Colleges: The Newest U.S. Export

American schools are bringing their campuses to students abroad

When Jeffrey S. Lehman became president of Cornell University in October, he kicked off his inaugural festivities in Doha, Qatar. Cornell recently opened a branch of its medical school there to serve Middle Eastern students, the school's first campus outside the U.S. But Lehman promises it's just the beginning of the transformation of Cornell into a "transnational university."

Other schools, from the elite University of Chicago to the fast-growing ranks of for-profit colleges, are also setting up shop overseas. They're tapping into what may be the greatest growth market in education history. As countries such as China and India develop advanced industrial bases, the global demand for post-secondary education could nearly triple over the next two decades, to 263 million students, according to IDP Education Australia, which has been helping Australian universities to expand abroad.

Most developing countries can't afford to accommodate such growth on their own, so they're opening their doors to foreign colleges. Baltimore-based Sylvan Learning Systems Inc. (SLVN ) has used a flurry of acquisitions to build a network of eight universities serving 101,000 students in nine countries in Latin America, Europe, and India. More than 40,000 other students attend American for-profit colleges in some 20 countries, according to the Career College Assn., which represents U.S. for-profit colleges. Thousands more go to traditional U.S. colleges' overseas sites.

EXPANDING OPPORTUNITIES. At a time when post-September 11 security concerns have slowed the flow of foreign students to America, delivering a highly regarded U.S. education to them in their own lands is a potentially huge opportunity for U.S. educational institutions. It's not always easy to do. Opening up abroad can be costly and can create an extra challenge to maintain quality. Washington University in St. Louis' Olin School of Business brings its U.S. faculty to Shanghai to teach its MBA program in English, with mostly the same curriculum. And while small programs like that may be welcomed, ambitious expansions such as Sylvan's could incite nationalist opposition. Still, "we believe you can service far more people, and make more money, if you take higher education directly to the countries where these students live," says Rene R. Champagne, the CEO of Indianapolis-based ITT Educational Services Inc. (ESI ), whose information-technology courses are taught through a joint venture to students in Beijing.

Sylvan, for one, has expanded at lightning speed, particularly in Chile. The for-profit company, which built its reputation by tutoring K-12 students in the U.S., bought control of Universidad de las Américas (UDLA) in Santiago three years ago. It has since quadrupled enrollment, to 20,300, by opening several campuses. Though Sylvan charges $2,500 a year, a hefty sum in a country with an average annual per capita income of $5,000, it has succeeded by marketing heavily to less affluent young people, working adults, and others often excluded from Chile's prestigious state universities.

In June, Sylvan snapped up two more universities in Chile, driving total enrollment to more than 40,000. It's now the country's largest operator of private universities, representing nearly one-tenth of Chile's 515,000 college students. As in the U.S., Chilean critics question whether for-profit universities provide a quality education. But Sylvan's career-oriented curriculum, plus a requirement that students study English, is expanding opportunities for many previously shut out of higher ed. "Now many people can come [here] to be excellent professionals and contribute to the country's development," says UDLA Rector Patricia Cabello.

Among traditional U.S. universities, B-schools have led the charge abroad. The University of Chicago's Graduate School of Business offers an Executive MBA in Barcelona and Singapore. Wharton School of the University of Pennsylvania helped found and develop two new business schools in Singapore and India.

LOCAL TALENT. In part, U.S. b-schools are succeeding by tapping into Western multinationals' hunger for local talent. Most of Olin's first Shanghai class of 72 students, which graduated in September, were Chinese employees of U.S. and other Western employers. The companies pay tuition for promising Chinese managers to attend in the hope that they will replace the pricey expats who now often run their local operations. The program is going so well that there's a waiting list. Olin Dean Stuart I. Greenbaum says he's considering opening campuses in other markets, possibly in Latin America or Asia.

Aggressive as they are, U.S. schools are outdone by Britain and Australia as exporters of higher ed. Australian universities have hundreds of offshore programs serving about 50,000 students, some 70% of them in Malaysia, Singapore, and China, according to IDP. Another 12,500 international students are enrolled in Australian distance-education courses. IDP expects to boost its education exports ninefold over the next 20 years. "Australia has become the world leader in exporting degree-granting programs," says Marjorie P. Lenn, executive director of the National Committee for International Trade in Education in Washington. Still, says Cornell's Lehman, the U.S. has the comparative advantage in higher education. If more U.S. universities jump on the bandwagon, education could become a hot new source of export earnings.

By William C. Symonds in Boston, with Dexter Roberts in Beijing and Jonathan Franklin in Santiago

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