College officials don’t think the online market ‘has peaked,’ survey suggests

Dive Brief: 

• Colleges that already have online courses plan to “solidify their lead” in the market by launching more programs than their competitors, suggests an annual survey of chief online officers from online learning group Quality Matters and Eduventures. 
• The report, which polled 367 administrators, found that 70% of colleges expect to launch fully online undergraduate programs in the next three years. An even bigger share (85%) plan to add new online graduate programs during that time. 
• These findings suggest college officials don’t think the online market “is saturated or has peaked,” the report’s authors write. However, the report notes that it is unknown if new programs will spur the desired enrollment growth. 

Dive Insight:

More colleges are entering the online market or scaling up their programs to make up for enrollment declines among traditional-age students. About one-fifth of the survey’s respondents said their top goal for the next five years is to expand their online program offerings, while one-fourth said it was to boost online enrollment. 

Yet there are signs online enrollment growth is beginning to slow. Heightened competition may make it harder for some programs to attract new students, though observers say colleges can still grow their online presence by targeting adult learners and taking advantage of their regional brand recognition. 

As more colleges seek to grow their online footprint, they’re increasingly relying on online program managers (OPMs) to help develop and run their distance education programs. 

Regional private colleges and flagship universities contract with OPMs the most, with 43% and 40% of survey respondents, respectively, saying they use them to provide or manage some aspects of their online programming. Community colleges, on the other hand, were the least likely to work with OPMs. 

For colleges with OPM relationships, around three-fourths said they hire these companies to market their online programs. Two-thirds said OPMs help them recruit online students, and half said these companies build their online courses. 

The most common reasons respondents gave for using OPMs was that they had expertise the institution lacked, they could rapidly scale online programs and they cover startup costs. 

OPMs typically shoulder the upfront costs of launching an online program in exchange for a cut of its tuition revenue, usually between 40% to 60%, for a set period. 

Although these deals allow some colleges to get programs off the ground quicker, they’ve caught flak for potentially driving up the cost of online education. Around one-third of respondents said they avoid OPMs because they prefer more limited contracts, while 46% said revenue-share models are unattractive. 

Earlier this year, Congressional Democrats launched an inquiry into companies using revenue-share agreements, arguing that they could be violating a federal law that bars most colleges from paying commission for help with recruiting and enrolling students. 

Recently, some OPMs have been offering more flexible contract terms. 2U, for example, indicated last year that it might offer some customers the option of working on a fee-for-service basis, a move that would allow it to support some smaller programs. 

Although online programs are sometimes viewed as a way to bring in more tuition revenue, just under half of polled officials said their online programs generate net revenue. About one-fourth said they are necessary to offer but don’t supply excess income, and one-fifth said it varies by the program.