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The Learning MarketSpace, February 1, 2001

Written monthly by Bob Heterick and Carol Twigg, The Learning MarketSpace provides leading-edge assessment of and future-oriented thinking about issues and developments concerning the nexus of higher education and information technology.


The systems theorist, Jerry Weinberg, once observed that we should "listen to the music, it is often different than the words." That admonition surfaced from the recesses of some long dormant synapses as I was reviewing the weekly news regarding the financing of higher education.

In the year 2000, following the lead of the Georgia HOPE program, 13 states provided merit-based, scholarship support to 325,000 students. The legislatures of at least five other states have before them proposals to create similar, merit-based scholarship programs. In a number of states, Texas most recently, a voucher program for higher education is being discussed. The ostensible strategy of such programs is to encourage the state’s best high school students to pursue their higher education in-state rather than drifting away to a prestigious out-of-state school. The source of funding for these programs varies, including lottery income, proceeds from the national tobacco settlement and even General Fund revenues from tax collections.

Merit-based scholarships are a significant break from our recent history of need-based financial support. Most of these programs require that the recipient maintain an acceptable, usually a B, grade point average to remain eligible for continuing financial aid. While lauded as an additional strategy to make higher education more affordable for the student, these programs have also been criticized for providing financial assistance where it was not needed--or at least, less needed.

Taken along side Federal direct lending and guaranteed-loan programs and institution-based financial aid, untold millions of students manage to finance a college education. Manage is the operational word here for even at a land-grant institution, four years of higher education is likely to cost $30,000. A four-year education at one of the nation’s more prestigious private institutions will run well over $100,000. For moderate income families who used to face purchasing a home as the single largest expense of their adult lives, each child’s education now represents something like the equivalent of purchasing yet another home.

The attitude of most higher education institutions is that every little bit helps. Unable to do much about their costs, which have doubled the rise in the consumer price index for several decades, institutions of higher education have sought strategies that reduce the effective price paid by students. In this regard, these state merit-based scholarship funds have been seen as preferable to student loans, whatever the philosophical concerns about merit vs. need-based support. Of course, for the student, state-financed, merit-based scholarships offer relief from the massive debt that has to be incurred with the alternative of student loans.

At the same time the Department of Education is struggling with its "12-hour rule" that requires students to be enrolled for at least 12 credit hours to be considered full-time and eligible for financial aid. The rule, originally created to assist in weeding out "diploma mills," has had the unfortunate effect of making most distance education students ineligible for financial aid. According to The Chronicle of Higher Education, Department of Education officials have indicated that they will consider "disbursing financial aid to students directly, instead of giving it to institutions, as is done now." This is not particularly surprising as the federal government has been moving in the direction of "vouchers" in many of its programs, funding the consumer rather than the provider.

The Carnegie Commission back in the 1970s raised the fundamental questions about education. "Who pays"? "Who benefits?" "Who should pay?" Not surprisingly, they concluded that there were societal benefits, in addition to the direct benefit to the student, that made contributions to the educational system sensible in terms of public policy. What the Carnegie Commission didn’t foresee was the extraordinary relative increase in the cost and price of higher education as a consequence of the education establishment’s failure to adapt to the information age.

We are just beginning to see those adaptations in a wide variety of computer-mediated and networked enabled applications. Because they are new--not necessarily place bound or faculty-labor intensive—many of the old strategies to help defray the high cost of education do not work. Clearly, one strategy that does work is direct funding of the consumer (the student) vouchers if you will.

The education establishment, conservative as are all establishments, has truly mixed feelings about vouchers—mostly negative. While happy to see any policy that makes the cost of higher education appear less to the consumer, vouchers strike at the very heart of public higher education. Funding the consumer rather than the provider necessarily admits of a high level of choice on the part of the student. With state- only scholarship aid it puts the publics in direct competition with the privates and creates an added dimension of competition between two- year and four-year institutions. Unfettered from state-only restrictions, as federal grants and loans are and likely state programs will eventually become, it adds an element of competition for the student beyond any yet experienced except by the prestigious "national" universities. It raises the specter that some institutions may well experience a decline in their market share of students.

Now, here is where we need to listen to the music as well as the words.

Existing institutions of higher learning are not the only competitor for enrollment in a world driven, or heavily influenced, by vouchers. As private institutions have long realized, to be competitive requires the proper balance of price, prestige and promotion. Public institutions have competed successfully more because of price than prestige or promotion. It seems safe to say that the public-institution pool of potential applicants is considerably more price sensitive than those currently attending private institutions.

To this point in time, most private institutions have been organized as not-for-profit entities. In a voucher driven or influenced world, we should expect to see the creation of new higher education entities, many founded on a for-profit basis. These new entities will position themselves in a horizontal marketplace of specialization rather than trying to duplicate the vertically integrated model of the not-for-profit sector. Released from the constraints of having to provide intercollegiate athletics, food service, lodging and the host of ancillary activities that have little to do with learning, these new entrants can be formidable competitors on the price dimension.

Like it or not, the tune playing spells a new era of competition in higher education.



In the last issue of The Learning Marketplace, we asked the question, does size matter? In discussing the applicability of the concepts and practices employed by the Pew Grant Program in Course Redesign to small, residential liberal arts colleges, we made a case that small institutions can benefit equally well as large ones in enhancing the quality of student learning. In this issue, we turn to a consideration of how the program’s cost reduction ideas can apply in the small college context.

When it comes to cost reduction, size does indeed matter. It stands to reason that if you start with large numbers of students and instructional resources devoted to teaching them, the potential for savings is, well, large.

For example, the University of Wisconsin at Madison spends about $1 million annually to teach general chemistry to 5,000 students. Like other large introductory lecture-based courses—especially those that include discussion sections and laboratories—general chemistry absorbs a significant amount of resources. In one semester, eight professors and sixty-four graduate teaching assistants are involved in the course. A relatively modest redesign can result in an annual savings of about $300,000

This phenomenon is not confined to large lecture courses. Similar costs occur in those institutions where individual faculty members teach large-enrollment introductory courses in multiple sections. Given the large number of sections required, those courses are also quite costly. Enrolling 3,600 students annually in its Elementary Algebra course, Riverside Community College spends $741,600 to offer 72 sections. Their redesign anticipates an annual savings of $334,800.

Since the number of students in one course at a large university or a community college can easily exceed the total enrollment of a small institution, a natural question arises as to whether small institutions can benefit from the new redesign concepts.

Several things need to be said.

First, the cost of a course—and the potential amount of savings one can generate—is dependent on a number of factors in addition to the number of students in the course. For example, the cost-per-student of the 30 courses we have analyzed ranges from a high of $575 to a low of $48.Those costs are determined by the kinds of instructional personnel employed (e.g., high-salaried full professors vs. modestly paid junior faculty, adjuncts vs. full-time faculty, and so on) as well as by the amount of time each person spends on the course (e.g., relatively low-paid instructors may spend lots of hours vs. high-paid faculty who spend comparatively few.) Consequently, the cost of those same 30 courses ranges from UW-Madison’s and Riverside’s high of $1,053,700 and $741,600 respectively to lows of $96,050 for psychology at the University of Southern Maine and $73,872 for Spanish at the University of Tennessee-Knoxville.

Second, savings can be realized by making changes in the kinds of personnel involved in the course, by reducing the number of hours instructors devote to the course, or by doing both simultaneously. The dollar savings is a result of how one manages or manipulates all of these factors in the process of redesign. More "radical" redesigns can result in greater savings. For example, Cal Poly Pomona anticipates an 86 percent reduction in the cost-per-student of its psychology course whereas the University of Southern Maine and the University of Dayton, who are both redesigning psychology as well, anticipate savings of 49 and 44 percent respectively. The difference lies in the redesign decisions each institution has made.

All of this points to the fact that a large-enrollment course at a small institution may enroll only 300 students, but because of the salaries of the instructors and the amount of time they devote to the course, the course costs may be relatively high. In fact, two of the highest cost-per- student figures ($575 and $506) in the 30 courses analyzed are at relatively small institutions. Teaching 300 students annually at a per- student cost of $575 results in a total course cost of $172,500. That’s not a million dollars, to be sure, but it represents a substantial resource allocation with a lot of room for creative redesign.

Third, the amount of faculty resources consumed by introductory courses at smaller institutions can often be proportionately greater than those at large schools. As an example, the University of Southern Maine has nine faculty members in its psychology department. Teaching the introductory course consumes the equivalent of 2 full-time faculty, thus placing serious constraints on the ability of the department to pursue its interests in such things as offering distance learning courses. As a result of its redesign efforts, the faculty at Southern Maine will now have the opportunity to pursue those interests while generating additional revenue for the university because fewer resources need to be devoted to the introductory course. Smaller institutions frequently face similar resource constraints and can benefit from redesign efforts that free faculty to do other things.

That’s the good news.

But what if your institution is even smaller and your faculty are less well paid than those examples cited above? Suppose your large-enrollment courses have enrollments of 75 and your cost-per-student is more like $225. (This example assumes that three sections of 25 each are taught by three faculty members who teach a four-course load and whose average salary and benefits is $45,000.) The total course cost of $16,875 is not a very big number from which to start. Even if your redesign produces a 40 percent saving (the average for our funded projects), that’s still only $6,750.

But more important than the dollar amount is the fact that at very small institutions, this $6,750 typically represents a fraction of a full-time faculty member’s time. How do you turn one-eighth of a faculty member’s instructional obligation into real savings?

If your challenges are like Southern Maine’s (insufficient resources to do the things you want or need to do), you can benefit by enabling that faculty member to teach an additional course in place of the introductory one. That’s not bad, but it’s also not particularly significant. Even if you redesigned all 20 of your highest enrolled courses, you would only free "pieces" of faculty from disparate disciplines to teach 20 additional courses. If your course enrollments are larger that this example, however, and if you have demand from additional students, enabling faculty to meet that demand and generate additional revenue can have a substantial impact on your institution’s financial well-being.

Absent that demand and absent a strategy that employs a mix of instructional personnel (as opposed to only full-time faculty), it would be very difficult for very small institutions to utilize the redesign methodologies employed by the Pew projects to realize real applicable savings (as opposed to paper savings). A key characteristic of those methodologies is scalability: they are designed to support large numbers of students with fewer instructional resources. When applied to very small numbers of students, the result may well be an improvement in the quality of learning. But when it comes to cost reduction, size does matter.




February 26, 2001, Dallas, Texas

Co-sponsored by the Executive Forum in Information Technology at Virginia Tech

This seminar will present the results of the first of three rounds of the Pew Grant Program in Course Redesign. Learn from faculty project leaders how to increase quality and reduce costs using information technology. Faculty from four institutions will talk about their models of course redesign, including their decisions regarding student learning objectives, course content, learning resources, course staffing and task analysis, and student and project evaluation. These models provide varied approaches that demonstrate multiple routes to success, tailored to the needs and context of each institution.

These seminars provide a unique opportunity for you to:

  • Learn firsthand how to increase quality and reduce costs using information technology from successful faculty project leaders.
  • Find out how to design learning environments for the future by tapping the expertise of those who have done it.
  • Talk with experienced faculty from multiple institutions about how and why they made their redesign decisions.
  • Move beyond "today" and learn where on-line learning is going . . . find a model that will work for your institution.


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Archives of The Learning MarketSpace, written by Bob Heterick and Carol Twigg and published from July 1999 – February 2003, are available here.

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Copyright 2001 by Bob Heterick and Carol Twigg.