Online Education Might Make College Cheaper, But Not for the Reason You Think

One of the underlying ideas for the potential good to be provided by online education is that it’s a great way to eliminate inefficiency. Online education is learning in its most basic form. Classes don’t even need chalkboards. And once we figure out how to do education right, all college is going to get cheap, because we can all cut out what’s unnecessary.

According to this recent opinion piece at Forbes, “standardized online courses… are cost effective and will reduce teaching costs to the benefit of students. The savings from the decreased costs of teaching can either help reduce tuition or to provide better services to students.”

A new working paper provided by National Bureau of Economic Research, by business and economics professors, suggests that online education might well be reducing college tuition, but that doesn’t have much to do with improving efficiency. According to the paper:

Using data from the Integrated Postsecondary Education Data System, we show that online education is concentrated in large for-profit chains and less-selective public institutions. Colleges with a higher share of online students charge lower tuition prices. We present evidence that real and relative prices for full-time undergraduate online education declined from 2006 to 2013. Although the pattern of results suggests some hope that online technology can “bend the cost curve” in higher education, the impact of online learning on education quality remains uncertain.

Looking at cost, the researcher found that the price of an online undergraduate degree dropped 43 percent. Tuition for education at large for-profit and nonprofit institutions went down about 8 percent.

Researchers found that there was a correlation between an increase in online education and a decrease in pricing. A 10 percent increase in students being education online came with a 1.5 percent decrease in tuition.

This was true online for for-profit and public schools. None of this mattered for private institutions.

That was interesting, but the reasons for this are a little unclear. The researchers notably did not find that institutions were making structural changes to operate more efficiently. Rather, tution changes may be due to “competitive pressure on the entire postsecondary education sector, lowering prices and/or increasing efficiency.”

“Thus, one needs to be cautious before concluding that lower costs and prices in online programs will raise the productivity of U.S. higher education.”

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