Online Education, Money Pit

Online education seems like a good way for colleges to make money. Low cost, high volume, no classrooms or office hours needed. Just sit back and watch the cash roll in, right?

Not really. According to career an article by Marc Parry in the Chronicle of Higher Education:

Generating money is “one of the worst reasons” to get into online and blended learning, argued Joel Hartman, vice provost and chief information officer at the University of Central Florida. He pointed to the recent failure of the University of Illinois’s Global Campus, for example, and older flame-outs like Columbia’s Fathom and NYUonline.

“If you look back over time, and read anything about the major online initiatives that have failed,” he told the audience, “one of the things that’s characteristic of all of them is they went into business intending to make a lot of money on online learning and blended learning. It just doesn’t happen that way.”

The trouble is that to make online education any good, the providers have to have good technology. And that technology is expensive. “Starting online programs can mean significant upfront costs for technology, training, and instructional designers,” according to Parry.

Over time, it’s possible for colleges to make money on online education, through economies of scale. Another way to make money is to just farm the whole enterprise out to a separate for-profit company.

The University of Southern California’s deal with 2tor, the technology company that has several traditional schools offer their programs online, allowed the university to offer master’s degrees to students all over the world. Rumor has it that USC made $6 million in the first year.

But examples like this are apparently very rare. Try again.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer