Wednesday, June 25, 2008

Higher Ed. Entrepreneurship

By Jim Coleman

Universities sometimes try to explain away soaring college costs by claiming that the services they offer have fixed productivity levels. Because of these fixed productivity levels they are unable to become more efficient, so prices rise (in real terms) relative to many other goods. For example, lectures today are still more or less conducted in the same manner they were by Socrates in ancient Athens. That’s over 2,400 years without substantial productivity increase! The reality, however, is that college costs are soaring not because higher education genuinely has a fixed productivity level, but because colleges simply refused to innovate and serve the changing needs of their customers.

The success of Entrepreneur Burk Smith illustrates that there are plenty of productivity advances to be made in higher education if one is willing to seize them. Smith’s company, SmartThinking started offering alternatives to Universities’ traditional in-house tutoring in counseling services. offers a variety of tutoring to students at participating institutions, while provides counseling services to students to assist them in staying engaged and on track with their broader life goals. The results have been impressive. By utilizing the internet and moving away from the traditional labor structure of universities, Smith’s services have been able to provide higher quality at a lower price. Perhaps the most appealing aspect is the gains to the student. Not only does their company charge less, but they also have more convenient options. Tutors are available 24/7 on a variety of subjects; they can even turn in essays and receive a detailed critique back in less than 24 hours.

As reported in the chronicle, Smith recently took this concept to the next level by offering accreditated college courses through his newest venture, Students can enroll in college courses for just $399 each. The courses are online so they can progress through the course when they want at the pace they want. There are significant economic gains from this arrangement. Students are offered cheaper more convenient courses, and colleges are able to free up resources; more classrooms will be available for other classes and labor that would have been used to teach intro or remedial courses can be shifted to a higher value use.

Smith’s success shows that there is clearly a demand for these services, and if the academy refuses to innovate, the market will be glad to do so. But first, obstacles in the form of federal regulations and accrediting agencies need to be reworked in order encourage more entrepreneurs to invest in higher education.


capeman said...

I may be wrong, but sounds like basically you get 10 hrs. of tutoring for $399 plus the book. (Included?)

For courses like "college algebra" (actually the material students should have learned in high school) you can get tutoring for far less than that, at the university I know best.

edu4higher said...

But Capeman, what would the student pay at the university you know best? What would the student pay if that course was unsubsidized? What does a student get for a comparably priced, online, general education course in today's higher ed system? This ventures seems to provide more instruction, more conveniently, and with content that is at least as good.

It seems to me that this venture may be worse than our idealized version of higher education, but is far better than the reality of most general education courses.

capeman said...

An in-state student would pay about $500. But the student gets more than in the online course. i.e. there are real classes with a live instructor (including office hours, not private tutoring, but office hours with a real math pro). Not online tutoring @ $40/hr.

If the student wants or needs additional tutoring, that can be had around here for $10-$15/hr.

Of course, the course here is subsidized. The subsidy at this particular school for this particular level course is low, about $250.

But it's more complicated than that. Of course, the math department here is making money on this basically high-school level course, and they use the "profit" to subsidize higher level math courses. That is how they are able to offer a math major at the same tuition rate as the entry-level course.

The actual cost of "delivering" the entry-level course here is probably less than $400. It is a complete myth that online education is more efficient, at least at present.

Is the online course "better" than the live one offered here? People will differ on this. The "live" courses here are always filled to the brim. And there aren't many students pressing the university to let them take it online (and the students are fairly good here at pressing for what they want).

I'm not against online education, I own stocks in companies that offer it, but I think they are definitely very limited in what they can offer.

Most universities and colleges would not accept the credits for the online courses featured here. My university would accept some online credits, but not these. The company would have to convince the university -- basically, the math department -- that the course was comparable to the course offered here.

edu4higher said...

Will your university accept AP test scores for credit? CLEP credits? Community college transfer credits? ACE credits? If any of these are true, your university is already accepting 3rd party credits where courses may be far less rigorous and supported that what’s offered here.

For your school, the tuition (does this include mandatory fees?) plus state subsidy is $750. The office hours may, or may not, be helpful to students. Office hours are notoriously inconvenient. So, your university charges twice as much for a course that may be less supported and convenient. The only justification is that this subsidizes higher level courses for math majors. While this is helpful for math majors, students not intending to be math majors may not want to subsidize that degree. Also, it seems like this program has “math pros” also. They are mostly masters degree and PhD holders.

Again, it seems like you are holding these courses to a different standard than what your university likely already accepts.

capeman said...

Well, maybe the course is all you think it is. The vendor is welcome to try to persuade the university where I work to accept the credits. As you suspect, they do accept credits from a number of other educational "outlets". All of them have been vetted, and this provider could give it a shot, too.

You may think structuring things to be able to offer advanced courses leading to degrees in math (and many other subjects)-- which inevitably is a money losing proposition if you just look at the money flows -- is not a worthy activity.

Students who feel that way can avoid subsidizing the advanced courses if they want to go to the trouble. If they don't like the finances are structured here -- if they think the entry level offerings cost too much -- take the course at the local community college (where they will pay less than $399, though the actual cost of providing the course is higher, and probably higher than it actually is at my unversity); or take a CLEP exam. Some students do. That's fine with me.

If a student really wants to save money, assuming he needed to learn the material but didn't want to pay for a live course, here's what I might suggest: find one of the FREE online college algebra course/ tutorials on the web. It doesn't take long to find them. If you need a tutor, hire one of the locals at $10-15 per hour on an as-needed basis.

As I said, the student taking an actual course here would pay about $500 in tuition.

For my money, that's a pretty good deal, better than a $399 online course (I love that $1 discount, it makes it sound like a discount outlet).

Again, as I say, the "college algebra" level courses here are always filled to the brim, there are more than enough people happy to sign up.

I really don't care if someone wants to make money with these online offerings, as I say, I own stocks in some for-profit educational ventures. (Reading about their legal troubles while the stock prices tumbled wasn't pleasant though).

What bugs me are the claims in blogs such as this that traditional higher education is some sort of ripoff, or that these entrepreneurs have discovered some sort of miraculous way to increase "productivity", or that the quality is higher than the traditional offerings at a lower cost.

I think it's mostly baloney.