Bloomberg News

Online Tuition Helps UT-Arlington Offset State Budget Cut

February 04, 2013

Universities Find Online Niches to Offset Budget Cuts

Most public universities around the country now charge roughly the same tuition for their online programs as for students who take classes on campus, even though it typically costs schools less to provide instruction on the internet. Photographer: Hoang Dinh Nam/AFP/Getty Images

Justin Reeves sat in a middle-school gymnasium near Houston, watching his two sons’ basketball practice while earning his bachelor’s degree in nursing from the University of Texas at Arlington.

Reeves, 31, hasn’t set foot in the nursing building on the suburban Dallas campus. He’s paying almost the same tuition as his counterparts in classrooms, even though it costs the school about $3,000 per student annually for online nursing programs, less than half the expense of those taught in classrooms, said Don Bobbitt, a provost at the school from 2008 to 2011.

The Texas campus isn’t alone. Most public universities around the country are charging roughly the same tuition for their booming online programs even though the costs are typically far lower. The universities are using the revenue to offset state budget cuts and pressure from governors and legislators to lower costs.

Once a course has about 30 students enrolled, “each additional online student is added at a fraction of the cost,” said Bobbitt, now president of the University of Arkansas System. “If you can bring things to scale, you can achieve pretty significant revenue.”

Most public universities spend $3,000 to $12,000 annually per online student, depending on the program’s size and level of services, said Robert Lytle, co-head of the education practice at Boston-based Parthenon Group, which helps universities with business planning.

University Spending

Four-year public universities spent an average of $35,679 per student in the 2009-2010 school year, including for online and classroom-based courses, according to a 2012 U.S. Education Department report. The department doesn’t track online versus classroom spending, said David Thomas, a department spokesman.

Several public schools, including Montana State in Bozeman and the University of Minnesota, said they don’t calculate the cost of providing education online versus in the classroom.

Research is mixed on the quality of online programs. A study last year by Ithaka S+R, a research and consulting service in New York, said “little rigorous evidence exists” about the effect on learning.

Ithaka studied students on six public university campuses who took a statistics course with machine-guided instruction accompanied by face-to-face instruction, versus those in a traditional format and found outcomes were “essentially the same.” The study also found the courses have the potential to “significantly reduce instructor compensation costs in the long run.”

Student Recruiting

Schools are hiring companies such as London-based Pearson Plc and Dallas-based Academic Partnerships to recruit online students, train professors to teach via the computer and run Internet sites.

UT Arlington has become the nation’s largest public university nursing program without expanding its faculty of about 50 professors and 100 clinical instructors, said Elizabeth Poster, dean of the nursing school. The school enrolls more than 5,000 students in online programs, up from 127 since its inception in 2008.

The school’s video lessons are taught by the faculty and the university provides “coaches” with advanced degrees -- hired by Instructional Connections Inc. based in Lewisville, Texas -- to help answer students’ questions.

Academic Partnerships is helping accelerate the shift to online courses, signing 24 public universities over the past 14 months, including Utah State University and the University of South Carolina, said founder and chairman Randy Best.

Seeking Donation

Best’s first U.S. client, Lamar University in Beaumont, Texas, asked him for a donation after Hurricanes Katrina and Rita in 2005 caused $50 million in damage to school property. Instead, Best suggested Lamar, a state school, hire his company to offer an online master’s program for teachers wanting to become administrators. Within 18 months, Lamar had 4,100 online students, Provost Stephen Doblin said.

Other schools then asked to “make me like Lamar,” Best said in an interview.

Most U.S. public universities charge online students about the same tuition as those attending classes, said Ryan Oakes, education managing director at New York-based Accenture Inc., which advises universities about online class technology.

“I can emphatically say that will change over time,” Oakes said. “Why pay the same tuition for a course with 1,000 students as others pay for a class that has 10 students?”

Cutting Funding

U.S. states have cut higher-education funding by an average of 11 percent since 2008, according to a study last month by researchers at Illinois State University. Tuition and fees at public universities increased an average of 3.9 percent annually from 1987 through 2009, according to a January report by Parthenon.

UT Arlington declined to describe its costs for the nursing program or comment on the cost difference described by Bobbitt.

“Our programs are competitively priced,” said Kristin Sullivan, a spokeswoman. The university has raised tuition for its online nursing program by 82 percent since it began because of strong demand, she said.

Reeves, the Texas nursing student, said he pays about $600 less than the $9,582 annual tuition paid by his counterparts in classrooms.

Rutgers Charges

Rutgers University in New Brunswick, New Jersey, charges its online students the same tuition as on-campus peers, said Rick Novak, an associate vice president for continuing studies and distance learning. The school doesn’t know how much it costs to provide online classes versus on-campus programs, he said.

Online courses tend to average about 20 students, which is “much more expensive to run than a large lecture class with 200, 300 or 400 students,” Novak said. Rutgers hasn’t closely examined costs, he said.

“Online enrollment and revenue help to address revenue issues, such as additional cuts in state funding and declining on-campus enrollments,” Novak said.

Reeves, who has finished his first online nursing course at the Texas school, was recruited by his wife, Christi, 31, who graduated from the program in 2011. Both have juggled school work with full-time jobs at Clear Lake Medical Center, where he works as an emergency room nurse and she tracks patients in the trauma department.

Opening Opportunities

Justin Reeves, who already has an associate’s degree and registered nurse certification, expects to graduate from the nursing program next year with a diploma that’s identical with his counterparts who attend classes. Gaining a bachelor’s degree in nursing will open more opportunities for management jobs, Reeves said.

His online courses include a mix of recorded lectures and written material, group discussion boards and quizzes, available 24 hours a day. He has done classwork in his dining room, bedroom and a local gymnasium while his children practiced basketball.

Justin Reeves said he doesn’t mind paying the same amount as students who attend class on campus, though he isn’t happy about recent tuition increases.

“I like studying at my own pace,” he said. “I can get bogged down in classrooms by other people. This way you can go through as quickly as you want.”

To contact the reporter on this story: David Mildenberg in Austin at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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