Purdue University rocked the world of higher education last month when it acquired the online, for-profit Kaplan University.
“We cannot honor our land-grant mission in the 21st century without reaching out to the 36 million working adults, 750,000 of them in our state, who started but did not complete a college degree, and to the 56 million Americans with no college credit at all,” said President Mitch Daniels, president of the public Indiana university, in announcing the deal. “None of us knows how fast or in what direction online higher education will evolve, but we know its role will grow, and we intend that Purdue be positioned to be a leader as that happens.”
The move prompted a renewal of media interest in online learning, which, here in Virginia at least, has attracted little notice since fascination with MOOCs (massively open online courses) erupted around the same time as the firing of University of Virginia President Teresa Sullivan five years ago. During that controversy, then-Rector Helen Dragas (who serves on the board of Partners 4 Educational Excellence, which sponsors this blog) had argued that UVa needed to pursue online learning more aggressively.
While UVa and other elite universities continue to dabble with online learning, lesser-known institutions have turned to it in a big way. According to the Wall Street Journal, the University of Maryland has more than 85,000 Internet students, while Colorado State has 18,000. Among private institutions, Liberty University here in Virginia has 90,000 online students, while Southern New Hampshire has 80,000.
Online enrollment holds out the potential to generate enormous revenue and positive cash flow. Liberty generated nearly $800 million in revenue from its online programs last year, up from $53 million in 2000, the WSJ quotes Jim Koch, former Old Dominion University president, as saying. As Koch wrote in an in-depth analysis in December (highlighted in Bacon’s Rebellion) Liberty has plowed hundreds of millions of dollars of surplus from its online programs into its endowment. That profitability may not last, however, as Liberty faces growing competition from other institutions.
While the rush of established public and private universities into online learning legitimizes the learning model, entrepreneurs continue to push the envelope in ways that could roil the higher-ed marketplace even more profoundly. Education startups are touting online programs as a vehicle to learn certificates of marketable skills that allow students to get good jobs without the necessity of a full two-year or four-year program. Writes the Associated Press:
Some innovators say a college degree may be obsolete.
MissionU, which began accepting its first applications last month, offers a one-year nondegree program in data analytics and business intelligence without an upfront tuition. As part of an income-sharing agreement, MissionU students will give back 15 percent of their salary for three years after graduation if they earn at least $50,000 per year.
Think about that. While traditional universities put the full risk of degree completion and job search on students, MissionU doesn’t collect a dime unless its graduates earn at least $50,000 a year.
The most valuable product many universities provide is not the education itself, but the degree, which signals to the labor marketplace that the degree-holder displays enough intelligence and diligence to graduate. The college sheepskin has long been a hiring filter for lazy human resource managers. But companies from Google to Ernst & Young have stopped insisting upon a diploma. Given the outrageous cost of higher education today, with students paying for tenured professors who don’t teach, football teams whose games they don’t watch, cadres of administrators who police their sexual behavior, politically correct faculty who stifle unpopular views, and the “Club Ed” complex of dormitories and dining halls, it should surprise no one that more and more students are seeking an education online.
The online trend will grow as broadband access reaches an increasing percentage of the population and as the technology and pedagogy of online teaching continues to improve. Elite universities have little to worry about, at least not now. Some people won’t mind paying $100,000+ to give their child the four-year experience of a residential college. But most Americans don’t have that kind of scratch. Second- and third-tier institutions need to be very, very afraid of alternatives that cut the cost of higher education in half.
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