Behind CX: Emerging Financial Models

There are some extremely interesting financial models that are cropping up in higher education in response to calls for reform, to lower the cost to learners, and to accelerate degree completion.  Some of these have proven business models, but most need additional vetting and more proof over time that they work.  Let’s explore a few here.

Subscription-Based Cost Models

Subscription-based cost models use a flat fee per “unit-o-time”.  One of the most well-known examples of this is Western Governors University, where they charge a flat fee per 6 month term.  Read their explanation of their financial model here.  They also describe their ROI, or Return on Investment, of their degree programs in terms of increased salaries of their graduates in the years after they leave the institution.

Other institutions are also now experimenting with this model.  Boise State University announced in June 2018 a pilot program for a two-tiered flat subscription cost.  Read that article on the announcement of their new subscription-based pricing model for their online degrees here.

A snippet from that press release reads:

By delivering a college degree that is affordable, targeted to individual career needs and accessible across the state, the program addresses several of the most pressing challenges facing Idaho higher education today — combating cost and student debt, delivering skills and competencies employers are demanding, and boosting Boise State’s efforts as a leader in moving Idaho toward its goal of ensuring that 60 percent of adults between 25 and 35 have a college degree or certificate.

Through the public-private partnership with CapEd, credit union members and employees can customize the amount of time and money they spend on their education with two subscription tiers — they may take up to six credits per term for $425 per month, or up to nine credits per term for $550 per month.

Though this pricing structure has been very beneficial for, and is a key differentiator for, WGU, it remains to be seen if it will be viable in other institutions.  Typically, costs are associated with courses – the cost of teaching a course being a primary component.  It is more challenging to model financials across programs and pace than it is across individual courses, particularly at institutions wherein some faculty make more for teaching than others.

Alternative Providers & Credit Accumulation

Another way to think about lowering the cost of a college degree is through individual students gathering credits from various providers.  Though this mechanism is not yet widely used, there are some sophisticated learners in the marketplace who are able to leverage their understanding to gather credits at much lower cost, thereby driving down the entire cost of their college degree.

MOOC Partnerships

There are several institutions that now partner with MOOCs in order to offer their courses or micro-credentials at scale.  Arizona State University’s Global Freshman Academy is a partnership between edX and ASU that enables learners to earn undergraduate credit by first taking the course and then paying for it upon successful completion.  Learners do not have to apply for admission to ASU upfront, and can transfer their credits to other institutions.  This minimizes the risk to the learner – they pay after they know they will be successful.  The flip side of this model is that the learner has no skin in the game or any sort of acquired loyalty to the institution.

Explanation of how edX and ASU works for Global Freshman Academy.
https://www.edx.org/gfa

Initial results from the initiative were not encouraging, and there has been no further announcements about improvement of progress.  A segment from the Inside HigherEd article by Carl Straumsheim from December 21, 2015 entitled Less than 1% provides the initial updated:

Less than 1 percent of the learners in the massive open online course partnership between Arizona State University and edX are eligible to earn credit for their work, according to enrollment numbers from the inaugural courses.

The partnership, known as Global Freshman Academy, was announced this spring with great fanfare. University officials and fans of the effort said the new way of delivering education (in addition to traditional online and face-to-face options) might be a way to get new students excited about and enrolled in degree programs.

The initiative launched this fall with three credit-bearing MOOCs — Human Origins, Introduction to Solar Systems Astronomy, and Western Civilization: Ancient and Medieval Europe — drawing a total of 34,086 registrants. Despite the added incentive of credit for completers, each MOOC saw only about 1,100 learners remain active in the course throughout its seven-week duration. Of those learners, 323 now have the option of paying ASU an additional fee to receive credit, the enrollment numbers show.

The number of learners who opt for credit may be even smaller. To be eligible, learners first have to pay $49 for an identity-verified certificate and earn a grade of C or better. Because of how the MOOCs are structured, learners can complete all the lessons and assignments and view their final grade before deciding whether to pay for a transcript from ASU. Learners have a year to make up their minds.

The university has agreed to charge the MOOC learners no more than $200 per credit hour. Credit from the first three Global Freshman Academy MOOCs costs $600 per course. Learners are not required to continue their studies at ASU, but are free to transfer the credits to any college that will accept them.

edX also has other partnerships to provide college credit for MOOCs, including MicroMasters programs, credit through Charter Oak College, and through ACE credit recommendations.

Straighterline

Straighterline is a third-party educational provider that partners with 130 institutions, ACE, and other organizations.  Learners can take their general education courses through Straighterline at extremely low cost, and then transfer those credits to partner institutions, saving students thousands of dollars.  Institutions benefit, as learners who come with Straighterline credits tend to persist and graduate at greater rates.

Read their explanation of how it works here.

Income Share Agreements

One financial model in higher ed that remains on the fringe is the income share agreement.  In this model, learners pay the cost of their education back to the institution as a percentage proportion of future earnings.

Read this article from the Washington Post that explains what ISAs are, and their advantages and potential pitfalls.  In case of a broken link, you can find a backup copy here.  Despite the buzz around ISAs, there are still relatively few institutions using them.

The Future of Financial Models in Higher Ed

Though there are many emerging methods to finance a college education, there are still many unknowns about the long-term viability of some of these mechanisms, as well as the impact to learners over time.  The need to explore new models is compelling, however, with student debt at record rates.

Navigation

Page 1:  Behind the Customer Experience
Page 2:  Behind CX:  More Tech Systems
Page 3:  Behind CX: Data Integrations and Insights
Page 4:  Emerging Financial Models (you are here)

 

References

Blitchok, A. (2017, November 2). 15 Higher-Ed CRM software recommendations for 2018 [Web log post]. Retrieved from https://www.workzone.com/blog/higher-ed-crm-software/

Boise State University. (2018, June 19). Boise State to pioneer monthly subscription-based college degree program. Retrieved from https://news.boisestate.edu/update/2018/06/19/boise-state-to-pioneer-monthly-subscription-based-college-degree-program/

EDUCAUSE Center for Analysis and Research. (2015). Analytics landscape in higher ed 2015. Retrieved from https://library.educause.edu/~/media/files/library/2015/5/ers1504cl.pdf

Gagliardi, J. S., & Wilkinson, P. (2013, December 13). Big data on campus. Higher Education Today. Retrieved from https://www.higheredtoday.org/2017/12/13/big-data-campus/

Mann Jackson, N. (2018, March 21). Connecting data silos in higher ed. University Business. Retrieved from https://www.universitybusiness.com/article/connecting-data-silos-higher-ed

Mulesoft. (2018, January 3). What is custom code?. Retrieved from https://www.mulesoft.com/resources/api/what-is-custom-code

Olson, E. (2017, August 13). Data integration – Point to point vs an integration tool [Web log post]. Retrieved from https://www.linkedin.com/pulse/data-integration-point-vs-tool-eric-olson/

Straumsheim, C. (2015, December 21). Less than 1%. Inside HigherEd. Retrieved from https://www.insidehighered.com/news/2015/12/21/323-learners-eligible-credit-moocs-arizona-state-u

Tissot, L. (2018, January 30). Predictive analytics to student success improvement. eLearn Magazine. Retrieved from https://elearnmagazine.com/predictive-analytics-learning-analitycs/