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Exploring Pricing Issues for High-Quality Online Programming

The EvoLLLution | Exploring Pricing Issues for High-Quality Online Programming
Though the academic costs of online courses are higher than on-campus equivalents, online students see savings from the lack of expenses related to the residential student experience.
All insights below reflect the experience at the University of Tennessee at Martin (UT Martin) and within its College of Business and Global Affairs (CBGA). The answers are not meant as “best practices” examples, but simply as “this practice” realities. UT Martin has, roughly, 7,500 students, with about 5,000 of those on campus on a regular basis. Another roughly 1,500 are unlikely to set foot on campus in a given semester except at one of the university’s centers that are one to two hours away from the main campus in Martin, TN. There are a few hundred “dual enrollment” students who are in high school and will not come to any part of the campus. While numerous students take online courses, most of these students are also enrolled in one or more courses at the main campus or a center. There may be approximately 200-300 students who are pursuing their degrees solely online.

One basic fact about the relatively low cost of tuition at UT Martin is that the state of Tennessee has traditionally been fairly generous—as compared to some other states—in its support of public colleges and universities. The relative bargain that is UT Martin would not be possible if the university received a percentage of support on the order of ten times less, as is true in some states.

It is very important to note that UT Martin’s main mission is residential education. The online component is intended to supplement that mission and help those who find it difficult or impossible to be on campus pursue their education in support of the state’s desire to increase the percentage of citizens with post-secondary degrees.

Another important distinction at UT Martin is that all the online courses taught for the MBA program are “out of load” and, thus, are paid at the same level as summer school courses (3.125 percent of annual salary per one-hour credit such that the usual three-hour credit course would pay 9.375 percent of the faculty member’s annual salary).

The last distinction for UT Martin courses that must be noted is the limit on class size. The agreed to limit per section for undergraduate courses is 25 enrollees. That number can be raised with the faculty member’s permission, but rarely ever exceeds 27 or 28. The limit for MBA courses is 20 and rarely ever exceeds 22.

1. What are the most expensive aspects of creating high-quality online courses and programs?

Accreditation realities drive many costing implications for a university such as UT Martin and CBGA in particular. Whether a student pursues a degree via the residential or online delivery mode, the desire to offer high-quality, AACSB-accredited programs within CBGA means the education should be the same across delivery methods. Put another way, the education should be the same except for the delivery method of that education. While it is relatively easy to have uniform textbooks and student learning outcomes, the faculty input is more difficult.

The definition of a “qualified” faculty member differs from SACS (at the University level) to AACSB (for CBGA), and, within the AACSB framework, differs from one AACSB school to another based on that school’s mission. No matter what, a given university must hire faculty who meet the quality goals it has set and these faculty have a fairly consistent reservation wage.

One way a school could save money would be to have more “supporting” faculty (what most would think of as “adjunct” faculty), but the online and on campus versions of the degree should be qualitatively similar. Thus, the emphasis on the residential education at UT Martin leads to a very high level of “supporting” faculty needed and that level is carried over to the online courses.

Of course, online programs require the hardware/software needed to run the programs and do so while providing redundancy. Although given functions in computing/communications (such as data storage) continue to grow cheaper, the innovations continue to change the need to continually update equipment/training/personnel and those costs are not going down.

At UT Martin, academic overhead is not inexpensive. Since UT Martin was established to be a residential campus, charges to online students carry costs for academic affairs and campus overhead. Online students do not have to pay many fees (such as those for campus recreation access), but pay all the general fees associated with being a student as well as a technology fee for the online course itself.

The last cost involved with creating a high-quality online course/program is time. Accreditation takes years … often a decade plus … if one is not already accredited. The value of a “brand”—such as The University of Tennessee—cannot easily be created for an upstart. The price of having such name recognition, though, is the added costs to support the campus overhead mentioned above.

2. Conversely, how can offering an array of high-quality online programs help business schools save money?

If a university offered a wide array of programs, it could probably save on its ‘brick-and-mortar’ investments. However, that is speculation in terms of speaking from the UT Martin model. Within CBGA, we offer an online degree at the undergraduate level—a BSBA in Management—and at the graduate level with our MBA. Those two programs are it. As mentioned before, the online MBA courses are taught out-of-load. Usually, the online undergraduate courses are taught within a faculty member’s regular teaching load.

UT Martin does offer multiple other programs via its UT Online programs, but all the others are outside the umbrella of CBGA even if almost all are under the larger umbrella of Academic Affairs.

Perhaps one way many programs could save money would be to outsource labor to non-tenure track faculty and/or to adjunct faculty who do not get benefits. These two methods are quite practical for many programs, but not so with UT Martin with its residential mission and AACSB accreditation based on that residential mission.

3. How should pricing for online courses and programs differ from that of traditionally delivered, face-to-face programs?

On the one hand, I would argue that the added convenience leads to a higher price for an online course as opposed to an on-campus one. The faculty costs are the same and the added technology that should be used in an online course also increases the costs as compared to an on-campus course.

However, the main savings of an online course is that, depending on the university delivering it, there should be little brick-and-mortar overhead. At UT Martin, the cost for the academic side of an online course is higher than for the academic side of an on-campus course. The savings to the online student is that he or she does not have the added expenses associated with the residential experience (dorm rent, meal plan, and such). The base cost per hour of course is the same no matter the delivery format, but the online courses have an added technology-related fee.

The UT Martin model does not allow for anything like decreasing of costs per unit based on large batch (class) sizes. Given the online class size restriction discussed earlier, CBGA does not have the ability to spread the fixed costs over more units of production.

4. As technology advances, how do you think the cost of creating and delivering high-quality online courses will change?

This answer is my speculation and is not really possible given the enrollment limits now in place at UT Martin. The most significant way to reduce the cost of delivering an online course is to increase the section size. It is easy enough to make the delivery of the lecture-type materials scalable. For instance, a recording made for one could just as readily be seen by hundreds, given sufficient bandwidth. The issue will be in creating ways to make student input back to the instructor scalable as well—especially for courses which need to have a large portion of student comments/writing assignments.

I would also venture that we will see little to no change if government assistance continues to let students borrow money in such a way that the students do not feel the true cost of attending college until long after graduation. Demand varies little if those demanding the product have little idea what the true cost will be.

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