What's the Price of an Online Education?

We're not breaking any revelatory news in saying that college and university pricing is … less than straightforward.

But it can be instructive to examine how institutions make decisions about pricing. As the online market grows more crowded seemingly by the week, administrators increasingly have to examine their competitors and understand their target audiences if they hope to remain afloat.

Here’s a look at how a few institutions approach pricing -- and a window into the endless complexities of this topic.

West Virginia University

While this public institution isn’t among the major national online players, it has a substantial online footprint, with more than 15,000 students per year taking at least one online course and 2,400 enrolled exclusively online.

Early on, the institution charged significantly more for out-of-state students attending online programs than for in-state online students. More recently, according to Keith Bailey, dean of West Virginia University Online, “we started to flatten our tuition to have one rate” for students regardless of location.

Figuring out online pricing is an iterative process, according to Bailey. The next planned step, he said, is a new “priced to market” program, which will be piloted this fall with four graduate online and one undergraduate online program.

The idea is to set prices by taking into account competition, rather than deriving a price from comparisons to a campus-based program. Several of the master’s programs involved in the pilot currently cost students more than $30,000. “The way all of our tuition was working was pushing them outside the market,” Bailey said.

The four online master's programs in this pilot will all cost $820 per credit hour, and the online undergraduate program will cost $369 per credit hour. These prices could change again in future years depending on market trends, Bailey said.

Going forward, all online students will pay a standard distance learning fee of $75, in place of the more expansive set of fees for on-campus students.

The result of these changes will be that some online programs will have a lower sticker price than their face-to-face counterparts. Right now, an on-campus business degree costs $1,000 per credit hour. After the market approach takes effect, the program will cost $820 per credit hour.

Assuming the price changes lead to more inquiries, Bailey said he hopes to expand the approach to several of the university’s other online programs.

The cost of delivery also comes up for discussion during pricing conversations, Bailey said. The university employs an entrepreneurial model in which revenue from online programs goes back to the participating colleges. Online development, including instructional designers and multimedia specialists, tends to cost more than face-to-face development, Bailey said.

“We try to budget that into it to make sure that over the next two or three years, they have enough enrollment to cover the expenses of those faculty,” Bailey said. “A lot of the programs may not have that detail, but it’s something we’re working towards.”

University of Florida

Few institutions have less flexibility around pricing than the University of Florida, which is required by a 2013 state law to offer online programs with tuition 25 percent lower than on-ground programs. The law also prohibits the institution from charging distance learning fees.

Delivering high-quality programs isn’t cheap, according to Evie Cummings, president of the University of Florida Online since 2015 (and an opinion contributor to Inside Higher Ed). As a result, the institution and the state have taken on a greater percentage of the cost burden for students in online programs.

The mandate has provided some valuable constraints and some considerable challenges as well, Cummings said.

Each year the state appropriates $5 million for UF Online. That amount hasn’t changed since the law went into effect, even as the number of students has grown and programs have become more sophisticated. Recurring check-ins from the UF Online advisory board, established by the Legislature in 2013, keep the institution focused on spending only when appropriate, according to Cummings.

“We don’t have the luxury as others do across the state to have an enormous online population paying really high tuition rates,” she said. “We’re very much focused on ensuring access at much more affordable tuition rate.”

Administrators at first overestimated the number of out-of-state students who would be interested in enrolling, but they also underestimated the interest from Florida residents. As of now, 90 percent of UF Online students are from in state.

Cummings doesn’t expect that to change anytime soon. In fact, she’s recently shifted some funds in the budget from marketing to core academic services.

“SUNY, SNHU, Missouri -- they’re investing in the hundreds of millions in marketing,” she said. “We’re just not going to be able to compete with that.”

Alamo Community Colleges

Spurred by a new chancellor urging a focus on “smart growth,” administrators took a survey of nearby community college districts in Texas and found that Alamo's online programs were priced significantly above average.

Close to 85 percent of the district's 7,000 exclusively online students come from within the district's boundaries, according to Luke Dowden, chief online learning officer and associate vice chancellor. His team's analysis of the potential market for online programs revealed that more than 1.1 million adults living within 100 miles of the colleges either attended high school but not college or have attended some college but have no degree.

Until now, in-district online and on-ground students have paid the same tuition price ($99 per credit hour), and the same has been true for out-of-district students ($215). Starting this fall, tuition for exclusively online out-of-district students will be $170 ($45 cheaper than for out-of-state on-ground students), while in-state students will continue to pay the same price ($99) whether they’re on-ground or online.

The goal for growth is to enroll between 300 and 350 more students this year -- “nothing too extravagant,” Dowden said.

Though an effort to target more out-of-district students might seem like a pure revenue play, Dowden insists the motivation is to promote “social mobility” and the college district’s access mission.

Dowden arrived at Alamo last year after eight years at the University of Louisiana at Lafayette. There, his bosses expected his online programs to be self-supporting, and cost and price were aggressively monitored. At Alamo, he has pushed to establish a financial model that will inform further pricing decisions.

“It’s not a static thing,” Dowden said. “You’re constantly feeding because you have different inputs, or you’re responding to needs of students, whether that be textbooks, virtual proctoring, the learning management system itself.”