Reason for Skepticism about University of the People

University of the People describes itself as, “the Education Revolution.” UoPeople, as they prefer to be abbreviated, says, “It is the first non-profit, tuition-free, American accredited online university.”

From the start, pundits and education writers hailed the revolution that UoPeople and its founder Shai Reshef offered. Back then, Kevin Carey, for example, writing in The Chronicle of Higher Education, said, “All around the world, people have been waiting for someone like Shai Reshef to come along.” The Chronicle and other publications have run opinion pieces by Reshef, who, before starting UoPoeple, made a fortune in for-profit higher education businesses.

But of the four things UoPeople uses in its description – non-profit, tuition-free, American and online, only the online part is entirely accurate. All its classes are offered only online.

Yes, the company is officially registered in California. But the American address they use for their “Office of Admissions” is a turn-key virtual office. In fact, you can have the same address as UoPeople for $99 a month.

And UoPeople is a registered non-profit with the IRS. But digging into their financials, they spend quite a bit of their money with a for-profit company they own.

In their three publicly available tax filings (2014-16, at Guidestar with free registration), the largest disbursements made over those years was to “affiliates” – more than $2.1 million combined, representing more than a third of their total reported expenses. According to Drew Zambelli, Director of Media Relations for UoPeople, those payments were made to a company called University of the People Education Ltd, which, according to the University’s audited financial statements, is for-profit company based in Israel and wholly-owned by UoPeople.

When asked about the payments to its for-profit subsidiary, Zambelli said, “This amount represents payments made by the parent company for services provided by the subsidiary.”

UoPeople’s 990 form for 2017, which is not available online yet, does not show any payments to “affiliates” but does show expenses of more than $2.8 million for “academic services” and “outside services.” Those payments represent 60% of the school’s total expenses and Zambelli did say that, after their 2016 filing, payments to their for-profit affiliate, “were allocated to the specific expenses categories.”

Although it’s not entirely clear how much of that recent $2.8 million went to the school’s for-profit, it’s safe to assume at least some did. If just half of that went to the for-profit, then UoPeople has spent more than $3.5 million in four years, a third of all spending in that time, with its own for-profit company for reasons that are no more clear than “services provided” or “outside services.”

Those spending patterns are especially confusing considering that they probably don’t represent technology or advertising expenses since those are listed separately in the 990 filings – expenses which total more than $2 million over the four years of filings. Who received those payments is not specified.

The payments to the for-profit probably also don’t represent significant investments in course design, management or teaching since UoPeople says they rely principally on volunteers to do that work.

“UoPeople has volunteer Deans for each course of education … The Dean then chooses a subject matter expert to develop the course for a particularly [sic] topic. The subject matter expert is a volunteer professor. All of the materials that the volunteer professor develops are from open educational resources (OER) – this fits into the UoPeople ethos in that everything is open and at no cost to anyone,” Zambelli said. “Lastly,” he added, “the volunteer professor who designed the course, teaches the course to make any revisions necessary. In short, essentially, UoPeople develops/designs all of its courses.”

Speaking of that “no cost to anyone” and UoPeople being, “tuition-free,” that’s open to interpretation too.

UoPeople charges a $100 exam fee per course to build a degree which means that a student could, in theory, take a class at UoPeople for free but has to pay $100 for it to count. So, if someone takes all their classes for a four-year degree at UoPeople, they will pay about $4,100, including the application fee.

“Yes, a 4-year BA/BS costs about $4,100,” Zambelli said. The difference is that UoPeople considers those fees, not tuition.

And while $4,000 for a bachelor’s degree is cheap, it’s hardly, as UoPeople described their “ethos,” at “no cost to anyone.” Over the four years of their tax filings, the school has collected more than $3.5 million in what it described on the forms as, “student tuition fees.”

Those “tuition fee” payments are direct payments from students because its students are not eligible for federal grants, aid or subsidized student loans.

That’s odd because, for almost all of the country’s thousands of colleges and universities, being accredited by a Department of Education accreditor means the school qualifies for loans and aid. But UoPeople is accredited by the DEAC, the Distance Education Accrediting Council. DEAC is a national accreditor, not a regional one which is considered the gold standard in accreditation. Furthermore, DEAC is the only accreditor in the country that allows schools to receive accreditation without meeting, or even applying for, the strict requirements to receive federal financial support.

DEAC accredits 78 schools and, according to Dr. Leah K. Matthews, Executive Director at DEAC, only about 14 of them qualify for federal student loans and aid. Fifty-three of the 78 are for-profit schools. “We are the only accreditor that offers a two step model,” when it comes to federal aid, Dr. Matthews said. “Our schools offer unique models for teaching and learning and many aren’t a good fit for how financial aid is. They want accreditation but are not interested in Title Four,” she said.  Title IV encompasses the federal laws governing student aid.

Among the requirements in Title IV is that course credit relates to time spent studying, in “regular and substantive” engagement with teachers and course materials, as examples. When one of their schools wants to participate in Title IV, DEAC, according to Matthews, sends a team to certify the school’s records, verify their awards are based on fixed time, regular and substantive engagement and other requirements.  “We need to be sure those schools are in lockstep with US DOE rules,” she said.

But having that two-step accreditation system allows schools such as UoPeople to be accredited without meeting standards set by the Department of Education and met by more than 90% of other schools.

Zambelli says UoPeople meets “all the standards” in Title IV but, “We haven’t applied to be eligible for federal financial aid because of the added administrative burden.”  But if they already meet the standards, it’s unclear what burden being fully accredited would add. Moreover, because they have not applied, no one has checked.

Which all means that UoPeople is based in California, sort of. It’s a non-profit. But one that has sent millions of dollars to its own for-profit company. It is tuition free. But still has collected millions from students by charging thousands of dollars to make progress on any degree. And it is accredited. But only partly, and not as most schools use the designation or most students understand it.

If that model of non-profit, tuition-free and accredited is “the Education Revolution,” it’s time to restore some order.

Yes, students should deeply research the schools they’re sending money to or taking out loans to attend. And supervisory authorities at the state and federal level can also do a much better job ensuring they these schools are what they claim to be and delivering what they advertise. So too can education writers who have breathlessly covered UoPeople and similar enterprises. No less a standard should be set by grant-making institutions such as Hewlett and Gates and Carnegie, which the New York Times says help fund UoPeople. Overall though, UoPeople isn’t a problem by itself, it’s a symptom of today’s “education revolution” environment, warped by profit and advertising and an alarming paucity of basic skepticism.

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