The Increased Cost of Distance Education

For uninteresting reasons, I just read Indiana University’s Strategic Plan for Online Education.  Here’s a fact I didn’t know, and haven’t seen well-advertised in the blog discussion on the cost transformative effects of distance learning:

IU (and the remainder of higher education) needs to educate policy makers and the public that online education generally is more, not less, expensive than on‐campus education at both undergraduate and graduate levels. The biggest reason for this is that a universal experience is that equivalent quality online education requires greater individual student attention than on‐campus education at all levels. Units deal with this either by decreasing class sizes, increasing the credit given to faculty teaching online in calculating their teaching load, or providing additional instructional assistants; all of these increase cost per student.

Additional factors that increase the cost of online instruction are the technological infrastructure needed to support it, the need to support student access 24/7, and the greater costs to develop and maintain course materials. The main factor that generally is cited for a decreased cost of online instruction relative to on‐campus is that it doesn’t require classroom space. This is valid; a careful computation by Associate Vice President Steve Keucher calculates this savings at $8.68 per credit hour, or roughly $26 per three credit course. While significant, this savings is not enough to offset the additional costs of online education, such as class sizes that often are 20‐35% smaller.

As pointed out by IU Vice President and Chief Financial Officer Neil Theobald, an important factor in pricing online education is pricing by peers in this market. As shown by the pricing summary for other universities in Appendix B, this pricing offers some guidance but is highly variable.

This seems to pose a challenge to those who would say that distance learning will drive costs out of higher education, no?

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4 Responses

  1. prometheefeu says:

    Here is a wild guess: university of Indiana is doing it wrong. There are a whole bunch of things that you can do with online education that you can’t do with classroom education. For instance: if a student has trouble, they have access to more peers. They can repeat a lecture. They can take longer to do the work. Those things would be expensive IRL but are effectively free online. (Or cheaper on the student because more flexible time commitments are cheaper) So on a per-student basis, you can make it cheaper, it’s just that university of Indiana hasn’t figured out how for whatever reasons. Most likely, I would guess they are “moving the classroom online” aka “just add Internet” because that is what they know how to do. The problem is that if your teaching model has been optimized over 2k years for classrooms, it’s probably poorly adapted to a completely different media and no longer optimal. Those are wild speculations based upon what I have seen some actors do in the field.

  2. Aaron says:

    I just ran across this last week while looking at IU’s MBA programs. The evening MBA program is $700 per credit hour while the online MBA (yes, IU offers an online MBA) is $1,145 per credit hour.

    I was told that “overhead” accounts for the different rate. Possibly. My guess is that some students are willing to pay extra for the convenience of online education.

  3. Ray Campbell says:

    Clayton Christensen wrote about this five or six years ago. The problem is that schools like Indiana try to duplicate the in class experience, but online. When it works, and it will, that’s not how it’s going to work. Khan Academy and MOOCs teach much of the same material that Indiana does, and for free. In most cases, those options are inferior to attending a good class in a classroom, but that’s the way disruptive innovation works. At first, it offers a good enough experience for people who can’t cough up $700 a credit hour or make time to go to a lecture hall, and over time they find ways to improve the offering.

  4. AFC says:

    Ray, the purpose of a university course is to certify the graduates, not to educate them. Khan Academy cannot do this. It does not filter through its students at all, dividing passes from fails. It’s just a video library. That’s why it’s free. But it’s no substitute for receiving credits.

    If you acquire an education through a library, you just end up having to sit through lectures on things you already know — or else you never get to use your knowledge, because nobody will acknowledge that you have it.

    The real disruption will come when the people who acquire their education through non-certified channels begin to out-compete, economically, those who go through certified channels. This will require new technologies to allow people to produce independently, without social support (as software programmers already can, because of the PC and free compiler tools).

    Only then will the university’s pretense to be the only possible source of knowledge become untenable. Along with the $700/credit hour price tag.A