The False Promises of Online Education

Policymakers need to address serious shortcomings identified in a new study
Blog Post
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March 2, 2017

Even as the overall college population is on the decline, enrollment in distance education continues to grow. Yet a study published this week by Stanford University researcher Caroline Hoxby found that online education may not be the “low-cost, high-quality” opportunity many say it is. In fact, the report found online education often misses the mark, with tuition that sometimes exceeds the on-campus price and post-college earnings that do not cover students’ upfront costs.

But the report has set off something of a firestorm within the industry this week as researchers and other stakeholders (including several online learning experts) challenged the study’s methodology. That’s because the study, which used individuals’ IRS data to calculate tuition costs and return on investment, estimated a student’s likelihood of being online based on the school’s distance-education offerings. Serious data limitations mean that the author couldn’t know whether each student attends online or not.

A separate, nationally representative survey of postsecondary students shows that, among students attending an entirely online program in 2012, 36 percent were at for-profit institutions, while more than half were at public institutions. At graduate schools, a plurality--39 percent--were at for-profit institutions. But in the Hoxby study, which uses data from the IRS along with information about school-level offerings,  77 percent of students attending  exclusively online institutions were at for-profit schools. Given the limitations of the methodology, along with these discrepancies across data sources, the conclusions can’t necessarily be extrapolated out to include every online program, particularly for students who attend online programs through mostly brick-and-mortar institutions. Rather, the findings are largely applicable to students at for-profit online institutions.

Still, the paper does carry serious implications about the costs and the value of online learning for students at schools that are exclusively, or even mostly, online. And policymakers in the Department of Education and on Capitol Hill should pay attention to it, for two key reasons.

First of all, online programs are often expensive--for students, and consequently, for taxpayers. WCET, an industry organization that was among the study’s detractors, recently conducted a survey of institutions that revealed three out of four respondents charged their distance-education students the same tuition as their on-campus students, while nearly one in five charged even more to attend online. That’s concerning, given that one of the key promises of online higher education has been its ability to increase access to an affordable education.

It’s an especially big problem with the mostly for-profit exclusively online institutions in the study. A survey of students in 2012 found that, while most fully online students attended public institutions, they weren’t paying all that much in tuition--well below the size of the maximum Pell Grant award. And nonprofit institutions, while expensive, enrolled fewer than one in 10 online undergraduate students. But the largest problem is with for-profit institutions, which enrolled over a third of all fully online undergraduates--and charged tuition averaging close to that of a face-to-face program, at nearly three times the tuition that public institutions charged their online students.

Average Undergraduate Tuition and Fees Paid, 2012
Portion of Student's Program Online Public Private Nonprofit Private For-Profit
All Online $2,895 $12,869 $8,277
Some Online $3,581 $16,152 $9,757
No Online $3,477 $22,064 $10,579

Source: NPSAS, 2012 Undergraduate Study.

All that might be well and good, if the value of exclusively online institutions held up. But the second reason policymakers need to take note is that the study raises important--and disturbing--questions about quality among those institutions. The Hoxby study found that earnings growth for students at fully online institutions was, at best, modest; and fell short of the amount spent on the programs themselves, by taxpayers and even by students themselves. Other studies have found poorer outcomes and employer skepticism of online programs, too.

So there’s no doubt that policymakers need to step up their game now, before the industry moves full steam ahead. Specifically, they need to:

  • Track distance education better--and use the data. The methodology arguments about the Hoxby study arose because her study uses institutional online education offerings as a proxy for student online course-taking. But the options for assessing distance education programs are woefully limited, shortcomings with significant implications that were detailed in a 2011 GAO report. The Department needs to track, at a student level, online enrollment--and then use those data to calculate measures of cost, repayment, and post-college earnings for online programs. Not only would this provide better information to policymakers and researchers studying the field and holding institutions accountable, it would give students the clear, comparable information they need to make the decisions that will offer them the best opportunities for success.

  • Constant vigilance when it comes to online education. A report from the Department of Education’s Inspector General issued in February 2014 found that distance education programs carry a high risk of abuse of taxpayer dollars, without enough oversight from the Department, accrediting agencies, or states. And aside from the potential for abuse of the system, it’s critical that these stakeholders ensure they are continuing to protect students from potentially poor-performing or unscrupulous institutions. At the Department of Education, that means ensuring adequate resources to review and investigate those institutions as needed, as well as ensuring the state authorization distance education regulations published late last year are carefully and promptly implemented. It also means state attorneys general, state authorization agencies, and accreditors have their own critical roles to play to hold distance education programs accountable.

  • Keep the focus on value for students. The Hoxby paper provides an important analysis that should inform students’ decisions and policymakers’ actions: return on investment. If a program offers a low-quality education, especially at a high cost, it presents an existential threat to the promised value of higher education. Policymakers should work to drive down costs--and put the lowest-value programs out of business--by ensuring that gainful employment programs offer a reasonable debt-to-earnings ratio, and by considering additional ways to bend the cost curve down for higher education programs. And hopefully, students can take advantage of this growing body of research and data to ensure they enroll only in the programs that offer them true opportunities to succeed.

Despite its detractors, this study points to key flaws--and significant shortcomings--in the promise of fully online education. And policymakers should demand that high-cost or low-quality online institutions answer these critiques before they continue soaking up taxpayer dollars.