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As the Cost of College Rises, Online Education Becomes a Promising Alternative

by David Conway, June 02, 2014
ARK-Invest_Blog-Banner_2014_06_02---Online-Education

Classes, adventures, friendships… and debt. College experiences are universal but prices have increased significantly over the past forty years. As seen below, by 2013 a private college cost $40,917 per year, 2.5 times as much as it did in 1974. Can online education become a promising alternative?

Average Tuition, Including Room & Board

From 1973 to 2013, annual median household income remained relatively stagnant while tuition rose. In 1973 tuition comprised 35% of household income, but in 2013 was over 80%. If this trend were to continue, the annual cost of attending college would surpass median household income in nine years. A child born today will enter college in 2033, at which point average annual tuition is on pace to cost over $64,000 in today’s dollars. If average household income were to remain constant, tuition would represent 126% of average household income, per student. The average household has roughly two children, suggesting combined tuition would represent over 250% of average household income!

Ratio of Tuition to Median Household Income

Further, the value of a college education is in question, so families and students are looking at less costly alternatives to the traditional four-year degree. Could this be the reason that college enrollment has started to decline, as shown below?

National Student Enrollment

 

In response, Massive Open Online Courses MOOCs are beginning to revolutionize digital higher education. These free online courses offered by companies such as Coursera, Udacity, and edX, create an open community for students and teachers to interact and share learning resources, available to anyone. They could be a disrupting force in an increasingly expensive higher education market.

A Coursera Certificate in Data Science costs just $490, compared to a similar University of Washington certificate costing $3,300, or a Columbia University equivalent costing roughly $20,000. Coursera also eliminates other expenses, including room and board, travel, supplies, and books.

While some colleges and universities offer online classes, most traditional colleges do not offer digital degrees. Georgia Tech’s Computer Science Program is an exception. For other schools MOOCs and Industry Sponsorship Educations are supplemental options.

Businesses are leveraging MOOCs to train employees. Some companies direct employees to a MOOC for specific skills, one course at a time, earning so-called nano-degrees. Thanks to online education, training costs drop and productivity increases.

For example, the staffing firm Aquent uses MOOCs to train employees for their future clients. Better known staffing firms and technical institutes such as Manpower [MAN], Robert Half [RHI], and DeVry [DV] are beginning to do the same. Online education is sure to disrupt current college market trends.