This week the Wall Street Journal profiled the launch of a new online university from a 
company based in San Francisco. New Charter University will offer tuition of about $800 per semester for as many courses as a student can finish. Including books and fees, people can obtain a bachelor’s from home for about $6,500 over four years. Students can even prepare for free by joining an online community that lets them access course materials and take practice quizzes.
For comparison, California Coast University is currently one of the lowest-priced online universities at a rate of $150/per credit hour. Degrees average 126 credit hours, which totals about $19,000 for tuition alone — double that for books and fees over 4 or more years. Still, $38K is a great deal compared to a brick-and-mortarboard university like the University of California. Their website recommends that instate residents prepare to pay over $120 K for a 4 year degree.
So what does a traditional university have to do to justify $120 K over $6 K to study in your pajamas? Many already say they can’t. (See my blog on Peter Thiel’s mixed message on the value of university education.)
Gene Wade, CEO of UniversityNow, which created of New Charter University, said, “We wanted to create a high quality university where monthly tuition payments are the size of a cable bill, not the size of a mortgage payment.” One of the ways they are able to achieve this rate is by eliminating student recruitment costs and financial-aid administration. That’s right, no financial aid, but the difference in cost more than makes up for the loss.
In addition, though interactions are not face to face, that is rare at traditional universities as well due to the professor to student ratios. New Charter University reports that faculty can interact with students an average of 32 hours per week, compared to ten hours at a traditional university on a slow week. Students also get targeted support and customized instruction more in-line with tutoring and absent from lecture halls.
So does this mean enrollment in “meatspace” universities is falling? Not by a long shot. The National Center for Education Statistics reported that enrollment has increased 38% overall over that past 10 years. For people over 25, enrollment has boosted by 43%.
For online courses, enrollment is actually slowing down. The Babson Survey Research Group’s annual survey, “Going the Distance: Online Education in the United States”, announced last year that “The slower rate of growth in the number of students taking at least one online course as compared to previous years may be the first sign that the upward rise in online enrollments is approaching a plateau.”
Your guess is a good as mine to explain this trend. The report suggested one obvious reason, “There remains a consistent and sizable minority that see online as inferior.” That minority includes most employers and HR departments. This may just represent slow adoption as online universities are fairly new in the ancient world of education.
Some other reasons could be that students want to be around other students for the college experience, that barriers to exit are much lower when you study from home, and that most popular professors prefer traditional universities.
Regardless, online universities like the University of Phoenix have now added physical campuses as traditional universities add more online classes. But it’s likely that this new super low-cost option will make some dramatic changes in the landscape of higher education.
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