Sramana Mitra: What do you forecast will happen to these online universities that are charging almost full price or maybe 10% less than the physical schools?
John Miller: There’s an emergence of a new model that is far more cost-effective, that I think will become pervasive. An example is an organization called StraighterLine, which is a low-cost solution set providing students with highly cost-effective distance education in the general education field. They have articulation agreements with a wide span of four-year schools.
The overhead that these schools were putting on top of the online education weren’t applicable. What we’re seeing now is an emergence of a new financial model for online learning. If you look at Straighter Line, you’ll see a new direction coming that’s far more cost-effective.
Sramana Mitra: To go back to my question, you would say that the ones that are not cost-effective online universities charging full price are going to drop?
John Miller: I think they’re changing and some of them are ceasing to exist. Carrington, for example, is a for-profit school that frankly has gotten into very significant financial trouble. They’ve closed operations. We find a lot of the for-profit organizations at that price point are having declining enrolments. We see it across a number of sectors in educating institutes, but I think that what’s happening.
Since the overhead cost of doing distance learning is so much less than what it would be in the face to face environment, we’re seeing that a number of those are starting to reduce. There’s an emergence of new solutions that are far more cost-effective. I do believe that the tuition costs are going to continue to reduce in distance learning even though they have been pretty high up to this point.
Sramana Mitra: What is the difference between the for-profit and non-profit universities when it comes to these online degrees? I understand you said that the for-profit are struggling to maintain their price points. What about the non-profits?
John Miller: There are some that are doing extremely well and their tuition prices are in line. There are others that are not because of the overhead cost that the university has. It may impact their capabilities. We’re seeing a mixed bag there and I don’t think there’s a clear picture yet.
The thing that you need to keep in perspective is that when there is a consolidation within that community, what’s going to happen is someone’s going to have to fill that void because if we lost 30% to 40% of those institutions, those students go away. There will be a tremendous need. I think the most cost-effective solutions out there will be the ones that will be most successful going forward.