(Illustration by Ben Wiseman)
Can the use of online platforms make higher education less costly? In a time of rising student debt, much of it driven by steep tuition increases, that question has become more and more urgent. A team of researchers led by David Deming, associate professor of education and economics at Harvard University, has worked to answer the question by analyzing how changes in the cost of tuition vary across different types of institutions.
Using information from the Integrated Postsecondary Education Data System, the researchers investigated trends in the median annual cost of tuition and fees for full-time students at US colleges and universities. “All of the talk is about the rising price of college, and indeed you do see [an increase at] public, four-year, nonselective schools,” Deming says. In inflation-adjusted terms, tuition at those schools rose by 9 percent between 2002 and 2013, from about $6,500 to more than $7,000. But the trend is dramatically different at private online schools such as the University of Phoenix. (The researchers classify a school as “online” if more than 50 percent of its students enrolled exclusively in online courses.) Over the same period, tuition at those schools decreased by 34 percent, from about $18,000 to about $12,000. At private in-person schools, meanwhile, tuition decreased to a less dramatic degree (by 8 percent, from about $16,000 to less than $15,000).
What accounts for the sharp decline in tuition at predominantly online schools? One explanation is that online education may be inherently less expensive to deliver than traditional in-person education. But Deming is skeptical of that theory; the link between cost of delivery and pricing strategy in higher education remains unclear, he notes. A second explanation centers on changes in the legal and economic context in which online schools operate. In 2006, the US Department of Education abandoned a rule that had limited the ability of online institutions to distribute certain kinds of federal student financial aid. “When the online education market opened up to competition, [we saw] a pretty dramatic drop in prices,” Deming says. In addition, the use of online technology removes geographic limits on competition and makes it easier for students to choose from a wide variety of schools.
Louis Soares, vice president for policy research and strategy at the American Council on Education (ACE), supports the latter theory. “The environment is more competitive,” he says. “That conclusion is supported by what we hear people in the industry saying.”
But in assessing the value of online education, cost is only part of the equation. “The outstanding question is how [online instruction] affects the quality of education,” Deming says. In their current research, Deming and his colleagues do not investigate the issue of quality. But other recent studies, he notes, appear to indicate that “student outcomes aren’t as good” in online programs as they are in traditional programs.
Efforts to evaluate the impact of online technology on higher education are still at an early stage. According to Deborah Seymour, assistant vice president for education attainment and innovation at ACE, demonstration projects at institutions such as Carnegie Mellon University have delivered promising results. “Over time, technologies might make education cheaper by improving students’ time to completion while meeting student needs and ensuring student success,” she says. Soares, for his part, is cautious about predicting the future of online learning. “We just haven’t seen these technologies scale enough to know,” he says.
In any case, there is plenty of opportunity for online education to scale up. As of 2013, Deming and his colleagues report, only 11 percent of degree-seeking undergraduate students in the United States took all of their courses online, and just 16 percent took some courses online.
David J. Deming, Claudia Goldin, Lawrence F. Katz, and Noam Yuchtman, “Can Online Learning Bend the Higher Education Cost Curve?” American Economic Review, 105, May 2015.
Read more stories by Rachel Wright.