Is Online the New International?

What the post-pandemic growth of online learning might mean to many institutions

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Recently both Phil and I have posted about growth in online higher education enrollments, and that these numbers give a post-pandemic view towards structural change that will persist. I am seeing more data that confirm this trend but also raise questions about the role that fully online learning is playing at some an increasing number of institutions.

As online education grows, we’re seeing an increase in institutions relying upon it for a significant and growing portion of enrollment / revenue, just as has been done with international students.

Online enrollment growth outstrips on-campus increases

Many institutions are seeing enrollment increases this semester, a welcome change from the recent past. As we dig into the numbers, an interesting pattern emerges where the increase in online enrollment is greater than on-campus increases - despite this being post-pandemic. This is true at many institutions with a big online presence but also at some that we tend not to think of as online powerhouses.

Oregon State (Go Beavers!) reported a 4% year-over-year enrollment increase. Its main campus in Corvallis saw a 2.5% increase, but its online eCampus saw a 7% uptick (it has gone up more than 40% in the past 5 years). One school in the University of Maine system, which is right in the midst of the enrollment cliff, saw a 20% enrollment increase from Fall 2022, much of it driven by online enrollments. Throughout the statewide system, online education now accounts for 37% of all student credit hours delivered. This percentage has nearly doubled from pre-pandemic levels. The system shows signs of having talked with Tom Cavanagh from UCF who, rightly so, likes to measure enrollment in student credit hours.

Penn State World Campus enrollment went down 3%, but it turns out that a lot of that decrease was due to students who went online temporarily due to the pandemic returning to on-campus study. First-time enrollments at World Campus increased for both graduate students (18%) and undergraduate students (4.5%).

The growing importance of online at many campuses

As I spend more time looking at online enrollment numbers, I am struck by the extent to which online enrollments at some institutions have come to be a bigger part of some institution’s overall enrollment. Online is no longer a side show to the main business of the university but instead a key strategic component.

At Oregon State University, by 2021 eCampus was the largest source of OSU’s tuition revenue.

Harvard Business School’s online course revenue is now nearly equal to that of their on-campus executive education offerings.

However, Arizona State University, as usual, provides us with a dramatic example of the importance of online enrollments. By Fall 2022, ASU’s online enrollment hit 44 % of total headcount, causing the Board of Regents to describe it as being “on track to become a majority online institution”.

Drivers of the growth in one state

In thinking about the growing proportion of university revenue coming from online, I think it can be useful to look at specifics such as the state of Arizona. In some ways, ASU is an extreme example, but I think it can also be useful in helping us identify trends. Obviously, demand for online learning and ASU’s relentless drive toward innovation play a role in the expansion of online. But their reliance on online enrollments also comes, I would argue, out of necessity and is the result of a decline in state funding for higher education. 

Comparative data paint a dramatic picture of the decline in higher education funding in Arizona relative to other states.

As the first chart shows, state funding for higher education is down from the 2008 local peak in most states, but the situation in Arizona is worse than in any other.

The chart below from the State Higher Education Executive Officers (SHEEO) shows a broader view of the comparative trends, showing that 2008 was a local peak (and hence is often used as a comparison year), but that nationally state funding per student has steadily risen since 2011. But not in Arizona.

The net result is that higher education institutions in Arizona have come to rely increasingly on tuition revenue to offset the decline in state support. Again, this is shown in charts from SHEEO showing net tuition revenue as a proportion of higher education budgets.

Net Tuition Revenue (i.e., student share of total education revenues at public institutions) in Arizona has tripled since 1980 while the US average doubled in that same time period.

Given that overall enrollment in higher education has been declining, ASU had to go online to find the students it needed. The scale at which they did so is a result of ASU’s ambition and drive. But there was a need for tuition dollars, and that funding came primarily from online students.

Looking further south to the University of Arizona

This state-specific view sheds some new light on the University of Arizona’s dramatic move in 2020 to buy the for-profit Ashford University and create the University of Arizona Global Campus (UAGC). At the time, the University of Arizona (UA) already had an online presence and was often put forward as an example of how universities were developing online capacity in-house instead of working with an Online Program Management (OPM) partner.  A May 2019 article in Inside Higher Ed, titled “Doing It Yourself: The ‘Internal OPM’ Model” describes how UA administrators

“didn't like the idea of being accountable to an invested outside provider, particularly if growth didn't happen as quickly as projected. Instead…[they].. had to figure out how the institution could develop capacity for many of the tasks at which OPM providers claim to excel. They quickly established offices for faculty development support, marketing and recruitment, and online admissions.”

Just over a year later, the University of Arizona announced that it was buying for-profit Ashford University and contracting with its parent company Zovio (OPM, RIP, OK?) to run the online institution. More than a few of us are still getting over the whiplash resulting from that sudden change in direction.

The decision has been roundly criticized by us and others. But the state trends and ASU history makes one wonder if UA’s reversal was driven in large part by the realization that it had not moved fast enough to deal with the changing mix of revenue. That its slow and steady approach to building online capacity was too little too late.

International students represent a prior but similar response

In seeking to find a new source of revenue from online students, ASU and UA are following a long tradition in American higher education. In an interview about his new (and irresistibly titled) book, Whatever It Is, I’m Against It, former Macalester College president Brian Rosenberg talks about how, in response to enrollment challenges,  US higher education has always been able to pull something out of its bag of tricks. First it was admitting women, then the GI Bill, then Pell Grants.

More recently, of course, the chosen trick has been a reliance international students, especially the full fee-paying kind, who have played a big role in supplementing higher education coffers increasingly depleted by declines in state funding. This has also been important in other parts of the world, for example in Canada and Australia. One can also see the impact on UK universities with online students.

Many institutions became very reliant on the revenue brought in by international enrollments. The University of Illinois at Urbana-Champaign (UIUC) famously took out insurance against a drop in international numbers. In more prosaic, operational terms, in my last year working at UIUC (2014), we were talking about beginning to offer help-desk services in Mandarin because of the large international student contingent. I have heard (unreliably) that UIUC never did collect on that insurance policy. If anyone has heard differently, let me know.

Naturally, international student enrollments went down during the pandemic, but at least in the US these numbers have rebounded strongly in the past year as seen in Higher Ed Dive’s coverage of new data released on Monday.

The changing nature of the increase, however, points to less tuition revenue for universities. As Rajika Bhandari, principal of Rajika Bhandari Advisors and co-founder of the South Asia International Education Network, explains in a recent Inside Higher Ed article:

“Most students coming from India are at the graduate level. This has always been the case and likely will be for the foreseeable future,” she said. “Therefore, just from a recruitment and revenue perspective, they are never going to have the same impact on an institution’s bottom line as the Chinese undergraduate students.”

Online students are going to continue to be an important source of tuition revenues for many higher education institutions into the future, with many similarities at least in drivers as the reliance upon international students.

Parting thoughts

There is a bit of a silver lining to that last fact. One of the arguments Rosenberg makes in his book is that universities have been putting off dealing with the two biggest issues involved in the cost of higher education: salaries and the costs involved in physical campuses. Done right (hope springs eternal in the human breast), online learning at least holds the promise of starting to address the latter.

There is some analysis needed on the pros and cons of this increasingly mainline reliance upon online education revenue, but we’ll leave that for another post.

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