What’s the Right Price for an Online Degree?
I recently came upon a pair of contradictory articles about what colleges will be charging for tuition next academic year: One reporting that Ohio State University found reasons last month to nearly double its online tuition, and another noting that some colleges are in a race to lower tuition.
So I wondered: What compels some colleges to double online tuition while others cut theirs?
Classical economics tells us that price is mostly determined by cost of production plus profit. Yes, these colleges are nonprofit institutions, but these incongruous cases seem to contradict that simple formula. Other forces must be in play.
The dilemma of what price to set for online tuition has a long history, going back to the early days of digital education, when many of us contended that online tuition should be no different than on campus. I was among those who argued that if students receive the same education from the same faculty, leading—more or less—to the same outcomes, tuition should be the same for both.
A quarter of a century ago, as digital degrees were first being launched at a handful of the nation’s colleges, many of us leading online programs worried that differential pricing might stigmatize fledgling virtual programs, causing families to feel uneasy about sending their college-age children to cheaper versions of expensive (and seemingly far-more-worthy) degrees on campus. By charging less for digital degrees, colleges might be fulfilling the market’s presumption that virtual education is illegitimate and that only costly on-campus degrees are justified.
Even though the cost of delivering online courses was then far less than on campus, we worried that if colleges set a lower price for remote instruction, students and their families might get the wrong impression, with lower prices signaling that digital learning was less valuable. To avoid introducing an upstairs-downstairs academic hierarchy, with on-campus honored on top and virtual demeaned below, many of us insisted on a single price covering both.
But since then, so much has changed in remote delivery, online faculty participation and virtual enrollment that these debates have taken on complex repercussions, including institutional survival. So it’s worth illuminating various cases for different pricing strategies for online tuition. In fact, I argue that the debate about how to price tuition is among the academy’s most threatening struggles.
Tuition and Consequences
When taking a cross-country airplane flight, you can never tell what someone seated right next to you is paying. A passenger in first class can be flying free on points, while a traveler jammed into coach might be charged a premium for a last-minute booking. So, too, students seated in the same class at most of the nation’s colleges and universities can pay as little as nothing or many thousands of dollars to attend the same lecture. Students on full scholarship, for instance, may take classes totally free, while an undergraduate from Amsterdam pays top dollar as an international student.
The value of college is hard to measure. Price is in part a measure of how much others value a college degree, how much it’s admired and how effective it is in securing social capital—giving graduates access to powerful networks, including often seamless entry into top positions in the job market.
According to the French social theorist Pierre Bourdieu, a college education provides graduates, especially those from elite universities, with not just a college degree, but with distinctive cultural qualities—the way graduates carry themselves, tastes they acquire and the economic class of their peers. These and other markers often secure graduates powerful positions in society.
And of course a college degree does have an economic payoff. Comparing the lifetime potential earning power of college graduates with those who complete high school only, a U.S. Census Bureau report calculates that over a working life, a college degree is worth nearly twice a high school diploma—or $2.1 million by contrast with $1.2 million for a high school graduate.
Colleges that set online tuition at less than what they charge on campus commonly follow the widely accepted belief that online degrees should be cheaper than those on campus. After all, campuses include expensive academic buildings, sports facilities, dormitories and other routine services, such as dining halls and libraries, requiring constant costly maintenance. Online courses, meanwhile, delivered in the cloud above campus, require far less infrastructure. For many, it seems reasonable to pass on the savings to students.
Yet some say that instructional costs online tend to be about the same as on campus while others conclude that teaching online is even more expensive than on campus, and as a result, many colleges add supplemental fees to virtual courses.
A study conducted by WECT before the pandemic found that only about 20 percent of colleges they surveyed charged less tuition and lower fees than they do to those who study in person. Counterintuitively, the study also revealed—to my surprise—that more than half of the colleges charged more tuition and higher fees to their remote students than to those studying on campus. The survey also uncovered another revelation: online fees added to tuition can be so large that they are greater than tuition alone. In a more recent analysis, however, US News & World Report last year found that average tuition for in-state online students was $316 per credit, while for those on campus, it was $311—a marginal difference.
Setting tuition often turns out to trigger ethical as well as economic effects. After all, each dollar added potentially shuts additional students out of the opportunity if they can no longer afford it.
In fact, more than half of American students are forced to go into debt to get a college degree, and the average student-loan indebtedness now exceeds $37,500, scandalously reaching nearly $1.6 trillion nationally. Over the past three decades, the average cost of attending a public four-year college has almost tripled and has more than doubled at private four-year schools.
Bending the Tuition Curve Online
Thinking about pricing online tuition recently, I’ve had a change of heart. I no longer feel that online and on-campus degrees should cost the same, especially because some online degrees are bending the so-called cost curve, finding ways to scale education in ways that lower production costs and allow for steeply discounted tuition. Any effort to reduce the cost of college is an admirable move that promises economic justice. If online can make it easier for low-income students to attend college, then I’m all for discounted virtual tuition.
Two recent trends are proving that virtual education can stall or reverse the nation’s continuously climbing tuition escalator. A recent study by the National Bureau of Economic Research found that colleges with a greater-than-average share of remote students largely charge lower tuition than their on-campus counterparts. As prices rose at most post-secondary institutions over the last decades, tuition at these colleges fell.
For example, two colleges with the largest online populations—Western Governors University (120,000 online students) and Southern New Hampshire University (97,000 online students)—also post among the lowest online bachelor’s degree tuition of any of the predominantly online colleges in America ($29,000 at Western Governors and $38,000 at Southern New Hampshire).
It wasn’t until providers of so-called MOOCs—massive open online courses—entered into online partnership with high-ranking colleges about a decade ago that serious discounting took off. The first of these MOOC-based degrees in computer science at Georgia Tech now boasts more than 11,000 enrolled, making it the largest computing master’s program in the nation, with students paying the unprecedentedly low tuition of just over $7,000 for a first-rank degree.
Since then, MOOC degrees have mushroomed, now with more than 70 others available in partnership with about 30 first-class universities worldwide. Coursera, the biggest provider, offers nearly 30 virtual degrees in business, data science and public health, among other fields, most discounted at less than half of comparable on-campus programs—a radical departure, opening these highly selective schools to thousands of candidates who might never have been admitted before the MOOC invasion.
Coming out of the pandemic, higher education suffered its most devastating, crushing loss in memory, estimated collectively at $183 billion. But even during this painful financial crisis, senior academic officers at the nation’s colleges largely held their tuition down, with many making meager increases of close to 1 percent. It took enormous strategic strength and the wisdom of restraint to achieve this unexpected result.
With some online degrees taking the lead, it’s now even possible to imagine higher ed prices falling in the years ahead, rather than continuing their climb.