Costs and Pricing of Distance/Online Education Programs

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1 Costs and Pricing of Distance/Online Education Programs A Joint Report from Indiana University, Purdue University, and Ball State University to the Indiana Commission for Higher Education December 9, 2011 Barbara Bichelmeyer, Indiana University Steve Keucher, Indiana University Mike Eddy, Purdue University Mary Sadowski, Purdue University Jennifer Bott, Ball State University Bernard Hannon, Ball State University When Tim Berners-Lee and CERN launched the World Wide Web in 1991 in order to develop a pool of human knowledge which would allow collaborators in remote sites to share their ideas, they certainly could not have fully comprehended the ways in which that action would revolutionize higher education. One of the most profound changes to higher education as a result of the Web has been the development and growth of distance/online education programs. The ability to send and receive text, images, video, sound, and other multimedia between individuals or groups of people at a distance either synchronously (in real time) or asynchronously (independent of time) is redefining the relationship between teacher and student, which is the core feature of the academic enterprise. Together, this new capability and this new relationship are leading to the restructuring of higher education programs and services, policies and processes, markets and competition, revenues and costs. The impact of the web on higher education has been so complex and so pervasive that, even after 20 years, we are still coming to terms with what exactly online education is, as accreditors and stakeholders work to build consensus toward a clear definition that will allow us to manage and monitor online education. A fundamental question still to be decided: is online education any program in which any student may select courses to create an experience in which 50% or more of the courses were taken online, whether or not the higher education institution intended the degree to be online (Higher Learning Commission, 2011, p.1); or is it more appropriately the Sloan Consortium s definition of an experience which a higher education institution intentionally designs, with 80% or more of coursework being online (Allen & Seaman, 2010, p.4)? One reason online education is so difficult to define is that online education may take so many forms, which involve so many different elements of the instructional experience, such as Page 1

2 presentation, interaction, and testing. Further, some forms of online instruction are more appropriate for certain types of learning than others, making it impossible to take any absolute view of the value or lack thereof of online education. This point was well-articulated by William G. Bowen, president emeritus of both Princeton University and the Andrew W. Mellon Foundation, currently serving on the boards of Ithaka/JSTOR. Bowen recently published the best-selling book, Crossing the Finish Line: Completing College at America's Public Universities (2009), and his special interest in the application of information technology to education is evident in his founding of Ithaka Harbors, an organization launched to accelerate the adoption of productive and efficient uses of information technology for the benefit of higher education. During his address at the Indiana University-Bloomington Graduate Commencement in May 2011, Bowen noted: Online learning is not a panacea. Being around other smart people is a huge advantage not only in acquiring knowledge in the abstract but also in learning how to work effectively with others. This is why MIT, in its pioneering webbased OpenCourseWare project, distinguished sharply between what on-campus MIT students would learn from actually being at MIT and what off-campus users of MIT materials could learn. Non-campus-based users could learn a lot, but not as much as those who had on-going interactions with fellow students and faculty members as well as access to the materials available to everyone on the MIT website. That said, there is absolutely no doubt that appropriate uses of online methods of instruction have an enormous amount to contribute to educationallyeffective modes of teaching. But this does not mean that even the most sophisticated approaches to online learning are equally well-suited to all subjects. Nor should one approach any discussion of whether to embrace online learning from an all or nothing perspective. even Indiana, with its renowned technological infrastructure, is in very early days in developing and testing how best to employ rapidly evolving online technologies. Accreditation Requirements for Distance/Online Education The variety of types of online instruction available, the appropriate uses for each type of instruction, and the importance of interaction to education are three key issues around which higher education accreditors are organizing their expectations for distance/online education. Prior to the advent of the Web, students who studied at a distance generally did so through correspondence education, which is defined by the Higher Learning Commission (the accrediting body for all Indiana University and Purdue University campuses), as when an institution of higher education provides instructional materials and exams to students who are separated from the instructor; in which interaction between the instructor and student is limited, is not regular and substantive, is primarily initiated by the student, and which are typically selfpaced. Further, correspondence education is not distance education (Higher Learning Commission, 2011, p.2). Conversely, the Higher Learning Commission (HLC), defines distance education as education in which information and communications technologies are used to deliver instruction to students Page 2

3 who are separated from the instructor and to support regular and substantive interaction between the students and the instructor, either synchronously or asynchronously, (Higher Learning Commission, 2011, p. 2). Regular and substantive interaction between student and instructor is the value added brought to distance education by the World Wide Web - though this type of interaction from a distance was not possible before the web, it is both the goal and the expectation of online/distance education at HLC- and other regionally-accredited higher education institutions today. In 2009, the Council of Regional Accrediting Commissions published Guidelines for the Evaluation of Distance Education (On-Line Learning), which highlight nine hallmarks of quality for distance education, to which institutions are to demonstrate compliance during accreditation reviews. The nine hallmarks of quality are: 1. On-line learning is appropriate to the institution s mission and purposes. 2. The institution's plans for developing, sustaining and, if appropriate, expanding on-line learning offerings are integrated into its regular planning and evaluation processes. 3. On-line learning is incorporated into the institution s systems of governance and academic oversight. 4. Curricula for the institution's on-line learning offerings are coherent, cohesive, and comparable in academic rigor to programs offered in traditional instructional formats (emphasis added). 5. The institution evaluates the effectiveness of its on-line learning offerings, including the extent to which the on-line learning goals are achieved, and uses the results of its evaluations to enhance the attainment of the goals. 6. Faculty responsible for delivering the on-line learning curricula and evaluating the students success in achieving the on-line learning goals are appropriately qualified and effectively supported. 7. The institution provides effective student and academic services to support students enrolled in on-line learning offerings. 8. The institution provides sufficient resources to support and, if appropriate, expand its online learning offerings. 9. The institution assures the integrity of its on-line learning offerings. The availability of multimedia communication and both synchronous and asynchronous interaction through the World Wide Web has created an expectation about distance education that was previously both unheard of and impossible, which is that online education can and should be comparable in academic rigor to programs offered in traditional instructional formats. The expectation that the online format, which is wholly different than on-campus instruction, could have the same rigor of experience and interaction is a testament to just how revolutionary the World Wide Web has been to higher education. Brief Overview of Key Benefits of Distance/Online Education Though the word revolutionary may seem to be hyperbole, the key benefits of Web technologies are changing the landscape of higher education as leading institutions incur significant new costs in order to drive the development of online education programs. Key benefits of distance/online programs for students and institutions include: Page 3

4 1. Reduced travel. The conveniences afforded by online technologies lead to significant cost and time savings for students, as they no longer need to drive to campus, buy parking permits, walk into classrooms, go to the library to access resources, or to meet face-to-face with faculty or other students in order to participate in educational experiences (Cornford & Pollock, 2003; Evans & Haase, 2001). 2. Flexible scheduling. The same technologies that reduce/remove the need for students to travel to campus also create opportunities for and convenience of flexible scheduling so students can watch lectures, communication asynchronously, and access library resources 24/7, which allows students to participate in educational experiences that might otherwise not be possible due to demands at work, home, and other personal responsibilities (Jung, 2003). 3. Interactivity. Web 2.0 technologies such as social networking, blogs, wiki, online communities and video communications have greatly improved and increased opportunities for students to interact with instructors and other students, allowing students to ask questions and to receive quick and frequent feedback from instructors, and to engage in interpersonal interactions with other students, across the dimensions of both time and space (Jung, 2003). 4. New markets. Online instruction that can be delivered instantaneously around the world removes the limitations of geography and time, and means that any and every education provider has the potential to reach a global market (Bartolic-Zlomislic & Bates, 1999; and Evans & Haase, 2001), though, obviously, the potential of reaching a new market may not actually be worth the cost of accessing it. 5. Greater scalability. Access to new markets means that the same courses can be used to educate more people, thereby increasing the scalability of online courses (Evans & Haase, 2001), which should lead to decreases in average cost per course enrollment as enrollments rise (Arizona Learning Systems, 1998). 6. Increased competition/improved quality. As education providers take advantage of Web technology to move in to new markets, increasing competition is expected to unleash market forces that will eventually improve the overall quality of education, as competitors vie for student enrollments (Bartolic-Zlomislic & Bates, 1999). Cost Analyses of Distance/Online Education Not long after the launch of the Web, administrators, evaluators and researchers began to conduct cost-benefit analyses of online education, and to engage in the related endeavor of identifying and quantifying cost differentials between this form of distance instruction and inclass instruction. Such studies have been ongoing; those reviewed in the preparation of this report include Bartolic-Zlomislic & Bates, 1999; Bacsich et al, 1999; Whalen and Wright, 1999; Kilby, 2001; Morgan, 2001; Cornford & Pollock, 2003; Inglis, 2003; Jung, 2003; Robinson, 2003; Rumble, 2003; Bartley and Golek, 2004; Bettcher, 2004; ASHE, 2006; Bramble & Panda, 2008; North Carolina General Assembly Program Evaluation Division, Page 4

5 This cost analysis section of the report will address three concerns: 1) an overview of cautions regarding cost analyses of distance/online education, 2) descriptions of significant costs for online education as experienced at Purdue University and Indiana University, and 3) an overview of findings from cost analyses published in peer-reviewed journals, handbooks from the field of distance education, and government reports. Cautions regarding Cost Analyses of Distance/Online Education As Web technologies have developed over the years, methods of conducting such analyses have also improved; yet there are still cautions that remain relevant and which should frame any conversation about calculating costs of online education. Factor of Use. Rumble (2003) notes the main message that emerges after the review of multiple cost studies is there are a great many caveats that have to be made to any statement about the costs of technology within education. The problem is that the cost of a given technology is not just driven by the hardware and software costs of that technology but by other factors of which the working practices underpinning the use of the technology is perhaps the most important (p.708). It is not the technology itself, but how the technology is used that may be the most important factor in determining true cost. This point is particularly well-taken with regard to whether and how much Web technologies are used to create interaction between instructors and students, and as instructors facilitate and monitor student-to-student interactions. Hidden Costs. Inglis (2003) warns about confounding effects of hidden costs when attempting to calculate the costs of online education, particularly when trying to compare online costs with the costs of other forms of education: there are invariably some costs that remain unaccounted for. The hidden costs can distort the basis of comparison. The costs of long-established methods of delivery are usually well-understood, whereas the costs of emerging methods of delivery are often not all known. Comparisons of this type therefore tend to understate the costs of newer methods of delivery while fully accounting for the costs of existing methods. The effect is to place new methods of delivery in a more favorable light, (p.735). Variation of costs. After review of multiple studies of costs-effectiveness of early online education, Jung (2003) found that even in studies which established cost-effectiveness of distance education, costs vary substantially from one situation to another and are influenced by a number of factors, and most generally, findings are that cost-effectiveness increases as the number of students increase and the number of courses declines (p.717). A further challenge in dealing with variation of costs is the variability of faculty salary, and balancing faculty-student ratios, since in order to achieve satisfactory faculty-student interaction class sizes typically need to be smaller and are therefore more costly Descriptions of Significant Costs for Online/Distance Education at Purdue, IU and Ball State This section of the report provides a description of the experiences of faculty and administrators at Purdue, IU and Ball State as we ve gone about organizing for, developing, and implementing online/distance education, in order to provide a context for and perspective of what online Page 5

6 education includes, how implementation occurs, and what impact it has had and is having at these institutions. One reason generally given by those who assume online education is less costly than oncampus education is that online courses do not require classroom space. Online may still require classroom space depending on whether and where faculty synchronously or asynchronously record lectures for viewing by students. Given the primary mission at IU campuses is to on-campus programs, there will continue to be a need for and ongoing commitment to maintenance of existing facilities at IU campuses. Calculations based on these assumptions indicate that online courses produce a savings of $8.68 per credit hour (about $26 per 3-credit course) on classroom space for each student. While significant, this savings is not enough to offset the additional costs of online education, such as class size that often are 20-35% smaller (Schnabel, 2011, p.17). The activities involved in lecture-capture, the most basic approach used to convert class lectures to online formats for courses such as Engineering Professional Education at Purdue, make additional costs of distance education immediately apparent. The instructor is recorded while teaching an on-campus course; lectures are then distributed to distant students by streaming video. Distant students are given access to the instructor by phone and online. Exams are administered to distant students on paper or online using a proctor. Costs of recording and distributing the lectures include classroom/studio facilities, recording and editing equipment, staff to record and edit, facilities and staff to manage materials, costs of distributing exams, and additional instructor hours in working with distant students. Using the lecture capture method, all the regular instructional costs are incurred and the distant aspects are additional costs to be recovered. For more progressive online course models at Purdue, an upfront course conversion effort is required. Generally, 10 hours of development are required for each hour of instruction, and these hours may be distributed among an instructor and instructional development personnel. The development of a three-credit course may represent about 450 hours of effort or.2 FTE. Beyond development hours for staff, additional costs include the maintenance of a learning management system (e.g., Blackboard) which includes staffing (technical, administrative, and customer support), hardware, and software licensing. Costs for development of produced video segments, animations, and simulations, etc. which enhance learning can be significant. As an example of processes involved in the adaptation of a master s degree course with high interactivity and group-based projects, one such conversion at IU-Bloomington involved the instructor and a team of five instructional and interface designers. The design team engaged in thirteen activities throughout the process of adapting, designing and developing the distance course, which involved: Confirmation of goals and objectives of the course Identification of major content components of the course Establishment of overall technology strategy for the course - web pages for presentation, group discussion forum to foster team interaction, announcement listserv to communicate time-sensitive messages to the entire class, messages from instructor for project feedback, and web chats for weekly office hours Page 6

7 Interface design - identification of specific web pages and links needed, as well as content needed on each web page Template design for each element of instruction - syllabus page, schedule page, presentations pages, assignments pages, resources, etc. Determination of navigation paths and navigation structure for the course website Gathering of instructional materials from previous lectures, textbooks, journals, websites to provide and write content for the course website Coding and editing of web pages Usability testing with students, and subsequent changes and updates Uploading to university learning management system and servers, testing of functionality and compatibility, and re-coding of problematic files Student orientation to course technologies and training to work in online environment Development of comment/suggestion function to gather students input for periodic maintenance and upgrading of the course website Ongoing monitoring of students interaction with course materials, university technology, and technology support for students throughout the course (Bichelmeyer, Misanchuk & Malopinsky, 2001). Both Purdue and IU have found that updating and revising of online courses is a more timeconsuming and expensive proposition than for traditional instruction. For a traditional course, the instructor generally works alone to modify lecture notes or even entirely revise the lecture sequence. To revise an online course requires the involvement of various technologies and often, instructional support staff. Time expended in this manner is in addition to the time spent in the intellectual effort of revising the content itself. In fast-changing technical fields like engineering, fresh lectures are recorded each term and costs are incurred. The Master's of Nursing program, one of Ball State's first online programs, is currently entering a three-year revision process. Because of their reliance on simulation to teach principles of nursing and the interconnectedness of the courses within the program, this revision process requires all faculty members' input, as well as significant technology and instructional design staff time and effort. The planning process for course revisions will take several months in order to sequence the material, incorporate significant peer-to-peer and faculty-student interaction opportunities and develop rich-media content in support of student learning outcomes. Purdue University representatives note that every distance learning course is considered to be a highly visible public representation of Purdue University, more so than a typical classroom on campus. As such, an online course is not an activity that is limited to an instructor, but typically involves efforts by an array of administrators and support staff. (An online course is less like the creation of a novel or a painting that is an individual effort, and more like a film production that requires a team effort.) Examples of team production are quality reviews in which the University ensures a precise content match between online and on-campus courses and programs; and assurance of technological efficacy and quality student experience neither of which occur for on-campus courses, and both of which require staff effort. Purdue University has only recently scaled-up undergraduate courses, and it is important that the courses meet or exceed the face-to-face expectations and take full advantage of the Page 7

8 technologies offered today. Obviously, it costs more to develop and operate courses at the high end of the quality scale. IU faculty and staff report that one of the main reasons online education is generally more, not less, expensive than on-campus instruction at both the undergraduate and graduate levels is that online courses require that instructors pay greater attention to individual students than is needed in on-campus courses in order to ensure equivalent interactivity and quality of the educational experience. (Consider that an instructor teaching a class on-campus may simply look around the room to see which students are sleeping, texting, or engaged in other forms of inattention, while the instructor of an online course must ask a question or create an activity to elicit responses that ensure students are engaged with the course, and then generally needs to provide feedback to students responses.) A study of a faculty member s interactions with 16 students in one master s degree course at IU-Bloomington found that the total number of written responses from the instructor to the students for one semester (in addition to 15 course lectures and other materials posted on the web) was 546, which included 61 feedback interactions for assignments (often multi-page documents), 97 feedback interactions in discussion format, and 161 feedback interactions via (Bichelmeyer & Pyke, 2002). At IU, units deal with this increase in instructional load either by decreasing class sizes, increasing the credit given to faculty teaching online in calculating their teaching load, or providing additional instructional assistants; all of these increase cost per student (Schnabel, 2011). At Purdue, the notion of efficiencies of scale has also proven elusive in distance learning, as the optimally effective use of student interactions with each other and with the instructor requires restrictions on class size. It appears the technology that supports grading, assignments and other interactions, and the logistics of managing interactions between one instructor and many students challenges assumptions that scaling-up online courses can be done in the same manner as with high-enrollment face-to-face courses. The process of scaling-up online to large-enrollment courses has not been found to be as simple as might be imagined. IU has found administrative factors that increase the cost of online instruction are the technological infrastructure needed to support it, the need to support student access 24/7, and the greater costs to develop and maintain course materials (Schnabel, 2011). Both Purdue and IU have found that, when online learning moves from supporting campus students to serving new audiences, significant new costs are incurred. Marketing strategies must be developed, materials developed and placed in appropriate media. Students must be actively recruited and appropriately supported during their studies. The needs of working professionals distant from the campus are quite different from those of traditional on-campus students. Still, both Purdue and IU seek to engage such new audiences in their distance learning outreach. Page 8

9 Review of Cost Analyses of Distance/Online Education In this section we review the research and literature of costs analyses and cost-effectiveness studies for distance/online instruction that uses a variety of technologies in both academic and corporate settings. Most cost analyses reviewed for this report distinguish between fixed costs and variable costs associated with online education: fixed costs being costs that remain the same regardless of output, and generally being incurred before a course is ever offered; and variable costs being those that vary directly with the amount of output, generally increasing with the number of students. Other strategies used to categorize costs use combinations of fixed and variable costs with costs of course development and costs of course delivery as key bases for analysis. In this section, findings are presented in an order moving from infrastructure costs, to course development costs, then course delivery costs, to provide a simple but comprehensive framework that highlights costs associated with online education, and where appropriate, discussion of how these differ from traditional, on-campus instruction is included. Again, note that research findings suggest the costs of online education vary greatly, especially by institution. Therefore, sweeping generalizations across institutions such as distance is cheaper or cost the same or cost more are not possible, and are even difficult to make within institutions, depending on factors such as the technologies used, the amount of interaction designed into the course, and the size of course enrollments. Infrastructure In a very detailed study of actual costs to deliver online education at Marshall University, Morgan (2001) identified the distribution of costs as being 16 percent of costs for infrastructure, 48 percent for development, and 36 percent for instruction. Drawing conclusions from cost analyses at multiple institutions, Inglis (2003) concluded that in all cases, there is a substantial impact initially from the start-up costs associated with the establishing new infrastructure, the development of new procedures, and the creation of new organizational structures for student and staff support. Inglis also noted the benefits of shifting to online delivery particularly justify the initial investment and ongoing costs when the shift to online delivery offers the opportunity to open up new markets that could not be accessed economically via existing delivery methods. Inglis further explained, the costs of online delivery are likely to fall as the capacity of networks grows, competition for customers increases, and technology improves. Meanwhile, the costs of existing methods of delivery are likely to remain stable or even increase (p.738). The relationship between capital costs and growing markets has been documented by numerous others who have conducted cost analyses and cost effectiveness studies of distance/online education: Arizona Learning Systems (1998) assumed that the average cost per course enrollment should fall as enrollments rise (p.24). Page 9

10 Bartolic-Zlomislic & Bates (1999) uncovered a general assumption that online learning can fully recover its costs within only a few instructional sessions; however, these researchers cautioned that this is not always the case and is highly dependent on how high the costs are associated with a given online learning program. Whalen and Wright (1999) found that costs of initial investments in server platforms, costs of ongoing maintenance, as well as costs of course development, are recouped when they are distributed among all courses housed on servers and shared by all students taking those courses. Jung (2003) found that, though costs vary substantially from one situation to another and are influenced by a number of factors, most studies generally find distance education to be increasingly cost effective as there are resulting increases as the number of students served and when the number of courses needed to reach these students declines. The return on investment of a course is determined by the number of students who will take the course so fixed costs can be amortized over all students, and must take into account the reusability of the course itself and the hardware and software to deliver it (Whalen and Wright, 1999, p. 39). To summarize findings regarding infrastructure, the high cost of initial investments needed for online education are generally offset as new markets are developed and the population of students taking online courses grows. However, this equation is variable and highly dependent on the costs of course development, the instructor to student ratio of a course, how often a course may be re-used, and how often it must be updated. Course Development The challenge of course development in online instruction is to transform a faculty lecture or a simple printed lesson transmitted via computer technology into an exciting online classroom with powerful interactive features for the learner. Bartley and Golek (2004) opined that it is the responsibility of education and training professionals to recognize the opportunity afforded by online instruction to implement these new technologies so that the online environment is a rich and value-added teaching methodology (p.174). The University of North Carolina cooperated with the Program Evaluation Division of the North Carolina General Assembly Legislative Services Office (2010) on a review of start-up and ongoing costs of distance education versus on-campus instruction throughout the University of North Carolina (UNC) System. This study concluded that, compared to on-campus courses, distance education courses cost more overall to develop. Development of distance education courses requires additional assistance from staff who have expertise with technological tools and platforms used to create online classes, which is in addition to the cost of content development by faculty. Drawing a similar conclusion from their research, Whalen and Wright (1999) found that, unlike most on-campus courses, content development for online courses involves six items: 1) instructional and multimedia design; 2) the production of text, audio, video, graphics, and photographs; 3) the development of authoring and delivery software, or the cost of licensing Page 10

11 commercial software; 4) the integration, modification, and testing of course content; 5) student and instructor training; and 6) course testing (p. 29). Bettcher s (2004) research led to a general calculation that it takes 10 hours of development for every hour of online instruction. She found that development costs of $10,000 per credit hour are typical (suggesting that a 30 hour master s degree program can require an investment of $300,000). However, she also found numerous examples of investments ranging higher, in the neighborhood of $15,000 to $20,000 per credit hour. To account for inflation from 2004 to 2011, these figures could be increased by as much as 20 percent. Further discrimination of development costs reveals differences in costs for course development between synchronous and asynchronous courses. Whalen and Wright (1999) found that synchronous courses required less development time, because the instructor s availability in real time to students means that there is less need for the development of multimedia presentation materials to convey the content of the course. Whalen and Wright also found a factor of 10x development time, with an average of 1321 development hours for asynchronous courses, versus 144 development hours for synchronous. Since development costs depend of the number of hours required, these researchers concluded, synchronous course costs much less to develop (p. 32). There could be additional hidden costs of development that have not been calculated in equations such as those above. Kilby (2001) noted that in most calculations of development for online courses, the majority of the focus seems to be given to the concrete aspect of the course, with little thought given to the complete integration of , discussion groups, and chat functions Kilby also noted the importance of such features to students, stating, without the complete integration of such functions, the learner in the online environment can become lost in the virtual world, without recourse in times of need (in Bartley and Golek, 2004, p.174). In sum, findings from cost analyses studies show that course development for online education is much greater, generally 10 times the amount, of course development for traditional courses, due to the need for multimedia materials, which require the involvement of individuals with other skill-set in addition to the instructor s content knowledge. Additionally, development costs are variable depending on the amount of multimedia materials required for a course, which is generally a function of the amount of synchronous or asynchronous delivery. Further, there may be hidden costs of development depending on the amount of interactivity designed into a course. Course Delivery Three key variables emerge from the research regarding cost effectiveness of course delivery for distance/online education: interactivity, faculty salary, and student travel. The cost of interactivity is by far the most commonly addressed variable in the literature related to online course delivery. The 2010 report of the North Carolina General Assembly identifies a major hidden cost of online instruction - greater involvement of faculty in online courses to establish interaction with students. Whereas students may sit passively in a classroom, they must interact in distance Page 11

12 courses because the technology utilized for delivery measures their participation (p.10). As a result, the report concludes, Teaching online courses is more time consuming for faculty (p.15). Given that faculty time is a limited resource, this additional outlay of time must be regarded as an opportunity cost. The NCGA report echoes what numerous other researchers have found regarding the cost of faculty-student interaction in online courses: Rumble (2003) found that in face-to-face tuition there is a clear cost control mechanism in place the timetable. The same is not true of online teaching, where the pressure is to respond to students queries rapidly and individually. In one comparative instance reported, the instructor s workload more than doubled. Rumble concluded that online distance education systems require more input from teachers than previous distance education systems, not least because they enable greater interactivity between teachers and students (p.712). Based on his research, Inglis (2003) concluded that the variable costs of online education increase because of the additional time taken to communicate in the written rather than the spoken word, while fixed costs are likely to increase because of the additional investment in infrastructure and support services (p.738). Arizona Learning Systems (1998) stated, all providers of internet courses have reported that this direct communication [between teachers and students] takes more time than preparation and delivery of a classroom lecture and the corresponding contact with students. These faculty workload costs have pushed the typical direct cost per course enrollment of an Internet course above that of the traditional classroom instruction, (p.20). However, this report suggested that faculty workload would eventually be reduced through improved support and processes. With regard to the comparative cost of faculty for online and on-campus courses, the 2010 North Carolina General Assembly report stated that costs for distance education instruction do not differ from on-campus instruction because faculty costs are the largest factor, and in many cases the same faculty, or a member of the faculty with a similar salary, teach each type of course (page 11). Further, this study found that the cost per student to deliver online courses was 29 percent higher than the costs in traditional classrooms (page 15). Finally, numerous studies reported the same finding first published by Whalen and Wright (1999), which is that the high costs institutions bear for course development are offset by reductions in time required of students to take the course. However, these reductions are generally experienced by students as decreases in travel time and costs, as well as decreases in time spent away from work (therefore providing extra time to earn revenue to pay for school). In other words, it s the student who sees the return on investment for the high costs of development for an individual course. Most recently, the 2010 North Carolina General Assembly report noted that, though tuition may be higher for distance learning, total educational costs for students may be lower because many indirect costs are reduced eliminated: Travel costs are less, and there may be fewer indirect costs such as child care or taking time off work to attend classes (p.9). Also, the study found that, if the alternative to distance is full-time campus enrollment, distance saves students the costs of campus housing and the loss of job income while pursuing a degree. Page 12

13 The summary of findings regarding cost effectiveness of course delivery is that equivalent amounts of faculty-student interaction in online courses is much more time-intensive for faculty, and therefore much more expensive per course; that there may not be major savings of faculty salary for online education because the same faculty who teach on-campus may be teaching online courses, and that cost savings from online delivery are generally experienced by the student as time savings from travel and savings from indirect costs associated with attending school (such as parking and babysitting). Brief Summary of Cost Analyses of Distance/Online Education Jung (2003) best summarized the factors that go into cost accounting for online education when she stated that, beyond technical infrastructure, the factors that affect cost and/or effectiveness of online education are: Number of students in a course Number of courses offered Amount of multimedia component in online courses Amount of instructor-led interaction Type of online education platform used Choice of synchronous versus asynchronous online interaction Completion rates (p.721). Clearly, these factors are highly variable on a course-by-course, program-by-program, and institution-by-institution basis, and therefore it is not possible to say in any absolute manner or with any absolute certainty that online education is more, or less, expensive than on-campus instruction. Applying the findings from research to IU, Purdue and Ball State, it may be argued that these institutions are currently experiencing the high costs of investing in infrastructure for online education, which involves investments in human capital to develop and delivery online courses, as well as investment in technical infrastructure. Further, the cost of investment in online education at IU and Purdue may be higher than at many other institutions due to expectations for high faculty-student interactivity in online courses, and frequent updating of course content that is expected from research-intensive and comprehensive teaching institutions. Finally, Purdue, IU and Ball State are clearly at the beginning stages of exploring new markets, and have not yet developed (and may never develop) large new markets of students for online education programs. It appears that Purdue, IU and Ball State may be particular examples of what President-emeritus Bowen has found in his study of institutions across the country. As he stated in his commencement address, At present, online instruction often does cost more because it frequently requires more student attention than traditional face-to-face modes of teaching. My strong suspicion is that obtaining high returns is going to require the up-front investment of large sums of money in the development of online courses that really make a difference in how students learn. There have to be huge economies of scale here. Page 13

14 Pricing Models for Distance Courses and Programs Purdue Continuing Education commissioned Eduventures (2010) to conduct a review of how aspirational peer institutions in distance learning priced their online offerings. The institutions were Texas A&M, University of Wisconsin, University of Maryland, Indiana University, University of Illinois, University of Georgia, and Penn State University. Results were mixed with respect to differentials between online and campus tuition and fees: three institutions charged less for online, two charged more, and one charged the same. In Spring 2011, IU conducted its own internal study of pricing for online education at peer institutions for both its research-intensive and comprehensive teaching campuses (including institutions such as the University of Illinois and Ohio State, as well as Penn State-Harrisburg and Western Michigan University), and also found pricing policies at the reviewed institutions to be highly variable. In the sections below, Purdue, IU and Ball State report on the pricing models used for distance/online education at each institution. Purdue University Pricing Models for Distance Courses and Programs Purdue utilizes three pricing models for distance learning noting that pricing of distance learning is not based on a costing model. When Purdue offers courses to full-time campus students, pricing is the standard Board of Trustee rates. Full-time students pay for online courses along with other courses in their block tuition. Purdue distance courses that are available to off-campus nondegree students, employ a Treasurer-approved rate that is equivalent to the campus rate for state residents and one and a half times that for nonresidents. This nonresident rate was enacted to make the courses viable for nonresidents. For distance degree or certificates for working professionals, pricing is determined by the market based on studies of the market. Purdue policy states that market-based rates will not be below campus resident fees. These nonstandard rates are approved annually on an exception basis by the Vice President and Treasurer. Again, it should be noted that in no case are tuition or fees based on cost. Broadly speaking, University standard rates are set to cover University costs as supplemented by state funding, research funding, and gifts and other revenue sources. Indiana University Pricing Models for Distance Courses and Programs At Indiana University, pricing of distance courses and programs has not historically been based on a costing model. Page 14

15 Currently, Indiana University s distance education fee rates for resident students generally match the rates charged for the analogous on-campus program. This practice should not be considered a university policy, but rather a reflection that as programs were started, the simplest logic to apply at the time was to use the same fee rates. For several distance education programs, nonresident fee rates are less that their on-campus analogs, but generally at least 40% greater than the resident rate, to maintain a meaningful distinction while recognizing market realities and competition. Several distance education offerings charge a separate distance education course fee in addition to the tuition. The fees range from $30 to $50, reflecting a portion of the additional costs associated with developing and delivering the courses on-line. As with the tuition rate, these fees were determined on a case-by-case basis. There are a few notable distance education rates associated with various executive education and other business programs in which the resident and nonresident rates are the same. With the establishment of an Office of On-line Education in Spring 2011, IU expects to develop and implement a set of policies to guide the setting of distance education rates, taking into consideration costs, competition, and markets. Ball State University Pricing Models for Distance Courses and Programs At Ball State University, pricing of distance courses and programs is as follows: For students taking at least one on-campus course, the tuition and fees are charged at the same rate for on-campus and online courses. Students taking no on-campus courses are not charged certain mandatory fees, including Health, Recreation, Graduate Course and Student Service Fees (all students pay a technology fee). Certain programs and courses have additional special fees, but these fees are identical for oncampus and online offerings. References Allen, B. & Seaman, J. (2010). Learning on Demand: Online Education in the United States, Downloaded from the web November 22, 2011 at: ASHE. (August, 2006). Cost Efficiencies in Online Learning, ASHE Higher Education Report. 32(1). Page 15

16 Bacsich, P., Ash, C., Boniwell, K. & Kaplan, L., with Mardell, J. and Caven-Atack, A. (1999). The Cost of Networked Learning. Sheffield, UK: Telematics in Education Research Group, Sheffield Hallam University. Bartley, S. & Golek, J. (2004). Evaluating the Cost Effectiveness of Online and Face-to-Face Instruction. Educational Technology & Society, 7(4), Bartolic-Zlomislic, S., & Bates, A. (1999). Investing in Online Learning: Potential Benefits and Limitations. Canadian Journal of Communication, 24. Berners-Lee, T., et al. (August, 1994). The World Wide Web. Communications of the ACM, 37(8): Bettcher, J. (June 29, 2004). Online Course Development: What Does It Cost? Campus Technology. Downloaded from the web November 22, 2011 at: Bichelmeyer, B., Misanchuk, M., and Malopinsky, L. (2001). Adapting a Masters Degree Course to the Web: A Case Analysis. Quarterly Review of Distance Education, 2(1), Bichelmeyer, B. & Pyke, J. (March 29, 2002). Feedback in a Distance Learning Environment: Types and Frequencies. Presented at Indiana University Scholarship of Teaching and Learning Forum, Bloomington, IN. Bramble, W. & Panda, S. (2008). Economics of Distance Learning: Theory, Practice & Research. New York: Routledge. Cornford, J. & Pollock, N. (2003). Putting the university online: Information, technology and organizational change. Philadelphia, PA: Open University Press. Council of Regional Accrediting Commissions (July, 2009). Guidelines for the Evaluation of Distance Education (On-Line Learning). Downloaded from the web November 22, 2011 at: https://content.springcm.com/content/downloaddocuments.ashx?selection=document,c00c3f32-56e5-e011-adf4-0025b3af184e;&accountid=5968 Eduventures. (October, 2010). On-Campus and Online Pricing Models for Select Institutions. Study Commissioned by Purdue University. Higher Learning Commission (August, 2011). Substantive Change Application: Distance Delivery. Downloaded from the web November 22, 2011 at: https://content.springcm.com/content/downloaddocuments.ashx?selection=document,e356a8b4-4e91-df cc448da6a;&accountid=5968 Inglis, A. (2003). A Comparison of Online Delivery Costs with Some Alternative Distance Delivery Methods. In Moore, M. & Anderson, W. (Eds.) Handbook of Distance Education. Mahwah, NJ: Lawrence Erlbaum Associates, pp Page 16

17 Jung, I. (2003). Cost-Effectiveness of Online Education. In Moore, M. & Anderson, W. (Eds.) Handbook of Distance Education. Mahwah, NJ: Lawrence Erlbaum Associates, pp Kilby, T. (2001). The Direction of Web-based Training: A Practitioner s View. The Learning Organization, 8(5), Morgan, B. (2001). Is Distance Learning Worth It? Helping to Determine the Costs of Online Courses. Downloaded from the web November 22, 2011 at: North Carolina General Assembly Program Evaluation Division. (2010). University Distance Education Courses Cost more to Develop but the Same to Deliver as On-Campus Courses. Downloaded from the web November 22, 2011 at: REC=4 Robinson, E. (2003). Return on Investment for Distance Education Offerings: Developing a Cost-Effective Model. In Howard, et al (Eds). Distance Learning and University Effectiveness. Hershey, PA: Information Science Publishing, pp Rumble, G. (2003). Modeling the Costs and Economics of Distance Education. In Moore, M. & Anderson, W. (Eds.) Handbook of Distance Education. Mahwah, NJ: Lawrence Erlbaum Associates, pp Schnabel, B. (2010). Indiana University Strategic Plan for Online Education. Downloaded from the web November 22, 2011 at: Whalen, T. & Wright, D. (1999). Methodology for Cost-Benefit Analysis of Web-Based Tele- Learning: Case Study of the Bell Online Institute. American Journal of Distance Education, 13(1): Page 17

18 PURDUE UNIVERSITY Instructional Fee Rates (Tuition) for Online Education Offerings * The default rate for online instruction is the same as the Trustee approved on campus rate. Exceptions are noted in the table. Instructional Fee Rates (Tuition)* Residency Institution/Campus Level and Program Status Online Rate * On campus rate Differential Purdue West Lafayette Engineering Professional Education per 3 credit hour course ** Both $ 3, $ / $ per $543 per semester credit hour Purdue West Lafayette Engineering Professional Education per one credit hour course ** Both $ 1, $ / $ per $543 per semester credit hour Purdue West Lafayette Engineering Professional Education per one credit hour course if 2 or Both $ $ / $ per $543 per semester more course taken. ** credit hour Purdue West Lafayette Engineering Professional Education per 3 credit hour Project/Thesis Both $ 4, $ / $ per $543 per semester course ** credit hour Purdue West Lafayette Engineering Professional Education per one credit hour Project/Thesis Both $ 1, $ / $ per $543 per semester course ** credit hour Purdue West Lafayette Engineering Professional Education per 4 credit hour Project/Thesis Both $ 5, $ / $ per $543 per semester course ** credit hour Purdue West Lafayette Veterinary Technology Distance Learning Program Undergraduate Both $ no equivalent N/A Purdue West Lafayette Agricultural Economics Masters Degree per credit Both $ 1, $336.10/ $ N/A Purdue West Lafayette Masters in Industrial and Physical Pharmacy per credit Both $ 1, $336.10/ $ N/A Purdue West Lafayette Non Traditional Doctor of Pharmacy Program per credit (Resident) Resident $ $ N/A Purdue West Lafayette Non Traditional Doctor of Pharmacy Program per credit (Non Resident) Non Resident $ 1, $ N/A Purdue West Lafayette Executive Masters in Business Program per module Both $ 26, no equivalent N/A Purdue West Lafayette Reading Recovery Program per credit hour fee Both $ $336.10/ $ N/A Purdue West Lafayette International Masters in Management per module Both $ 25, no equivalent N/A Purdue West Lafayette Masters in Technology Building Construction Management per credit Resident $ $ $273 per semester hour (Resident) Purdue West Lafayette Masters in Technology Building Construction Management per credit Non Resident $ $ $273 per semester hour (Non Resident) Purdue West Lafayette Masters in Technology Aviation Technology per credit hour Both $ $336.10/ $ $273 per semester Purdue West Lafayette Masters in Technology Concentration Organizational Leadership Resident $ $ $273 per semester Supervision per credit hour (Resident) Purdue West Lafayette Masters in Technology Concentration Organizational Leadership Non Resident $ $ $273 per semester Supervision per credit hour (Non Resident) Purdue West Lafayette Masters in Technology Concentration Information Technology Project Management per credit hour Both $ $336.10/ $ $273 per semester

19 Instructional Fee Rates (Tuition)* Residency Institution/Campus Level and Program Status Online Rate * On campus rate Differential Purdue West Lafayette Masters in Technology Concentration Technology and Innovation per Resident $ $ $273 per semester credit hour (Resident) Purdue West Lafayette Masters in Technology Technology and Innovation per credit hour (Non Non Resident $ $ $273 per semester Resident) Purdue West Lafayette Education M.S. Learning Design & Technology per credit hour (Resident) Resident $ $ N/A Purdue West Lafayette Education M.S. Learning Design & Technology per credit hour (Non Resident) Non Resident $ $ N/A * Online rates include Technology, R & R and differential fees. ** Engineering Professional Education Degrees include Masters of Science in Engineering Interdisciplinary Engineering Concentrations: Engineering Management & Leadership Biomedical Engineering Computational Engineering Integrated Vehicle Systems Masters of Science in Aeronautics and Astronautics Masters of Science in Electrical and Computer Engineering Masters of Science in Mechanical Engineering Masters of Science in Industrial Engineering

20 Instructional Fee Rates (Tuition)* Residency Institution/Campus Level and Program Status Online Rate * On campus rate Differential Purdue North Central Undergraduate Distance Education, Resident Resident $ $ Purdue North Central Undergraduate Distance Education, Nonresident (for students from states participating in the Midwest Student Exchange Program) Nonresident $ $ Purdue North Central Undergraduate Distance Education, Nonresident Nonresident $ $ Purdue North Central Graduate Distance Education, Resident Resident $ $ Purdue North Central Graduate Distance Education, Nonresident (for students from states participating in the Midwest Student Exchange Program) Nonresident $ $ Purdue North Central Graduate Distance Education, Nonresident Nonresident $ $ IPFW Undergraduate Distance Education Resident $ $ IPFW Undergraduate Distance Education Nonresident $ $ IPFW Graduate Distance Education Resident $ $ IPFW Graduate Distance Education Nonresident $ $ * In addition to paying the online tuition fee, IPFW students are assessed the following per credit hour fees: Technology fee ($8.35/credit hour); Student Service fee ($11.90/credit hour); Parking fee ($6.10/credit hour); Facility fee/repair & Rehab fee/facility Repair & Exp.fee ($6.25/credit hour). for a total of $313.65/credit hour, which is equal to the Statewide Education Fee. Purdue Calumet HTM Certificate Undergrad Both $ no equivalent Purdue Calumet Nursing BHS RN to BSN pre requisites Undergrad Both $ no equivalent Purdue Calumet Nursing BHS RN to BSN Undergrad both $ no equivalent Purdue Calumet CET Undergrad Resident $ $ /cr hr Purdue Calumet CET Undergrad Non Resident $ $488.90/cr hr Purdue Calumet ICN English Undergrad Resident $ $ /cr hr Purdue Calumet ICN English Non Resident $ $488.90/cr hr Purdue Calumet EDCI Graduate Both $ no equivalent Purdue Calumet Educ Admin Graduate both $ no equivalent Purdue Calumet IPFW Nursing Graduate Both $ no equivalent Purdue Calumet Nursing Online Masters Graduate Both $ no equivalent Note: non discounted Nursing Academic partners tuition rates are listed.

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