Project Kitty Hawk, named for the town near the Outer Banks site of the Wright Brothers’ historic first flight, has nothing to do with aviation. It’s the brainchild of University of North Carolina System leaders, a new education technology nonprofit designed to help UNC campuses run online degree programs for the state’s working adults.

Still, the name fits its soaring ambitions. UNC System President Peter Hans has hailed the project as a game changer—one initially predicted to have 30,800 students by 2028, the equivalent of adding another campus to the state system.

“I can’t emphasize how big a deal this is,” Randy Ramsey, chairman of the system’s Board of Governors, told the board in November 2021, after N.C. legislators allocated $97 million in pandemic recovery funds for the nonprofit venture. Ramsey promised Kitty Hawk would be “really groundbreaking for many, many years to come.”

The project would draw students at a critical time. The growth of North Carolina’s 18-to-24-year-old population is flattening, fewer high school graduates are choosing college, and some campuses are seeing enrollment declines. UNC Greensboro’s enrollment has dropped 12 percent since 2019; UNC Asheville’s, nearly 19 percent.

But now, more than two years into its work, Kitty Hawk has hit difficulties. It has dropped its original business model and slashed enrollment projections. It also faces a deadline that complicates its task: It must spend its one-time $97 million appropriation by the end of 2026.

In February, Kitty Hawk leaders briefed Board of Governors members on the business model change during an annual update. After betting on a revenue-sharing plan as a route to rapid growth, the project dropped the model last year to avoid running afoul of possible changes in federal higher education rules. Instead, it would charge campuses fees for services. 

“We pivoted, and we pivoted fast,” Kitty Hawk CEO Wil Zemp told board members. Growth of programs and revenue would now be slower, he said, and while the fee-for-service model “certainly had its challenges,” it was “a viable way forward.”

Kitty Hawk’s pivot includes downsized enrollment projections—14,800 students instead of 30,800 by the end of 2028. By June 30, the projection is 210 students, down from 1,300. Enrollment in its six newly-launched programs totalled 72 students, as of the last week of March.

Source: (left) Project Kitty Hawk update to the UNC Board of Governors, February 22, 2023; (right) Progress Report to the N.C. General Assembly, March 1, 2024

The new projections are included in a report to the legislature, but Zemp didn’t discuss them during his Board of Governors presentation. Instead, he and other Kitty Hawk leaders accentuated the positive: The nonprofit’s online tech platform was completed “on time and on budget.” It was partnering with North Carolina Central University and East Carolina University to launch nine online programs by June. And its marketing could catapult these new programs to the top of Google search results. 

Kitty Hawk leaders are projecting that by the time they spend the state’s upfront investment by the end of 2026, as federal rules require, “the significant revenue we generate from our PKH-powered degree programs” will sustain the operation, according to a spokesman for the project. But the nonprofit is also deferring $32.9 million of its fees over five years to help campuses with start-up costs. They won’t be due until programs generate sufficient revenue for repayment. Kitty Hawk leaders haven’t said when that will be. 

The project also faces a problem that has hamstrung other public systems trying to centralize online education: faculty skepticism. “What is definitely the case,” UNC Faculty Assembly Chair Wade Maki told The Assembly, “is faculty across the system wonder if this was the best use of $97 million to support higher education in North Carolina.” 

Kitty Hawk was always a gamble. It may succeed, fulfilling its stated goal of helping “the careers of North Carolina adult learners, the state’s public universities, and the employers that power its economy take off—together.” But if Kitty Hawk crashes, it leaves the fate of the state’s multi-million-dollar investment in question. 

A new twist on online degree programs

From the start, Project Kitty Hawk was going to be different, an attempt to make a better nonprofit version of the for-profit online management companies, known as OPMs, that run online degree programs at hundreds of colleges. 

Often, these companies assume upfront costs and financial risk in exchange for a share of a college’s revenue, which can be 50 percent or more. 

Successful ventures have created cash-cow programs for colleges, but consumer advocates have criticized the companies for hard-sell recruiting and huge marketing budgets that drive up tuition costs. One critic, Kevin Carey, with the left-leaning think tank New America, has argued that by using management companies, colleges squandered the chance to make quality online education affordable. In 2022, the U.S. Government Accountability Office concluded that the Department of Education needed to strengthen oversight of these arrangements. 

Kitty Hawk, however, was created solely to serve North Carolina’s 16 public universities. It pledged to take a smaller cut of revenues, around 40 percent, but deliver “best in class” services tailored to the needs of adult learners. Eight-week courses would be offered all year long. Classes would be asynchronous to accommodate students’ work schedules. Counselors would help them navigate challenges. 

These programs would cost less than those of many out-of-state providers, a point that leaders have emphasized. But they’d cost more than existing online programs on UNC campuses, because they’d be self-supporting, not counted in a campus’s state funding formula. For example, N.C. Central’s new Kitty Hawk-powered bachelors of nursing completion program is $350 per credit hour for in-state students. The same degree, subsidized by the state, costs $189.48 per credit hour at UNC-Charlotte and $204 at Appalachian State University

The General Assembly created Project Kitty Hawk to be self-supporting, said Andrew Kelly, UNC System executive vice president for strategy and policy, because legislators didn’t want to “bind the hands of future legislators with large, unknown potential financial commitments.” 

Source: The University of NC System’s Progress Report to the General Assembly

Kitty Hawk’s new programs join 153 existing online bachelor’s degree programs and nearly twice as many graduate programs that university system campuses are already approved to offer. This spring, 10.7 percent of the system’s undergraduates enrolled exclusively in online courses. Campuses run most of these programs themselves, without OPMs. 

But university system leaders have emphasized that Kitty Hawk is targeting the state’s working adults, especially those with some college coursework, but no degree. This is a coveted demographic in higher education, but also one that can be challenging to attract and keep. 

In North Carolina, the “some college, no degree” population includes more than a half million people between the ages of 25 and 44. But many residents who’ve enrolled in online degree programs in recent years—63,000 in 2019—have chosen out-of-state universities such as Liberty University, Strayer University, and Southern New Hampshire University, according to UNC System leaders. They hope to grab some of that market share by offering a wider array of top-quality, high-demand online programs. 

‘A gut punch’

With the project’s spending deadline adding urgency, Kitty Hawk was launched quickly. In January 2022, the Board of Governors approved university system President Hans’ slate of appointments to Kitty Hawk’s inaugural board. Three weeks later, that new board, which includes Hans and is chaired by BOG Chairman Ramsey, hired Zemp as its CEO.

“To put it lightly, time was of the essence,” Kelly, the UNC System executive vice president for strategy and policy, said. 

He and Zemp met in 2021, Kelly recalled, as he and colleagues were finalizing the blueprint for Kitty Hawk. Zemp had recently become director of global education initiatives at Amazon Web Services and was one of a number of people “whose brain we picked on the concept,” Kelly said.

Zemp, 53, a retired Army colonel-turned ed-tech innovator, was no stranger to challenges. He had completed multiple tours in Iraq and Afghanistan and directed an Army division that used emerging technologies to develop curricula and training programs. After his 2014 military retirement, he spent seven years at Southern New Hampshire University, an online-education powerhouse with more than 160,000 students. His positions included executive vice president and chief strategy and innovation officer. 

Zemp said he “fell in love” with the UNC System’s project. “It was a moonshot,” he said, a huge leap for a system that wasn’t built to serve the needs of working adults. While smaller efforts have been tried elsewhere, he said, they hadn’t come to fruition.

But this venture had strong backing, he said, and he believed that if “we get it right, and everything aligns, we could help a lot of people.” 

Zemp was born in Charlotte, and he and his wife have family in North Carolina. That also made the job attractive. 

After he took the CEO job in February 2022, the project began hiring staff, building a tech platform, and preparing to sign a contract with UNC-Greensboro, its first campus partner. UNC campuses aren’t required to partner with Kitty Hawk, but if they do, they get access to resources, including marketing, that can help them compete with large, established online universities.

A year later, the U.S. Department of Education made an announcement that upended Kitty Hawk’s plans. Education officials were reconsidering the department’s 2011 exemption that had permitted colleges to engage in revenue sharing with online program management companies.

“It was a gut punch,” Zemp says.  

Fearing the business would be thrown into chaos if the government disallowed revenue sharing, the nonprofit switched to a business model that charges fees for its services. In the long term, this model gives campuses a larger share of revenues. But in the short term, campuses owe money up front. And that can make the model a tougher sell. 

Source: The University of NC System’s Progress Report to the General Assembly

At this point, UNC-Greensboro backed out. Recent enrollment declines had already reduced its state funding, and partnering with Kitty Hawk meant “a projected loss of additional revenue,” Kimberly Osborne, UNCG interim vice chancellor for strategic communications, said in a statement. 

Osborne said it would have taken UNCG three years to break even, even though Kitty Hawk offered an advance of funds. She also noted that Kitty’s Hawk’s credit hours would generate no state funding for the campus.

Since then, Kitty Hawk has scaled back plans to take on five campus partners this fiscal year. Instead, it has two—N.C. Central and East Carolina universities. Kitty Hawk is giving them millions in grants and deferring fees to mitigate upfront costs. “Our mantra is do no harm,” Chief Operating Officer David Eby told Board of Governors members in February. 

The nonprofit, which rents office space in Chapel Hill, now has 50 employees. It had spent more than $35 million as of January 31. 

Kitty Hawk’s first program, N.C. Central’s bachelor’s of nursing completion degree, went live last October. 

N.C. Central added an information technology program in January and a business administration program in March. In February, East Carolina launched programs in psychology, security studies, and information and cybersecurity technology. Three more programs are expected to launch by June. 

Administrators on these campuses praise Kitty Hawk. Mohammad Ahmed, dean of N.C. Central’s College of Health and Sciences, said the project “has a tremendous machinery for advertising” and that the nursing program is receiving many inquiries from potential students. 

And at East Carolina, already a leader in this space with more than 4,500 undergraduates in fully online programs, Chancellor Philip Rogers said in a statement that collaborating with Kitty Hawk amplifies ECU’s commitments to “access, affordability, and student success.” 

Faculty are skeptical

While UNC System leaders tout Project Kitty Hawk enthusiastically, faculty are wary, said Maki, chair of the UNC Faculty Assembly, which represents faculty across the system. “We were not involved in the planning and it was simply announced to us,” he said. “It wasn’t something campuses had asked to have happen.”

Faculty are involved in designing and teaching in these new programs, but Maki says there’s worry that they’ll end up competing with existing online programs, which lack Kitty Hawk’s big-budget marketing and quick-response student recruitment team. Campuses already offer successful programs for working adults, Maki said, but “what we didn’t have was marketing and referrals. All we needed from the system was a place to coherently market our online programs and direct students back to us.”

Hans, however, said in 2021 that many existing programs didn’t engage students “nearly to the extent I think that we could and should be.” 

Though Maki said Project Kitty Hawk came as a surprise, Kelly said it grew out of task forces and initiatives that included administrators, faculty, and staff. “It would be a surprise if that idea continued to make its way into the list of potential options if it were brand new or unknown or even in some cases not helpful to academic decision making,” he said. 

Phil Hill, a Phoenix-based educational technology consultant who publishes the On EdTech newsletter, has been watching Project Kitty Hawk since it was unveiled in 2021. Then, Hill cautioned that enrollment goals were too ambitious and noted that efforts in other states had struggled or failed, often because university systems didn’t get buy-in from campuses.

“The biggest risk that UNC faces with Kitty Hawk,” he wrote in 2021, “is a subtle one that too often is at the center of centralize vs. collaboration discussions. Hubris. The staff of the new organization with $97 million of funding viewing themselves as ‘the smartest people in the room.’ That risk killed many of the other state initiatives.”

Hill wasn’t the only expert with concerns. Zemp’s former boss, Southern New Hampshire President Paul LeBlanc, said he recommended Zemp highly to UNC system leaders, but cautioned Zemp that Kitty Hawk would be a tough job. “Many have tried to do centralized online services for state systems, and most of them have failed,” he said.

Hill, who has reviewed Kitty Hawk’s latest progress report, said its leaders made the right call to scale back enrollment projections that were unrealistic even under its fast-growth revenue-share model. 

But in what Hill describes as a “pretty saturated” market, the new projections, he said, remain “pretty wildly optimistic numbers, even with this modified plan.”

Can Kitty Hawk take off?

At Kitty Hawk’s February presentation to the Board of Governors, its leaders showed a chart projecting revenue through 2028. The chart didn’t show expenses, however, and no one explained what happens if enrollment falls short or if campuses can’t repay the millions in fees Kitty Hawk plans to defer. 

UNC Board of Governors members listen to a Feb. 28 update on Project Kitty Hawk. Source: Screen grab from meeting livestream

Zemp told The Assembly that the nonprofit is partnering with fewer campuses and adding degree programs more slowly “so I can make my way to ’28,” when Kitty Hawk projects it will be self-sufficient. 

While the business projects self-sufficiency, if it ceased to exist, its assets, including Kitty Hawk’s tech platform, could still be used by the university system. Kelly says those assets would be “very useful to the system. That’s important to remember.”

Soon, Zemp hopes to partner with campuses to run short, targeted online training, such as continuing education or certifications. Kitty Hawk is also in talks to partner with employers, including UNC Health, that offer employee tuition benefits, he said. 

And it may seek outside funders. “Like any non-profit organization, Project Kitty Hawk will evaluate available fundraising opportunities that can benefit the UNC System and its students,” a spokesman said in a statement. 

The nonprofit also has hired a company called ReUp to contact and re-enroll former UNC System students who never graduated. Kitty Hawk is paying ReUp $3.8 million and offering the service to campuses for free. Ten campuses, including UNCG, are using it. It has enrolled nearly 1,200 students. 

During the February update, Zemp touted Kitty Hawk’s success bringing students “either into the UNC system for the first time or back into the system,” lumping 1,000-plus re-enrollments with enrollments in the fledgling online degree programs. These re-enrollments are generating revenues for campuses, but they don’t help Kitty Hawk’s bottom line. 

After the presentation, two governing board members—businessman Swadesh Chatterjee and Art Pope, a former state budget director—requested more financial information.

Pope wants to see 10-year budget projections under the new fee-for-service model. They will be provided, a university system spokeswoman told The Assembly, but were unavailable as of last week.

Chatterjee said in an interview that he’s not criticizing, but he’s concerned that Kitty Hawk can’t meet its projections. “The way I look at it, it’s definitely a challenge,” he said. 

Two other board members didn’t respond to The Assembly’s requests for comment on Project Kitty Hawk, and two said they didn’t know enough to comment. 

UNC Board Chairman Ramsey also declined an interview. But in a statement, he expressed no worries: “Project Kitty Hawk’s early programs have shown strong potential,” he said. “The Project Kitty Hawk board and UNC System leadership are confident about Project Kitty Hawk’s trajectory and mission.”

This story is a collaboration between The Assembly and Open Campus, with support from Ascendium Education Group. It was co-published by The Chronicle of Higher Education

Pam Kelley is a longtime Charlotte journalist and author of Money Rock: A Family's Story of Cocaine, Race, and Ambition in the New South.