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Online Education's Depressing Statistics, and What They Mean for the Future of For-Profit

Online education promises many things:

  • low costs
  • extreme accessibility by anyone
  • customized pacing
  • flexibility in scheduling
  • more digitally based interactive tools

And perhaps the greatest potential is the toppling of the current system of education. Why would students pay hundreds of thousands of dollars for the same information they could absorb on their own?

One reason, which is being discovered as the great online education experiment is carried out, is that most of us aren't motivated enough to teach ourselves. And because of this, the opportunities that massive open online courses, or MOOCs, present may be a long way off from being realized -- if at all. And the companies with a hand in it have to be prepared for any future.

The cold, hard data
One of the founders of the first step toward MOOCs, Sebastian Thrun of Udacity, reported some depressing statistics to Fast Company. Of the 1.6 million students to sign up for the free Udacity classes, less than 10% finished a course and fewer than that earned a passing grade. While Udacity's goals of opening up knowledge to anyone with an Internet connection are noble, Thrun told Fast Company, "We have a lousy product."

This finding is repeated in past studies on online education. As the Chronicle of Higher Education reports, a study of 51,000 community college students from 2004 to 2009 found an 8 percentage-point gap in completion rates between those who took courses online versus in person. It makes sense that the social pressure and face-to-face relationship with other students and teachers lend themselves to better student performance.

The same rate is found even in for-profit programs like Apollo Education's (NASDAQ: APOL  ) University of Phoenix. Only 17% of full-time students graduate from its online campus within 150% of the expected time of graduation. Career Education's (NASDAQ: CECO  ) American InterContinental University online program reports a bit better statistics, with 27.6% of students graduating within the same time frame, although another online school under the same company, Colorado Technical University, reports only a 9.5% graduation rate.

What does it mean for the future of online courses?
Udacity is pivoting a bit. Companies have come to Udacity to produce courses for current and potential employees. It will focus more on professional development. It also teamed up with Georgia Tech to offer an online master's degree program in computer science, sponsored by AT&T. AT&T will use the program to train its own employees and recruit graduates.

With the question of how much a college education really is worth appearing repeatedly in terms of return on investment, this focus on vocational training may be the future for online education. Company-sponsored courses could be a healthy revenue source for for-profit schools, just as they are for Udacity. And for-profit schools could improve graduation rates and avoid the many regulations and criticisms around their benefits. A student who is going to school for an employer, or a future employer, can easily see the return on investment with a job at a specific employer at the end of a degree program.

Online-augmented education
Online education may not meet its most grandiose promises of revolutionizing education. Some things are just better face-to-face. However, there is still opportunity to leverage new technologies to add to an educational experience -- whether it's a simple employee education tool for part of a job or part of a larger degree program. And for-profit schools that have run on the wrong side of public opinion could take advantage of new corporate partnerships to help their image.

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  • Report this Comment On November 20, 2013, at 9:16 AM, NJJoe wrote:

    I believe Apollo Group's University of Phoenix has an online graduation rate of about 5%.

    Its overall graduation rate, according to the Department of Education, is 17%.

    I would believe that with so many site closings, University of Phoenix faces even lower overall graduation rates in the coming years.

  • Report this Comment On December 05, 2013, at 5:28 PM, Npard23 wrote:

    Online education has no "grades" tied to it that mean anything for employers or graduate schools. This is why its not catching on. These online courses would still need a physical test center otherwise it's too easy to cheat.

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