There have been a number of entrants into the online degree space whose tuition are at significantly lower price points than the majors. Some of these have seen tremendous enrollment growth over the last year to two. In addition, they have remained (in many cases) extremely profitable. What are your thoughts on these low price providers? How do you think they will fare long term? Will they be able to continue to grow with the high marketing/lead costs?
Low cost/tuition online schools…they have been growing, what are your thoughts of long term prospects?
May 7, 2009 By 3 Comments
Hi Tom,
As you know GetEducated.com does national surveys on the cost and affordability of online college programs. We then publish these as Best Buy rankings for consumers. The market has become extremely competitive. Consumers see cost as an essential brand differentiater and this is not an area where most for-profits are competitive. Consumers are using a cost-credibility index to judge how much any one online college is worth. Schools that are low in credibility but high in cost are in for some rough times in this next decade. Consuemrs will pay more for certain factors but if they have a choice between 2 or more schools and both are equally credible cost is now a tipping factor. –Vicky Phillips, GetEducated.com
When I was first met with a group that had acquired a for-profit college in 2001 I was aghast that lead aggregators were charging $15 per lead. Today these leads are $40-$60 and higher, and the sellers boast that the conversion rate may be as high as 3%! I’ve concluded that only idiots – or schools with exorbitant tuition rates – are buying leads these days. But at Andrew Jackson University we stopped buying leads in May 2006 and have since more than doubles our enrollment. How did we do it? We have established relationships the “old fashioned” way: we went to them and met their employees or group members. We also lowered (yes, lowered) our tuition and then, eliminated it entirely through our unique sponsored tuition program. While a Merrill Lynch report said that schools spend between $1400 and $2700 per start, we are at around $200. And with the new American Opportunity Tax Credit even our semester fees and books can be almost 100% covered so a student’s net cost for three semesters is almost covered. We are, on the other hand, being attacked by some schools who either can’t figure out how to do something similar or are just a bit envious of our marketing approach. So what are the long term prospects for schools that provide quality education at low cost? Lokk what happened to a couple Japanese car companies that tried that approach starting back in the late ’60s…
You would think that with all the expenses that are saved with online education enrollment costs should go down or the schools should be making more money. I think that is a step in the right direction to educating our population better in the US. Lower costs and more flexible schedules.