Bureaucrats Shut-Down Cheap, Online University Courses

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The wave of the future for higher education is distance learning. The World Wide Web is a revolution. It offers people opportunities to buy information from anywhere. The cost of delivery is close to free. The need for bricks and mortar facilities is ending. There are several accredited colleges with no physical facilities that offer low-cost degrees.

As of 2006, there were 3.5 million students taking distance learning courses. The figure is higher today.

When I wrote the early editions of my manual, College for $15,000 (or Less), I realized that the bricks and mortar colleges now face a major crisis. They are facing price competition. Management guru Peter Drucker wrote a generation ago that any industry that faces price competition from a new source that offers the same product or service for 10% of the existing price will be replaced by the existing industry. Drucker saw what this means for university education.

Thirty years from now the big university campuses will be relics. Universities won’t survive. It’s as large a change as when we first got the printed book. Do you realize that the cost of higher education has risen as fast as the cost of health care? . . . Such totally uncontrollable expenditures, without any visible improvement in either the content or the quality of education, means that the system is rapidly becoming untenable. Higher education is in deep crisis. . . . Already we are beginning to deliver more lectures and classes off campus via satellite or two-way video at a fraction of the cost. The college won’t survive as a residential institution. Today’s buildings are hopelessly unsuited and totally unneeded. (Robert Lenzner and Stephen S. Johnson, "Seeing things as they really are," Forbes, March 10, 1997)

All bricks and mortar campuses are in a position to enter the field of distance learning, yet with only one major exception, Louisiana State University, none of them is doing this. They are in a position to offer low-cost courses to out-of-state students in many fields and do so at a profit, yet they resist.

In 2009, there were three main campuses that offered a wide range of courses at a price of under $200 per semester credit: LSU, Texas Tech, and Eastern Oregon University. Texas Tech offered courses at under $170 per semester credit. In 2010, the school hiked its fees to out-of-state students to over $770 per credit hour. It went from the #2 school in the nation in terms of course offerings and price to one of the most expensive. It thereby killed its distance learning program.

As of summer, 2012, Eastern Oregon will double the price of its courses to all students other than Oregon, Idaho, and Washington. That will effectively remove it from contention.

The former governor of Georgia, Roy Barnes, described the thinking of any college administration that prices its courses at a significantly higher rate to out-of-state distance-learning students.

Many will ask whether states can afford to do this in times of a sluggish economy and state budget cuts. This question is based in large measure on the fallacy that thousands of students will pay out-of-state tuition for a college course they take on a computer at work or at home. When a distance-learning course is priced at an out-of-state tuition rate of $1,200, for example (three times the average in-state charge), the revenue for a college or a state is usually $1,200 x zero students = zero dollars.

Barnes understood pricing, but university presidents do not. The president of Eastern Oregon University offered this explanation for the school’s decision to double the price of its distance learning courses to out-of-state students.

In order to increase our revenues, and as mandated by the state, we must develop a non-resident tuition model that fits in with our strategies of being cost competitive. This can be done (Western Oregon is a prime example of this) and we are working diligently in this area. Non-resident tuition will not be our "silver bullet" and save EOU from future budget issues; however, if implemented correctly and aggressively, it will enable us to control our revenue streams much more effectively.

This is economic nonsense. With the defection of Texas Tech in 2010, Eastern Oregon University could legitimately claim to be the second-best deal in distance learning in the United States. There are 4,000 colleges and universities. Eastern Oregon is now in second place. Yet the school never promoted itself for what it was: in the top three. It then moved from #3 to #2 because of Texas Tech’s suicidal policy. But it will keep this position for only one more academic year.

Meanwhile, the University of Phoenix has 500,000 students at tuition fees far higher than Eastern Oregon University’s.

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Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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