Thursday, October 22, 2009

Online Education Can't Come Fast Enough

I put college money away for my daughter in a 529 plan because I want her to be able to get the type of education she's going to need in order to compete in the job market come 2023 or so. I do this even though I secretly believe that by the time 2019 gets here she will be able to take all her classes from home online. That's assuming the earth isn't destroyed by Mayans or whatever in 2012.

I hope this comes to pass (online college, not the Mayan thing) despite my feeling that colleges will fight it tooth and nail. Why? Money, of course. While there would be money to be made in online classes, there would be less:

  • No (physical) textbooks. They would all be online. Cheap to generate. Cheap to revise. No more changing some punctuation, calling it a "new edition" and charging $150 for it. This practice is one of the most egregious rip offs ever devised by bureaucrats.

  • Less teachers. Lesson plans, syllabi, etc. could come from more centralized sources. Right now there are thousands of English Lit 101 classes being held, and each one has its own professor, who creates a syllabus, conducts the class, has office time, etc. With the internet, syllabi could be condensed and standardized to the point that there are a few hundred (or dozen) to choose from. There would of course be a need to update them, but this could be done by far fewer people. Office hours could be replaced with more of a help desk model. Hopefully not outsourced to India.

  • Cheaper college credits. Since all colleges would be online, you could easily bargain shop. The more colleges to which you are accepted, the more choices you have. College A wants to charge you $200/credit while College B charges $150? If other factors (equivalence of degrees, prestige, etc.) are comparable you can save. Colleges will have to compete on price, something they've never had to do before. Imagine being a high school senior and being bombarded by emails offering 20% coupons to Harvard.

  • Travel and housing costs eliminated. Of course, not all college-age people want to live at home but it becomes an option. Sorry, mom and dad.
Why should you be hoping for this future as well? Because of this. College tuition is the one thing that is absolutely guaranteed to rise in price regardless of economic conditions. Economy in a recession? Tuition rises. Cost of most consumer goods declining? Tuition rises. Enrollment falling? Tuition rises. Enrollment climbing? Tution rises.

It rises faster than inflation. It rises when colleges promise not to raise it. It should be a t-shirt: Tuiton: It Rises.

The excuse right now is that colleges are being forced to pass on "their own financial problems". That sounds plausible, except that tuition rose when colleges didn't have financial problems. It rose when Harvard and Yale's endowments were $36 billion and $23 billion, respectively. It's risen now that those endowments are at $26 billion and $16 billion. It's true that their big cash piles have had several shovelfulls removed. But "we have to raise tuition: we've only got $23 billion in the bank!" just doesn't sound right to me.

When you consider that tution rises outstrip inflation, it sounds really bad:

"The price increases came despite painful cost-cutting by colleges on everything from faculty to cafeterias and sports travel. And as usual, the rise in tuition outstripped the overall inflation rate. In fact, during the period covered by the report, consumer prices declined 2.1 percent. So the latest tuition increase at public colleges was closer to 9 percent in real terms."

Think about that for a minute. Can you think of another business (and let's be honest, that's exactly what a private university is) that would look at declining demand for it's product (declining enrollment), a deflationary dollar (the dollar is worth more) and an economy in which people are having to make hard choices on where to spend their money, and conclude that raising the price is the way to go?

How do they get away with this? I see it as three-fold problem: First, bargain shopping doesn't apply to colleges. Little Suzy wants to go to Harvard. Or maybe Yale. If she can get in that's where she's going. If she can't get in (or can't afford it) she's probably going to Mystate U., the local school.

Second, a college education is looked at the same way as gasoline: it's a must-have commodity regardless of price. We may bellyache about the cost when it goes up but we pay it anyway.

Third, the role of subsidies. Financial aid isn't called that, but that's exactly what it is:

"The estimated net price – what the average student actually pays after financial aid is taken into account – is still much lower than the list price, at about $1,620 at public four-year colleges, and under $12,000 at private ones. Both figures are up slightly from last year but still lower than five years ago."

The dirty little not-so-secret of universities is that they tend to tie tution increases to the available pool of federal and state tuition grant money available each year.

So, cheaper education from the comfort of your own home and lower taxes (that's where grant money comes from, after all) all thanks to the internet. The only thing opposing it is a monolithic higher education entity that relies on increasing tuition, text book sales and housing payments to increase an already-giant pile of cash.

I'm going to keep up those 529 payments.


  1. i'm not defending the way colleges and universities handle money--i'm sure your research is accurate. (it was a rant--i skimmed.) however, i don't agree that all-online college is the answer.

    what about the rest of the college experience? making friends? all that "learning to be a mature adult and take care of yourself" business? 1:1 interactions with teachers that get to know you vs. an impersonal help desk model? there are some important social elements that you'd miss out on.

    sitting at mom and dad's house, taking classes alone on the computer does not sound like a character-building college experience to me.


  2. I don't think that brick and mortar schools will completely disappear while I'm alive. It's jsut that right now, online degrees are largely the provenance of "schools" like Phoenix Online.

    I would expect real schools to start having (And expanding) online degree programs and to take it seriously.

    Also, I have no doubt my views are colored by the fact that my experience in college (being miserable right out of high school the first time, going back as a 27 year old who didn't hang out with the young kids, and having exactly zero friends-from-college) colors my view of the importance of the social aspect.

    However, we're already witnessing the effect social networks have on the ability to connect and make friends. I would expect things like online study groups, online group sessions with professors and so on to spring up as online schooling becomes more prevalent.