Online Learning: Bending the Cost Curve in Higher Education?

Higher education is becoming a must to succeed in the 21st century labor market.

Research has shown that not only do individuals with higher degrees – from community colleges, technical training programs, or traditional universities – make hundreds of thousands more in salary over their working lives, but also enjoy greater social mobility, longer life expectancy, and myriad other benefits.

But despite this clear consensus, extended education is still scarce in emerging economies like those of Latin America. And in more developed countries the costs – and associated debt – are skyrocketing. As a new paper from a group of researchers led by Harvard’s Claudia Goldin and Lawrence Katz argues, “The earnings premium associated with additional education in the United States has risen markedly since 1980, suggesting that the supply of education labor has not kept pace with demand.”

This supply shortage has started to create innovation in the sector, in particular with the expansion of online education technologies. Programs like Massive Open Online Courses (MOOCs) provide students around the world with low cost access to coursework from leading institutions like MIT and Harvard. But is this type of competition bringing down costs across the entire sector? And – more importantly – is it high enough quality?

Despite the intense debate over the benefits of these types of new models – which allow for education to become a tradable good, which can be exported and imported between countries and within regions – the evidence one way or another has been thin. Adding to our knowledge in this regard is a major benefit of Goldin’s paper. The authors found “some evidence that colleges are charging lower prices for online coursework, suggesting that advances in online learning technology might be able to ‘bend the cost curve’ in higher education.”

There is still a perception that online education is less serious, less rigorous, than traditional schooling. Nonetheless, the Harvard study points out that “online-only” bachelors degrees grew from 0.5 percent of the total in 2000 to over 6 percent by 2012. And as education policy analyst Rachel Fishman argues, “almost all students today are online students in some way – whether it be accessing institutional services online, taking a hybrid or fully online course, or enrolling in an online credential program.”

Most of this growth comes in the United States. Companies like Kaplan, the University of Phoenix, and DeVry University together enroll hundreds of thousands of online students, more than a third of the country’s total. They are expanding into Latin America as well: DeVry entered the Brazilian market in 2009 and now operates eleven institutions there with more than 86,000 students. The Dallas-based Whitney International University System operates the “Universidad del Siglo 21” (21st Century University) with offerings in Panama, Colombia, Argentina, and Brazil. 

Online education clearly holds the promise of making education available globally, even though progress on this front is still relatively slow. The Harvard study reveals that in 2013, just 1 percent of all enrollment in fully online U.S. courses came from outside the United States. But MOOCs and other technologies are already pushing this to change. Today, for instance, nearly 10 percent of all students taking part in MIT’s edX online platform – some 130,000 people – come from Latin America.

Goldin’s research also highlights another important aspect of these developments: online education is not so much replacing the traditional four year college, as some predicted it would, but rather expanding opportunities to those who were otherwise shut out of higher education. “[O]nline students are older, have lower levels of parental education, are more likely to be single parents themselves, and are more likely to be working full-time while enrolled in school than are other college students,” write the authors.

“Most of our students work full time, and choose to study online because they need the flexibility,” says David Stofenmacher, the founder of UTEL, Mexico’s only online-only university, with nearly ten thousand students. “Because of their socioeconomic background, they also need a higher level of support than traditional students in a classroom setting.”

Clearly, online education is serving a slice of the population that has for too long been neglected. While the debate still remains open about the level of quality that the sector is capable of delivering, it is offering a valid alternative for working adults or marginalized students who would otherwise receive little or no education. Especially in the emerging economies of Latin America, these options should be encouraged and expanded – if only to inject some much needed competition to incentivize creativity in the incumbent education providers.