Think You’ll Make Big Bucks in Online Ed? Not So Fast, Experts Say

Oak Brook, Ill.—For universities facing tight budgets, it can be tempting to look at online education as a pot of gold at the end of the rainbow. Shifting classes to online and blended formats will save money, some think—or, better yet, bring in more of it.

Not so fast, warned e-learning experts from three public universities who spoke on a panel at the Sloan Consortium’s annual conference on blended learning Tuesday.

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 discussion was prompted by an audience member who wanted to know if blended classes—meaning classes that replace some face-to-face time with online work—can save an institution money.

One problem with that desire, panelists said, is that starting online programs can mean significant upfront costs for technology, training, and instructional designers.

“Right now, you’re not going to be saving money because you should be investing money,” said Tanya Joosten, interim associate director at the University of Wisconsin at Milwaukee’s Learning Technology Center.

(Not everyone heeds that advice. During an earlier workshop in the conference, one where most participants were involved with blended education, Ms. Joosten was shocked to learn that only about 20 percent had faculty development.)

Down the line, the investment in online learning can pay returns, Mr. Hartman added. That comes once programs have grown to the point that they take advantage of the economics of scale.

Central Florida is a good example: Blended and online courses account for 30 percent of total credit hours at the institution. Not counting faculty salaries, the university generates about $20 for every $1 invested in blended learning, Mr. Hartman said.

There’s another way nonprofit universities can quickly ratchet up their online programs, though: outsourcing to for-profit companies. Those companies collect a share of tuition revenue in exchange for marketing, course construction, and other services.

One outsourcing example highlighted during another session at the same conference was the University of Southern California’s deal with 2tor. Such partnerships can go “from 0 to 1000 students in a matter of months,” said Josh Jarrett, a senior program officer at the Bill & Melinda Gates Foundation.

“The rumor is USC got about a $6-million check the first year of that partnership,” Mr. Jarrett said during his keynote address. (The relevant section comes about 48 minutes into the speech.)

A USC spokeswoman, Merrill Balassone, declined to discuss the financials of the university’s contract with 2tor. But she did say that one of the online programs USC runs with help from the vendor, a master of arts in teaching, has grown tenfold in two years, from 144 students when it began in 2009 to about 1,400 today.

(This post was updated Thursday morning to reflect new information provided by USC.)

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