nine "competencies," or key concepts, that a student is required to master. If a student has prior knowledge in a subject area and can demonstrate this to the university, he or she can often complete the class in a shorter period of time. In addition, there is no limit to the number of classes students can take in a six-month semester. Since most WGU students are older and often come to the school with prior knowledge in their subject area, the average time it takes a student to get a college degree from WGU is 30 months, compared with 60 months nationwide, says Mendenhall.

"Ninety-five percent of online education in this country is just classroom education delivered over a wire, where students listen to lectures over their computers," says Mendenhall. "At Western Governors, we turned the whole thing around because we are basically using the computer to do the instruction and deliver the content, which makes it totally scalable. Potentially, 100,000 students can access the school at the same time and whenever they want."

Mentors by Phone and E-Mail

It may seem an impersonal approach, but students are given a significant amount of support during their time at the school. For example, each student is assigned a staff mentor from his chosen study area when he enters the school, a staffer who talks on the phone with the student once a week, guiding him through the degree process and helping him map out a course of study. In addition, each class has a course mentor, who evaluates students' work and is available to help them via chat rooms or e-mail if they are having trouble mastering a concept in class. The school also has many of the trappings of a typical brick-and-mortar university albeit in digital form, including a virtual career counseling center and an online library and bookstore. The only time the student body gathers in person is for the commencement ceremony, which takes place in Salt Lake City twice a year.

WGU's atypical learning model means students need to be self-motivated and have excellent time-management skills to get through the program successfully, says Deborah Ward, a mentor at WGU who works with students in the business college.

"Many student do struggle at first with the competency-based model, and it is not for everyone," Ward says. "A lot of students think it is going to be easy and they can zip through the courses, but it takes time to understand how to access the learning resources and courses and juggle their time. Usually by the time they finish their first six months, they have the knack for it."

Productive Lunch Hours

The flexibility of WGU is ideal for students such as Shelly Stanton, 49, who has been working in the business world for more than a decade without a college degree. She started out 11 years ago as a sales assistant making $10 an hour at Performance Mechanical Group, an HVAC contractor in Washington state, and in 2007 she was promoted to the role of chief financial officer. The new demands of her job, coupled with her life-long desire to get a bachelor's degree, led her to WGU, where she enrolled in the school's BS program in accounting in 2008. For the past three years she has juggled school and work, using her lunch hour to study for classes, do research, and write papers.

"For me, the price was excellent, and there was the additional motivation of being able to use the things I already know so I can finish earlier," says Stanton, who hopes to graduate next March. "I liked that, because if I'm really motivated enough to commit the time, I will spend a lot less on college because of that."

The mega virtual university is increasingly gaining notoriety because it has pioneered a completely new model of moving students through college, one that has the potential to change the way universities across the country deliver classes, says Louis Soares, director of post-secondary education programs at the Center for American Progress, a Washington (D.C.) think tank.

Expanding Popularity

A growing number of states are becoming interested in bringing the Western Governors model to their students, especially as classes become crowded and public universities face increasingly bleak fiscal outlooks, says Soares, who recently co-wrote an article, with Harvard Business School (Harvard Full-Time MBA Profile) Professor Clayton Christensen and two others, that looked at ways the nonprofit higher education world could be reformed through online education. The authors point out Western Governors as an example of an institution that has the potential to transform the higher education industry because of its competency-based learning model.

Already, Western Governors has begun to scale up its operations by forming strategic alliances with interested states. State lawmakers in Washington are now considering a proposal that would create an online school called WGU-Washington, and Western Governors is "in discussions" with several other states, Mendenhall says. Last year, Indiana Governor Mitchell Daniels announced that the state had formed a partnership with WGU, creating WGU Indiana, which he dubbed Indiana's "eighth state university." Under the agreement, Indiana residents can use their state-funded financial aid to enroll in the virtual college, which will be operated by WGU, since it is considered a state school. The move is a "game changer because it allowed the state essentially to create a new campus for students without investing millions of dollars in building one," Soares says.

WGU is "the only institution I know of in the country in which technology has taken over education," says Soares. "They have demonstrated how online education can be taken to scale—that is the key."

Damast is a staff writer for Bloomberg Businessweek.

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