Today I continue my feature on universities, crediting them as a key part of the United States’ economic future. But that future will likely look different from the present.
As we are seeing the price of information plummeting for news organizations, information from universities is seeing a similar albeit slower disruption to their century’s old business model.
Higher education costs have skyrocketed over the past few decades, jumping almost 10-fold since 1978, far more than the 3-fold increase in cost of living and the 6-fold increase in the cost of healthcare. What’s more surprising in recent years is technology is pushing the cost of providing education down while the costs of receive the education continue to skyrocket.
The Washington Post published a analysis of the business model turmoil in store for universities. Online universities still possess a stigma of being inferior to brick-and-mortar colleges, but as more and more students attend, that stigma will decrease (see online dating or online retail).
Thus far online courses have remained as expensive as their terrestrial counterparts, sometimes more expensive with additional “technology fees” added on even though these classes cost a tiny amount to offer. But a new company profiled by the article called StraigherLine aims to toss the higher education model for a whirl. The company offers all-you-can-study for $99. If you can take four classes in two months like a woman did, it will only cost you $200 compared to thousands upon thousands for the same education at a regular university.
This is not good or bad – it is basic economics. Just like the newspaper or music industry, technology is making it cheaper and easier to spread and share information. Professors and experts are offering open source, free, or cheap textbooks online in addition to blogs and interactive teaching materials that work in and outside of the classroom. Collaboration tools allow students and teachers to be fully engaged even without being in the same room or even state, saving money and time.
Universities (and certainly textbook publishers) have been timid to adapt amid growing demand for cheaper education. While several universities offer free online courses, these are not for actual credit. Other universities that offer online courses in addition to their regular offerings do so with similar or more expensive pricing (the technology fee). But these classes cost the university less and can lead to more, not less, efficiency. There is no limit to the student space and professors have more time to respond to student’s questions, allowing for more students and more questions. These online courses can easily handle introductory classes or even small writing seminars (just email other students your essays) and in-person classes can focus on more complex, discussion or debate heavy classes (as wonderful as Twitter and Skype are, a rousing round table is still best in person).
Top universities offer something more than knowledge. Much of their value comes from reputation and the quality of their student body, a key scarce good that allows them to now and for a long time charge a premium for their service. State and middle-tier schools face the most threat as competition from online universities convince more and more students (and employers) that their education is as good but significantly less costly. And as society requires more and more students to complete higher education degrees, the need for affordable education will become more in demand – and more affordable because of the greater supply.











Picking the right college affects everything. It decides whether you get a good job, good money, get married, and now, whether you’ll beat BioShock before the summer.


