The Nonprofit Approach to Online Education

Unlike for-profit schools, Western Governors University doesn't have to answer to shareholders.

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WGU President Robert Mendenhall and a graduate at the school's commencement ceremonies. COURTESY: WESTERN GOVERNORS UNIVERSITY

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While well-known, for-profit online schools—such as University of Phoenix and Kaplan University—are enduring scathing criticism and ever-tightening restrictions from regulators, Western Governors University, a nonprofit online school, has been winning prizes and praise from some prestigious education organizations. 

Earlier this year, the school's president, Robert Mendenhall, won the McGraw Prize for post-secondary education from textbook giant McGraw-Hill for his efforts expanding the school and providing access to education for an underserved population. WGU also received an award for quality online education from the Sloan Consortium, a preeminent online education organization. "They've gotten to a point in their relatively short history that the quality is so high," says Burks Oakley II, who oversaw the Sloan-C awards committee. "And they want to get better." 

[See other Sloan-C award winners.] 

The school, which was founded in 1997 and received seed money from 19 state governors and additional financial backing from major corporations like AT&T, Microsoft, and Oracle, has seen enrollment nearly quadruple since 2006 to roughly 21,000 students today. While tuition at the largest for-profit schools is typically nearly $15,000 annually, Western Governors charges $5,800 a year. "We've had a focus on being affordable for students as opposed to making money for shareholders," says Mendenhall. 

The for-profit schools may soon be subject to federal regulations that measure the ability of their graduates to land jobs with salaries comparable to the cost of their education. If its students are saddled with unmanageable debt, a school risks losing its ability to receive federal funding, which would effectively cripple the institution. Given its nonprofit status, WGU won't be subject to these regulations initially, but thanks to the lower tuition cost—and literacy and computer proficiency tests that weed out about 7 percent of unqualified applicants—the school wouldn't have trouble complying. The school's loan default rate in 2008, for example, was 6 percent, compared to 11.6 percent for for-profits and 7 percent for all schools nationwide. 

[Learn more about online education.] 

Unlike most for-profit online schools, WGU charges on a six-month basis rather than by credit hour. This could be a hindrance for students who work full time, as 65 percent of WGU students do, but for those who are willing—and able—to work at a faster pace, it pays off. The average time it takes for first-time WGU students to finish their degree is 35 months, and 30 months on average when students with transfer credits are taken into account. However, several former WGU students have publicly vented on message boards, complaining that it often took an extended period of time for assignments to be graded or their questions to be answered. 

The primary reason for the brevity of study is the school's commitment to awarding credit based on a student's competency in a subject, rather than the time they spend studying it. Students are given an option to test out of courses before they take them. Pass the final exam, portfolio, or project, and students receive credit for a course without spending any time delving into subject material that's redundant with skills honed outside of school. "We know that students come into higher education knowing different things and they learn at different rates, and yet we have a system that says everybody needs 120 credit hours, that they need the same required courses, and that every course takes four months," says Mendenhall. "We free them up to be able to learn at their own pace instead of sitting through a class at the pace of the average [student]." 

[Use these five tips before you pursue an online degree.] 

Because it awards credit for expertise, the school caters to more experienced workers looking to finish—or start— a college degree, which is reflected in the average age of the student body: 36. Michael Varno, 27, was one such student. An information technology professional working for the U.S. Department of the Treasury, Varno hoped to propel his career. He considered attending a for-profit online school, but the relatively low cost of WGU won him over. He enrolled in June 2009, and despite working full time, he was able to finish his entire undergraduate degree by May 2010. Thanks to his IT expertise, he was able to test out of five courses, which helped expedite the process. Soon after graduating, Varno received a promotion and is now pursuing an M.B.A. at WGU that he hopes to complete in January. "I had the IT certifications and experience, but I didn't have the basic undergraduate foundation," he says. "I'm certain that the undergrad really helped me receive the promotion."