The University of Maryland University College, fearing that it has lost its mojo as a dominant player in online education and suffering from recent enrollment declines, is considering converting itself into a private nonprofit institution.
Backers of the privatization plan, which would entail some level of independence from the University System of Maryland, say it would give the institution, known as UMUC, more flexibility in marketing and personnel, and help it compete with up-and-comers like Southern New Hampshire University and Arizona State University.
While many in the university question the need for such a radical move—last month UMUC wrapped up the last of eight meetings where faculty and staff members were invited to air their concerns before the university’s president recommends next steps—a close look at the data illustrates why some at the distance-education powerhouse fear for its future.
The Rise of an Online Giant
UMUC built its reputation as an affordable institution that served military personnel overseas. For more than four decades those enrollments helped it to flourish. That identity is evident at the university’s headquarters, where three clocks hanging prominently in the lobby are labeled “Europe,” “Asia,” and “Adelphi, Maryland.”
“Until the end of the Cold War, we were an overseas institution with a Maryland component,” says Javier Miyares, its president.
Then, in the latter half of the 1990s, as the United States was drawing down its troops overseas, UMUC became one of the first major universities outside the for-profit sector to embrace online education. As quickly as its overseas headcount was falling—quicker, actually—its domestic enrollments took off.
“Now we’re a stateside university with an overseas component,” says Mr. Miyares.
That shift did not come painlessly. From August 2012 to August of this year, UMUC consolidated managerial operations overseas and laid off more than half of its administrators in Europe and Asia, bringing the number to 99 from 205. It cut full-time faculty members at almost the same rate, from 199 to 114. Perhaps just as telling for a university where most courses are taught by adjunct professors, the proportion of those instructors based overseas who teach face-to-face and hybrid classes has shrunk over the past five years, even as the overall number of adjuncts has increased.
But in fact, even domestically, UMUC is still pretty reliant on its military and military-related enrollments. And while the university has long been seen as a major player in distance education—it ranked 11th nationally in the number of exclusively online students, according to the latest available data from the U.S. Department of Education—it actually doesn’t have much of a national reach. In the fall of 2013, of its 39,557 stateside students—both online and face-to-face—only 4,342 were non-military (veterans, active-duty service members, or their spouses) or from outside the state of Maryland.
“The reality is, when you are growing, you become complacent,” says Mr. Miyares.
Competitors at Their Heels
Meanwhile, other distance-education providers have been raising their profile—not only for-profit colleges like the University of Phoenix and American Military University but also private and public nonprofits like Arizona State, the University of Florida, and Southern New Hampshire, with its College for America competency-based degree programs. In 2009, American Military, part of the American Public University System Inc., surpassed UMUC as the largest military-serving university.
The rise of competitors hasn’t gone unnoticed at UMUC, where a tabletop advertisement promoting the recently announced deal between Arizona State and Starbucks sits on a conference table. Mr. Miyares picked it up at his local Starbucks. “It’s a reminder,” he says. UMUC was among the universities that lost out on that deal.
UMUC does have other arrangements that could prove just as promising—most notably a deal, signed in April with the U.S. Office of Personnel Management, that offers 25-percent discounts on courses to millions of federal employees and their families. But so far that deal hasn’t caught fire. University officials say a website for the program has received more than 20,000 visits, but only about 1,000 people have enrolled for the discounted courses.
Arizona State says in just four months that nearly 4,000 Starbucks employees applied, 1,800 were accepted, and more than 1,000 have enrolled for the mid-October start of the next semester. (UMUC has open admissions.) At Southern New Hampshire, online enrollment has grown from about 3,000 to more than 44,000 over the past 10 years.
Maryland is a small state, the military market is shrinking, and the university depends on growth in enrollments to fuel innovation, says Mr. Miyares. It has also been “way behind the curve” in forging enrollment relationships with corporations, and, he says, its lag in using its alumni base to help current students and new graduates in job networking is “almost embarrassing.” He’s worried about momentum.
An administrator at UMUC since 2001, Mr. Miyares became acting president in early 2012, after the sudden and still-unexplained resignation of Susan C. Aldridge. He was named permanent president a few months later. “In this business there are shiny objects,” says Mr. Miyares, and “today the shiny objects are Southern New Hampshire and Arizona State. We are not the shiny objects.”
Making Adjustments
But UMUC is looking to gain some sheen. In the past few years, it has shifted to shorter course terms, which can be more attractive to adult students; instituted larger classes, which are more economical to offer; and pushed toward full reliance on free, open educational resources, rather than textbooks, to create a more-affordable program for students (by next fall, it aims to use 100-percent open materials). UMUC is also making greater use of data analytics to improve student retention and planning its first two competency-based degree programs.
So why the need to go private?
No faculty members sat on the committee that proposed the change, and more than a few are wondering just that.
UMUC “has an incredible history,” and what attracts students is its connection to the University System of Maryland, says Betty Jo Mayeske, an adjunct professor of history who has been teaching part time at UMUC for 35 years. “Why would you want to be anything other than a state university?”
The proposal to break away from the university system was revealed this past summer with the publication of what the committee called an “Ideation Study for UMUC: A Future Proposition.” The study cited several areas in which UMUC is at risk because of changing market conditions, and concluded that “the level of efficiency and agility” that UMUC needed to compete “is simply not possible operating as a government entity.”
As a private nonprofit, the committee said, the university would be “liberated” from requirements like public-records, open-meetings, and financial-disclosure laws, which cover salaries that “some great talent finds unnecessarily intrusive.” In other words, the committee wanted UMUC to have more freedom to pay big salaries to key employees.
Yet as Mr. Miyares acknowledges, some of those same public-accountability laws now exist in Arizona, and that didn’t keep ASU from landing the Starbucks deal. But he says some strictures from the state system remain problematic. For one, he notes, the university must comply with a statewide unpaid-furlough policy for all of its employees in the years after the 2008 financial crisis, even though UMUC’s finances were relatively strong.
He says a different governance system could also make it easier to explore new business models, such as offering degrees in collaboration with other universities, much in the way airlines do “code sharing” on flights. Or at the very least, he says, he could imagine UMUC’s providing the technology and marketing expertise to other institutions offering online courses, much as a company like Pearson’s Embanet now does, and then sharing in the tuition revenue.
Mr. Miyares has said he will make a recommendation to the system’s Board of Regents by the end of October so it could be considered by the regents’ finance committee in November, the full board in December, and, if necessary, the state legislature in 2015.
Still, there’s at least one big factor that could keep UMUC from walking away from the Maryland system: a $216-million fund that it has contributed to the system over the years from the “profits” it has made on its operations. The money belongs to the university system, which uses it, in combination with other funds produced by other campuses, as collateral when borrowing for new buildings.
The fund strengthens the university’s credit rating, allowing it to borrow at low interest rates. UMUC’s profit margin was just 2 percent in the 2014 fiscal year, but it was 11 percent in 2013 and a record 17 percent in 2012.
In any decision about UMUC’s future, the fate of that fund will certainly be part of the equation. “I don’t want to be the president who walks away from that money,” says Mr. Miyares.
At the same time, he says, there’s urgency to act. In distance education, “the market will end up, like any maturing market, with some big players” and many also-rans, says Mr. Miyares. And when that happens, “we want UMUC to be one of those standing.”
