Online education is booming, but is it the financial saviour colleges think it is?

SOURCE: Marvin Meyer/Unsplash
Higher education is moving well beyond the classroom with technology playing a more important role than ever in how learning is carried out.

By U2B Staff 

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Education and the way we learn is a constantly shifting idea. Gone are the days of a stuffy classroom, rows of desks and learning by rote. This is true at all levels of education but nowhere more so that at university.

Higher education is moving well beyond the classroom with technology playing a more important role than ever in how learning is carried out.

Technology is ubiquitous in almost every aspect of our lives. It has changed the way we communicate, the way we do business, and crucially the way we learn. The learning environment has shifted from a classroom to, in many cases, the computer screen.

Willing students can learn from the comfort of their living room, or when killing time waiting for a flight, or receive a first-rate qualification from a university on the other side of the world.


This convenience, paired with the far more affordable price tag, has led to a surge in online education in recent years.

Students studying exclusively online grew by 38 percent from 2012 to 2017, according to Moody’s Investors Service, and is expected to continue its growth as more tertiary institutions expand their online offerings.

As enrolments to traditional on-campus education plateau and funding dries up, many colleges see the new revenue stream as the answer to their financial woes.

While it certainly offers fresh opportunity, is online education the panacea universities so badly want to believe it is? Or is it riddled with risk?

Business is booming

It’s no surprise that with the proliferation of the internet, so too has online education grown.

The latest report from the Education Department’s National Centre for Education Statistics, released in January, showed the number of all students in the United States who took at least some of their courses online grew by more than 350,000, a healthy 5.7 percent, from autumn 2016 to autumn 2017.

One in six (15.4 percent) of all post-secondary students in the US were enrolled exclusively online; that’s up from 14.7 percent in 2016.

The share of all students who mixed online and in-person courses grew slightly faster, to 17.6 percent in 2017 from 16.4 percent in 2016. And the proportion of all students who took at least one course online grew to 33.1 percent, from 31.1 percent in 2016.

These figures are far higher than just a few years ago when, in 2012, the proportion of all enrolled students who had studied online stood under a quarter. This steady and fast growth shows a steady march in the normalisation of online learning.

Why that’s a good thing

For universities and colleges the growing acceptance of online learning is heartening. As state funding dries up and enrolment plateaus, online education is a welcome revenue stream for many colleges.

Spending cuts on higher education have hit many colleges in the US hard. Since 2008, states have collectively scaled back their annual funding of public colleges by US$9 billion, according to the Center on Budget and Policy Priorities.

In some cases, the cuts have been devastating. Alaska recently announced a devastating devastating cut to higher education in order to grapple with the state’s mounting debt. The University of Alaska System is set to lose US$135 million in funding, forcing layoffs and closures across their three campuses.


This cut in funding is compounded by dwindling enrolment.

Higher education enrolment is predicted to steadily decline through to 2027 due to the shrinking size of college-aged population in the United States. Universities have capitalised on the consistenetly growing high school graduates over the last few decades. But this growth is slowing significantly, drying up the potential for tuition revenue that institutions so desperately rely on.

Figures from the National Center for Education Statistics show the number of high school graduates will rise just 0.2 percent in the next nine years, compared to 6 percent during the previous nine years.

Freshman applications to the University of California system in 2019 dipped for the first time in 15 years. Other major institutions, like Michigan State University, are also seeing declines.

As colleges brace for tough times ahead, the promise of a potential saviour in the form of online education is obviously a welcome one.

As colleges brace for tough times ahead, the promise of a potential saviour in the form of online education is a welcome one.

It offers institutions the opportunity to diversify and step back from their reliance on on-campus tuition revenue. It means they are more dynamic with the course content and can meet the needs of an ever-shifting workplace.

To ensure they are giving students and employers what they are looking for, universities are incorporating competency-based learning curricula in their online offerings and short courses. Many are developed in collaboration with business to ensure they meet their needs.

These online offerings are proving incredibly popular and colleges are expending resources to meet the demand. According to Wiley Education Services, Over 600 universities planned to adopt competency-based learning degree programs in 2018, up from 50 in 2014

This hike in demand for online learning has prompted some colleges to reach for partners in the field, enlisting online programme managers (OPMS) to bring their courses to market.


This collaboration between higher education and OPMs enables colleges to offer a wider range of services, attracting students that perhaps otherwise would not consider attending university.

OPMs tend to know the market space and have the tools to reach out to prospective clients. Statistics from Tyton Partners, as reported by Education Dive, online programmes that used an OPM increased enrolment by 20.5 percent in 2013, compared to 3.7 percent for all non-profit online programmes. By 2016, those rates were 10.2 percent and 6.1 percent, respectively.

All of this expansion allows universities to reach a far broader range of students. Stepping away from the typical post-high school teen, online education opens up the lucrative market of adult working learners.

It’s undoubtable that the new medium offers a far wider market, tapping into sectors of the population for whom a traditional university course just isn’t possible.

But while this explosion of online courses – and revenue – may appear to be a straightforward answer to colleges’ prayers, it doesn’t come without some risk.

The hidden risks of online education

In their recent analysis of the sector, Moody’s was quick to dissuade universities from believing online programmes are the solve-all answer to their funding issues.

“The capital investment, expertise and institutional commitment required to develop online education at scale are often too great to make this a worthwhile strategy for many institutions,” the report reads, as reported by Education Dive.

To make it worthwhile, it has to be done right.

While the market for online education is huge, thanks to the proliferation of the internet, it also means people are no longer restricted by geographical boundaries and can choose a course from anywhere in the world making competition in the market incredibly steep.

In such a cut-throat field, colleges need to ensure they differentiate themselves from other and ensure their offerings stand out from the crowd. There are several methods to do this, whether through price, delivery model, perceived value, or faculty service levels, but all options take effort, resources and sometimes sacrifices on income.

The market is flooding with private online universities and companies that are specialised and offer better customer experience than many colleges more accustomed to in-person client interaction.

That’s often where OPMs come in. Universities are partnering up to ease the burden and gain expertise in the service. But involving a third party immediately brings with it more risk.

Aligning the missions of education providers and profit-focused private companies can pose a challenge, warn Moody’s.


The university also becomes reliant on the OPM for support, both financial and technical, removing large parts of control from the college. Given the volatility of the market, this places substantial power in the hands of the provider.

In such a competitive market that is quickly growing, colleges can be a hero one year and bust the next. Courses need to be constantly updated to ensure they are offering the skills needed in the modern job market and meeting students’ increasingly high expectations.

The nature of online education means enrolments can be volatile, changing from one semester to the next, making it a risky revenue stream to rely on.

Focusing too much on online courses also risks colleges risk brand dilution, detracting from its main offerings of on-campus degrees. But focus is exactly what’s needed if you want to survive in the online marketplace.

With competition continually hotting up, colleges and universities need to seriously consider if online education is the best way to spend their efforts and resources.