8 Ways Online Education will Help Balance University Budgets

A sound college degree is expensive and the cost of managing universities is continuing to put pressure on stretched state budgets. Online education entered the market in the past few decades and is disrupting the traditional system. Despite this feather ruffling it also will bring a few new things that may help both universities and states become more cost effective.

The legal design of the institution (for or non-profit) is less important than the actual quality of education provided. To that end, traditional land based universities have come grudgingly to accept the merits of online education in both terms of cost and learning quality. Online education will change the cost structures of universities (Cowen & Tabarrok, 2014):

1. Using the best professor and content creators to teach more students.
2. Save time with less repetition and commuting costs.
3. Flexibility in when and how lectures are viewed.
4. Greater productivity improvements as software substitutes labor.
5. Additional incentives to invest in quality as market increases.
6. Stronger feedback through adaptive systems.
7. Greater student measurements.
8. Reduce cost and increase quality of higher education through enhancing productivity.

Online education is here to stay and will continue to grow and develop over the years. It will provide a number of benefits for universities whose administrative and cost burdens are high. By focusing on high quality online quality learning, universities will be able to find higher economies of scale and greater reach for their educational benefits.

Cowen, T. & Tabarrok, A. (2014). The industrial organization of online education. American Economic Review, 104 (5).

Is the Cost of Higher Education Slowing?

According to a report by the College Board shows how college tuition has slowed this year when compared to the past 30 years. This is great news for people concerned about the overall cost of education and how it is increasing faster than inflation every year. In some years tuition increases have reached double digit levels putting additional burden on families. The question of why this is the case has not been fully explored or discussed. Certainly, no solution has been found yet.

The report shows how 2013-2014 tuition and fees increased 10% for private non-profits, 17% for public 4-year and 18% public 2-year. In the past some, of these costs would reach into 20 and 30% increase range begging the question of why. Improvement in the numbers is to the benefit of students, families, and the government itself. The answer to "why" such large increases occur is difficult to answer in a single sitting.

Some have argued that the recession and smaller state budgets are forcing institutions to increase tuition. If this is the case then it is possible that such state monies are not calculated into the cost of education and the entire system has not been evaluated properly. Likewise, this would also assume that a majority of the increases were during the recession which is also not entirely accurate.

Others may argue that it is the availability of state money itself that is forcing colleges to increase tuition. When state money is guaranteed, student loans plentiful, and demand high the traditional educational institutions have no reason to change much like monopolies or government. Why mess with a gravy train?

It is also possible that legacy costs of buildings, mammoth sports programs, be all to everyone approach, and lack of competition are causing these increases. A far majority of society believes that education is the pathway to success thereby creating a captive audience when competition is not fierce enough to force change. In recent years, newer models of education, disruptive technology, and international competition are starting to raise the stakes on antiquated models and opens them to questioning.

The problem of increasing costs will not be resolved anytime soon. Large colleges with endowments and prestige appear to be doing well while a number of smaller colleges are suffering and closing their doors. Institutions based on disruptive technology are starting to make significant headway and traditional institutions are copying parts of their model. Success seems to still be a numbers and economy of scale game.

http://trends.collegeboard.org/

Is Higher Education Crashing? Report Indicates Major Problems on Horizon

States are cutting funding and college tuition is rising and student loans are exploding and we are officially in a public higher education crisis. According to the Center on Budget and Policy Priorities more states are pushing the burden on students and this may have an impact on the skill level of the next generation and their ability to successfully navigate the economic environment. The problems are a result of a number of issues related to budget cuts, increased tuition, and policy decisions. 

The primary issue is that public college education is increasingly being removed out of the hands of the average student. During the recession it was necessary to cut state budgets to ensure that the books were in balance. Despite these cuts many states still were not able to balance their budgets in other areas. State appropriates from 2008 to 2013 for higher education declined around 19%, student expenditures rose 27% and enrollment has increased over 11%.

The report indicates that policy decisions appear to be the major problem. Although one cannot disagree with the concept that the decisions we make impact other things down the line we have to wonder if there is something more fundamental going on. Has the college education refused to change with the times and bulky systems are now eating a larger lion’s share of personal, state, and federal costs?

There are three fundamental problems. 1.) States must raise revenue and become more efficient, 2.) Higher education needs to reform to make it cost effective and convenient, and 3.) Higher education should become more relevant to both the individual student and their employment prospects. 

Raising revenue doesn’t necessarily mean raising taxes but can mean raising economic activity that leads to greater revenue generation. Updating appropriate infrastructure and encouraging economic activity can create efficiencies and better long-term budgeting. Higher education must focus on their core responsibilities and encourage the development of the entire human being through innovative development that lowers costs. Higher education should be aligned to the needs of the modern market while still respecting the arts and other programs that foster the creativity needed to succeed. 

We know that this is a huge problem and no one is likely to have all the answers. Yet through working together, brain storming, taking action, and implementing we can change the foundational aspects of higher education that allow more members of society to learn the skills they need to make their lives successful. We can no longer afford to bury our heads in the sand and pretend we don’t have some work to do. There are lots of bright people with bright ideas….we only need to find the one’s that will work. For now…we are engaging in a public discussion with few right or wrong answers.

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