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Reversing Course, U. of California to Borrow Millions for Online Classes

San Francisco

In the midst of a budget crisis, the University of California plans to borrow at least $2-million to pay for a controversial project to build online courses rather than relying entirely on outside grants or donations, as university leaders had previously said.

The pilot project, which seeks to offer up to 20 online undergraduate courses by next January, is one of the system’s most ambitious efforts to reshape itself during a historic decline in state support. Leaders hope to eventually expand enrollment and make money by offering fully online undergraduate degrees.

To reduce concerns about the project’s expense, university officials have said it would be supported entirely by external sources, and the project received a $750,000 grant from the Bill & Melinda Gates Foundation last week.

But Daniel Greenstein, a vice provost and the project’s co-founder, said on Friday that finding enough outside support had been a challenge. The university has secured the option to borrow $7-million to help pay for the project and may spend $4-million to $7-million of that money over the next several years, he said.

In order to repay what it borrows, Mr. Greenstein outlined a new plan to offer the online courses to people not enrolled at the University of California, as well as to undergraduates. Tuition from those students will pay the loan back, he said.

Mr. Greenstein said the system would probably get additional grants, reducing the need to borrow, and would tread carefully before taking out too much money. “We’re very conscious of what happened at Illinois and other places, where you have a big bet and start spending immediately,” he said. “We’re not doing that.”

The loan comes as the university is struggling to deal with a $500-million cut in state support approved last month. In recent years, it has cut enrollment, reduced staff, and sharply raised tuition. The president’s office, which is supporting the online project, is expected to downsize by $50-million.

The move reflects how expensive building an online-learning program can be, as experts from three public universities testified at the Sloan Consortium’s annual conference last month. It could draw criticism from some University of California faculty members who have resisted the expansion of online education.

Daniel L. Simmons, chair of the system’s academic senate, said on Friday that he supported the pilot program and understood the need to experiment with online education even during times of crisis. The senate formally endorsed the plan last year.

However, the online pilot “remains a risky proposition,” he said.

“The office of the president, at the same it is talking about lending this $4- to $7-million to develop online courses, is probably going to cut the funding for some very successful centrally managed research programs,” Mr. Simmons said.

There is considerable ambiguity about what the online pilot program seeks to accomplish, he said. “Are we exploring this as a way to help UC students to complete their degrees in a timely manner? Are we using it as a revenue-raiser? Are we using it to expand access to the UC? Nobody has really sat down and fully explored the answers to those questions.”

Daniel F. Melia, a Berkeley rhetoric professor who has been critical of the online project, said he was not surprised by the system’s difficulty raising money. “Unless you want to turn Berkeley into Phoenix, this is not going to make money in any kind of short- or medium-term,” Mr. Melia said.

The non-University of California students would take one or two online pilot courses at a time, not an entire degree, Mr. Greenstein said. They would take degree-completion and college-preparation courses and would probably be placed in separate sections from enrolled undergraduates, he said.

Mr. Greenstein said the loan would allow the online program to move ahead quickly and did not involve a big risk to the university. ”It’s not like we’re taking student-fee money,” he said. “It can’t be used for anything else. I’m not shutting the Spanish department to do this program.”

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