President’s Blog

The Current Status of Higher Education

January 22, 2013
Online education promises (i) easier access for greater numbers of students, (ii) additional revenue streams for universities, which will lead to (iii) greater affordability through lower costs for hard-pressed families, and (iv) better learning outcomes for students to compete in a tough job market. Will these promises be realized?

I have been reading, reflecting and talking with experts in the field to learn how Washington College can capture all these benefits of online education.  Although I firmly believe that there is no more successful model for having young people learn and graduate with a meaningful degree than the personalized experience they receive at a four-year residential, liberal arts college, I owe you a fiduciary responsibility to constantly search for ways we can increase efficiencies, reduce costs and enhance the educational opportunities for our students at Washington College. 

Easier Access for More Students

No one can argue that placing university courses online, where they can be available at no cost to millions of people who would otherwise not have the time or money to attend university, is an enormous contribution to the sum of knowledge in the world, an unqualified public good. The closest precedent I can think of is when the Encyclopedia Britannica decided in 1999 to go from print to digital and place all of its content online. As we know, this was the single greatest transfer of information in human history.  (So much so that the resulting global rush to access all this data caused the website to crash within minutes.) 

This coming revolution has even produced a new acronym – MOOCs or massive open online courses. These MOOCs have been adopted and promoted by faculty at some of the most prestigious universities in the world, including Stanford, MIT and Harvard. Some professors boast of having over 100,000 students in their “classes.”

Yet the transfer of information through online courses has been better so far in theory than in practice. Some of these courses, such as statistics or mechanical engineering, are far more conducive to learning online than others that benefit from frequent interactions with professors and other students, such as politics or literature.  

Also, many people initially sign up for these online courses, but few actually finish them. Many of the MOOCs attract those students who think they might be interested in a subject, but lose focus and desire over time. The data shows that fewer than 10% of students actually complete online courses. (This is not really surprising. Think how many people resolve on New Year’s Eve to get in shape, but then stop going to the gym after a few weeks.) At least for now, it appears that MOOCs work best for highly motivated, highly talented students within a few narrow academic disciplines. 

Additional Revenue Streams for Universities

With roughly 4,500 colleges and universities across the country, ranging from two-year community colleges to research universities, it is difficult to make sweeping generalizations about any aspect of higher education, much less to evaluate the impact of largely untested technological innovations like online education. But let me try! 

Some schools, mostly large public universities less interested than private universities in having a selective student body, have long used online technologies to offer distance learning and correspondence courses, for a fee, to those students who were unable to attend classes. New online technologies will appeal to these state schools, especially given the squeeze of rising costs and reduced state support for higher education nationwide. More online courses will allow these schools to reach more students, resulting in more revenue.

As far as I know, no selective private university has yet marketed its courses online in ways that can make a profit. (There are a few exceptions for certain graduate courses.)  And it is unclear when they might start to do so. One of the most prominent companies involved in this space is Coursera, a for-profit start-up by two Stanford University professors, which has yet to identify a monetization strategy. In the annex to their standard contract with their university partners, they list eight possible approaches to creating revenue, with their partners potentially getting a small slice of the pie. Much will probably depend on scalability – whether the university’s online offerings will be able to attract large numbers of additional fee-paying students. 

Despite the rush by some elite universities to sign up with Coursera or its counterparts, edX, Udacity or 2U, it is important to remember that none of these for-profit online companies has a track record of success or a financial plan that offers university administrators any comfort about its sustainability. One of Coursera’s own investors speculated that the company may not see any profits for at least the next decade. In a New York Times cover story examining online education on January 7th, he is quoted as saying: “Monetization is not the most important objective for this business at this point.”

It could be that these companies intend to partner with a prestigious university or consortium of prestigious universities and first try to capture a large share of the education market. Only later will they then try to charge for the online courses they had previously given away for free. But will students pay for these online courses? As the newspaper industry discovered, it may be difficult to start charging for content once a consumer gets used to not being charged. 

Students might be willing to pay for online courses, however, if they receive some type of credit or credential in return. Some private universities like MIT offer students a “certificate of completion,” but not course credit that can be used towards achieving a degree. Most private universities have made a bright-line distinction between virtual courses open to anyone online and courses taught in classrooms on campus. This makes sense. After all, no entity has ever stayed in business very long by giving away its intellectual property. (A related, but different issue, is whether firms hiring young people will continue to care about the distinction between certificates of completion and actual degrees.) It is possible that a two-tier pricing structure will eventually emerge, with top dollar charged for the full on-campus experience at private universities and a lesser fee charged for taking the same courses online.

While additional revenue from online education is tantalizing but as yet uncertain for private universities, the substantial start-up costs universities will have to incur to produce such online courses is a tangible hit to their bottom line. One approach is that the private universities will invest in creating “production value” for each course in their curriculum. This means going well beyond simply placing a camera at the back of the room and video-taping a professor’s lecture against a blackboard. It means splicing pictures and video clips together, perhaps with charts and graphs, and often with a voice over by the professor, for each class. (Think PowerPoint on steroids.) It also means training the faculty in how to teach effectively to an online audience, as well as hiring and training teaching assistants to help manage and administer the added students. Early estimates have placed this cost at $50,000 per course. 

At times, this online product will come to resemble entertainment; in fact, a generation raised on video games may respond better – learn more – the more entertaining it is. Unfortunately, the start-up costs for this home-grown model will be prohibitively expensive for all but a handful of the wealthiest institutions. (Anyone who doubts this only need check the growth in IT budgets on every campus across the country over the past few decades.) So another approach may be that a third party – a for-profit company – will assume these upfront production costs, including perhaps the responsibility to recruit and retain new students for these online courses. In fact, these types of for-profit companies exist and are already working with dozens of public universities. 

Alternatively, some private universities, and perhaps many smaller colleges as well, will decide that generating online content themselves, even with a third party assuming much of the costs, is not the way to go. Instead, they may prefer to purchase prepackaged courses from a few large companies that have partnered with prestigious universities and then offer these courses – and pass these costs along – to their students. These courses or “platforms” can then be customized or tailored by their faculty for delivery in the classroom. 

The rub here is that most faculty, at least those who think carefully about their craft, would understandably balk at teaching a course that had been created by someone else. Not only might the prepackaged course content be at odds with their own preferred approach, such courses have no way of responding to and building off of the particular interests of the students who are enrolled in that semester’s course.  As many faculty tell me, no matter how many times they may teach a particular course, every class is different because the students are different. The intellectual community that is created face-to-face depends upon this interactive relationship between faculty and their students. No prepackaged course can ever replicate this phenomenon. 

Lower Costs for Families

Like all parents with children in college, I avidly hope for lower (or at least constant) tuition, room and board bills, yet am disappointed each year. Historically, this is not new. Institutional costs per student have continued to rise over the past one hundred years. The productivity gains we have seen across a variety of private sector industries have not been replicated in higher education. There are many reasons for this, but a key driver is that teaching is highly labor intensive and it is very difficult to substitute capital for labor in the higher education workplace. (And not just in higher education; the same is true in the arts, e.g., the high cost of a ticket to a Springsteen concert or a Broadway musical.) Adding to these costs are improvements to the quality of education, including investments in state-of-the art lab equipment, new services for students and new facilities that students and families want and have come to expect. Regrettably, online education appears unlikely to be a game-changer when it comes to lowering the costs of higher education. To date, universities have shown far more interest in expanding their reach to attract new students via online courses than in reducing tuition costs. In a provocative article in the latest issue of The American Interest (“The End of the University as We Know It”), Nathan Harden writes that “Most universities charge as much for their online courses as they do for their traditional classroom courses. They treat the savings of online education as a way to boost profit margins; they don’t pass along those savings to students.” Some university administrators have confirmed this. Duke’s provost, in an article in Inside Higher Ed this past November, was asked whether allowing students to take courses online would curb steep tuition increases. ‘”Do I think that having available these types of courses will be able to allow us to lower tuition to the full Duke experience?”…The answer is no. “It may slow the growth,” he continued, but “I don’t think it’s going to lead to a reduction.”’ In other words, students may be able to take some online courses for free but not receive any credit towards a degree, or they can receive credit towards a degree but will have to pay for the online course at the same rate as on-campus students.

I can think of one exception to this dismal news. First, talented high school students could take online courses before they enter college, allowing them to place out of first-year introductory courses and do more advanced work during their freshman year. This may shorten the time needed to graduate, which would save them tuition, room and board dollars. (Alternatively, some high school and community college students who have not acquired the math and writing skills needed for success in a four-year college or university could take remedial courses online. Just such a pilot program is being launched at San Jose State University, which has teamed up with Udacity and the National Science Foundation, to offer such courses online for 300 students. This could allow more students to graduate from four-year institutions, but it is not clear that this would lower costs.)

Better Learning Outcomes

Of course, all of this hope about online education is for naught unless it can deliver better learning outcomes for students. Data show that students prefer the face-to-face contact of a classroom to learning online. That is important, but most students (and their families) would probably be willing to sacrifice a little bit of classroom comfort if it resulted in better learning outcomes. But does it? Dr. William G. Bowen, the former President of Princeton University and one of the country’s most thoughtful voices on higher education, last year delivered two public lectures on higher education and technology. After reviewing all the data, Bowen concluded “How effective has online learning been in improving (or at least maintaining) learning outcomes achieved by various populations of students? Unfortunately, no one really knows the answer to either this question or the obvious follow-on query about cost savings.” 

To put it mildly, this is discouraging. But the good news is that it is still early days in this new field; if this were the music industry, we are only at the equivalent of the 8-Track stage of R&D. And with so many talented educators, entrepreneurs and IT people working on these challenges, I am confident that the coming years will see more new ideas, opportunities and delivery systems. I will continue to monitor closely these developments in online education and try to discover ways in which we can add value for our students and reduce costs. Washington College is committed to being at the forefront of innovation and affordability.

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Tim Last modified on Jan. 23rd, 2013 at 2:24pm by Tim Fields.