Selling College Courses at Near Cost

Barry Lenson

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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