Funding Distance Education & The For-Profit Sector

BalzoraLalla

Cavanaugh Higher Education Business & Finance

Background Information

• Universities from around the world offer long distance learning, and it has been found that distance learning is beneficial to traditional and non-traditional students.

• There is a pool of students who may be interested in a program but who may not have easy access to the courses offered on campus at specific times during the year.

• Because the universities are aware of the demands of online courses, they use various systems to allow their students to learn without having to be confined to the classroom.

• Finding the right tools, such as software, hardware, and online learning platforms require funding and requires strategic planning to properly allocate these funds.

• Distance education from institutions of higher education can be funded at the federal, state, and institutional levels.

• The political, historical, and geographical features of the American higher education system, however, result in some differences, especially in the case of organizational structure and funding.

Federal, State, and Institutional Funding of Distance Learning

Federal

• Most federal funds for distance education come through grants and through regulatory changes [e.g. The Fund for the Improvement of Postsecondary Education (FIPSE)]

• U.S. Dept. of Ed. Dropped the 12-hour rule in 2002, which opened more funds for distance education.

• The Deficit Reduction Act of 2005, repealed the 50% rule once imposed by the state.

State

• The State has more authority over higher education, especially over public institutions.

• Given lesser emphasis of traditional institutions on fixed expenditures, the funding of distance learning was found to be problematic for state funding. State funding is more often project-based while distance education requires more recurrent funding.

• The States fund institutions through given formulas for variable costs (e.g. maintenance).

Institutional

• Because many institutions face demands for better access, and opportunities for greater reach, a large number of institutions within the United States have added distance education to their traditional operations.

• “Successful distance education efforts are those that fit with decentralized governance, with a system of numerous, broadly distributed education providers, and with American capitalist competitiveness for market niches and students.”

• Many institutions adopted a business-like model for their distance educations to help fund it better. In some instances, distance education is managed as a separate business operation or profit center.

• Occasionally, distance education will be separated from its parent institution, and will be operated as a subsidiary organization. For instance, Cornell University formed eCornell, which is for-profit, and develops and distributes online education.

Partnership & Collaboration

• Consortia connect institutions within states; it allows them to publish centralized catalogs of courses and programs. It may also supply centralized libraries and support services to students, and it provides an avenue for leaders to cooperate on decision-making, especially on funding.

• Educational institutions manage their distance education efforts through consortia and partnerships with other institutions.

• Consortia helps decrease costs through the reduction of duplication of courses and services.

• 60% of degree-granting institutions in the U.S. that offer distance learning are members of consortia.

• There is a systems of approaches to the costing of distance learning, which is highly dependent on human activity systems (e.g. educational and training organizations)

• System framework: • One developed by

Miller and Rice (1967); Materials subsystems: design, production, distribution, and reception of course materials to support an agreed academic curriculum

• *** Supporting: the logical system which replenishes the resources required by the system, and the regulatory system which plans and manages the overall system

Principles of Coherency

Capital & Recurring Expenditure

• Capital: non-recurrent

expenditures such as equipments.

• Recurrent: Software, programming.

• Variable cost• Fixed cost

Rumble, G. (2001).The Costs and Economics of Open and Distance Learning. RoutledgeFalmer, Oxon.

Example: The materials which are given to students to keep each semester fall under recurrent variable cost

• FIPSE funding allows colleges to explore available electronic tools and corporate service providers, to weigh their advantages and disadvantages, and to choose those that best fit their needs.

• Institutions of higher education need to be customer and market focused in order to avoid distance learning courses or curricula that carry high costs which few students are willing to enroll in.

• The more important management of costs proposed by scholars is for the university, state, and government, including policy makers to understand the issues of scaleability and replication.

CASE Study

Faculty Perspective and Their Role in Distance Education

Policy Making

Questions

• What are faculty perceptions of how distance education policy is created, who creates it, and who should create it?

• What are faculty perceptions as to the role and impact of policy in distance education?

• What is the nature of faculty involvement in the development of distance education policy?

• Why do faculty think it is important to be involved in the distance education policy making system as a whole? 

Findings

• Faculty can Impact Distance Education Policy by Sharing Their Experiences and Having Greater Involvement in Distance Education Policy Development

• Contextual factors affect policy development and faculty involvement in the process 

• Faculty Type

Findings

• Structure and History• Politics and Power

Recommendations

• Give Faculty a Voice  • Involve Contingent Faculty  • Provide Faculty Support • Allow Opportunities for Student Feedback  • Consider the Role of Context 

Business Modeling and Distance Learning

• Defining the challenge:

digital technologies cost more than traditional methods, and yet e-learning continues to grow in universities

• Current approaches to costing technology innovation– Cross-institution approaches– Within-institution approaches

http://www.youtube.com/watch?v=FGX_XLbJSP8

Relating Benefits to Costs

• The principal cost parameters for comparing teaching methods

• Modeling the real costs and pedagogic benefits of TEL innovation

• Benefit parameters that can differentiate between old and new methods

Cost Drivers

• Focus on the major cost driver of staff time• Represent value to the learner in terms of use of

their time• Support the local exploration of the cost-benefit

relationship• Represent technology-specific benefits• Represent benefits in terms of improvements in

learning

Section Conclusion

• Making tools available to support local improvements in understanding benefits and related costs of the technology, and within a community of practice could lead to a better general understanding of how to optimize the innovations in personalized learning that digital technologies make possible

Funding Distance Learning & For-Profit

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FOR-PROFIT SECTORFinancing Distance Learning

For-profits are “Picking the low hanging fruit” and leaving the “heavy lifting” to traditional academe… (Berge, 2000)

• Profit institutions are the fastest growing sector in education (Gallagher, 2003)

• Blurry line between public and private universities in the financial arena.

• Only 4% of all higher education students are enrolled in for-profit providers, but only 33% of all online students are enrolled with these providers. (Gallagher, 2003).

Revenues Financing Distance Learning in the For-Profit Sector

Revenues in For-Profit sector consist principally of tuition, application and graduation fees, and commissions earned from bookstore and publication sales.

• Tuition represented 98.5% of Capella revenues.• End of the year 2007 Capella enrollment and revenues grew

by 25%. This growth came– Partly from increased demand for their online programs, – establishment of relationships with large corporate employers,

healthcare institutions, the U.S. Armed Forces, and various community colleges; and a growing acceptance of online education.

INDUSTRY Financing Distance Learning in the For-Profit Sector

For-profit institutions have been designed to meet the growing demand and are becoming an increasingly convenient option for working adults.

• The revenue growth rate in fully-online education exceeded the revenue growth rate in the non-profit segment of the post-secondary market from 2001-2006. (Eduventures, 2006)

• The number of students enrolled in fully-online programs at Title IV-eligible, degree-granting institutions grew by approximately 24% in 2006 to reach approximately 1.5 million as of December 31, 2006 and grew to approximately 2.1 million by December 31, 2008. (Eduventures, 2009).

MARKETING Financing Distance Learning in the For-Profit Sector

Since 2007, 32% of Capella University learners received a discount in connection with one of their marketing relationships:

1. Corporate and Healthcare Relationships.

Capella has learners from over 140 corporations and healthcare providers.

2. U.S. Armed Forces Relationships and Discount Programs. In 1997, approximately 16% of Capella learners received a U.S. Armed Forces tuition discount.

3. Educational Relationships. Capella has made arrangements with over 200 community colleges (as well as PTK advisors).

TUITION AND FEESFinancing Distance Learning in the For-Profit Sector

• Fixed tuition amount regardless of the number of courses taken.

• Funds received under various government student financial aid programs, predominantly Title IV programs.

• From 2005-2007, approximately 70% of Capella revenues were attributable to funds derived from the Title IV programs.

• Financial aid from other government sources, tuition reimbursement from employers or the Department of Defense or through private funding sources.

– For the year ended December 2007, less than three percent of their learners used private loans and less than one percent of their revenue was derived from private loans.

Online ReportsFinancing Distance Learning in the For-Profit Sector

Stockholders received regular online reports. Some have open online conferences for stockholders.

• Thirty-two Trends Affecting Distance Educationhttp://www.westga.edu/~distance/ojdla/fall63/howell63.html

• 2007 Annual Capella University Reporthttp://www.shareholder.com/visitors/dynamicdoc/document.cfm?Doc

• 2008 University of Phoenix Academic Annual Report. http://www.phoenix.edu/doc/about_us/AcademicAnnualReport-2008.pdf