Selling College Courses at Near Cost
In an article published this week on the website of The John William Pope Center for Higher Education Policy, our CEO Burke Smith asks a provocative question that I will summarize this way . . .
What if colleges sold courses for close to what they actually cost to produce?
To quote from the article:
“Colleges only spend about $100 in direct instructional costs to deliver the most popular college courses like those taught in the first year of college. Yet they are able to generate between $1,000 and $2,000 in revenue from such a course. This revenue comes in the form of state support, tuition, and fees. The `margin’ (the difference between the actual cost and the revenue) goes to support the remainder of the college infrastructure—buildings, security, low-enrollment majors, upper-level courses, climbing walls, marketing, profit, and others. Arguably, this is money well spent in a face-to-face environment. However, online students do not benefit from this infrastructure at all. . . In theory, online courses should not be saddled with the subsidies necessary to perpetuate a face-to-face infrastructure.”
That statement distils what StraighterLine is doing, by delivering online college courses at a price that comes as close to their actual cost as possible.
The statement also points to the challenges that traditional brick-and-mortar colleges will be facing in the coming years. How will they continue to justify charging grossly inflated prices for their educational products in a time when their graduates are finding it so hard to find jobs? Sooner or later, the forces of the marketplace are going to exert themselves and students who are spending $200,000+ for a college degree will question whether they are getting a good return for that investment.
People are already starting to notice that fancy campuses or athletic complexes don’t deliver an education – courses do. That kind of thinking is at the heart of the major shakeout in American education that has already begun.
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