THE BLOG

Online Higher Ed's Profit Potential Aids in Driving Push Toward 'Innovation'

01/17/2014 08:16 pm ET | Updated Mar 19, 2014

Profit potential and bottom lines -- not increased access for students -- are the underlying motivation behind the recent push toward online higher education, according to research by the Campaign for the Future of Higher Education.

Private companies and investors have exploited the money-making potential of this latest trend in higher education, partnering with both public and private universities to offer factory-farm-type courses that often fail to do much more than make money for the corporations behind them, according to "The 'Promises' of Online Higher Education: Profits," one of three research papers released by the group and available online.

The big business facts often left out of the national conversation revolving around online higher ed are among topics to be discussed this weekend in New York City, where dozens of university faculty, union leaders and others are gathering the Campaign for the Future of Higher Education's (CFHE's) national meeting, hosted by the Professional Staff Congress in the City University of New York system.

The grassroots national campaign, initiated in 2011 by leaders of faculty organizations nationwide, tasks itself with ensuring that affordable quality higher education is available to all and advocates for online education policy to be rooted in reliable research and in consideration of real students and educators.

The research findings on profits in online higher ed are jarring.

In 2012, investment in the "ed tech" sector hit $1.1 billion, with 324 ed tech companies earning $1.43 billion in profits during a 12-month period in 2011-2012. It's become a hot spot for corporate growth, and many are jumping aboard.

But the recent past holds many a cautionary tale when it comes to online higher ed and who stands to win -- and lose -- in the long run.

Early champions of online higher ed standalone providers, such as the University of Pheonix and Kaplan University, were darlings of Wall Street in the early 2000s. Between 2000 and 2003, online higher education providers were the highest-earning stocks of any industry. As the decade wore on, scandal over dismal graduation rates and shoddy degrees rocked the industry. Then in 2012, Sen. Tom Harkin (D-Iowa) released a report revealing that the for-profit providers spent more on advertising and recruitment than on instruction. Profits in 2009 alone hit more than $3 billion.

The profits, research shows, came and continue to roll in from federal financial aid. In 2011, $32 billion in federal financial aid was funneled to for-profit colleges -- amounting to 25 percent of all Department of Education financial aid funds. Pell Grant monies, as well as veterans' educational benefits, to these companies also rose dramatically.

The bottom line? Taxpayers were, and are, footing these companies' profits. During 2009, the Harkin report shows, for-profit schools received 86 percent of their revenues from taxpayers.

The investigation generated media scrutiny and public outrage, severely impacting the companies' coffers. But the sector didn't die. It simply regenerated into "partnerships" with existing universities and colleges, allowing companies to bank on the trusted brand of respected institutions.

Last year, about 200 non-profit institutions partnered with for-profit service providers, with some 500 more expected to follow suit in the next two years.

The latest for-profit innovation, massive open online courses (MOOCs), stands to become the next big money maker in the online ed sector. According to a report by Inside Higher Education, the three big MOOC providers -- Udacity, Coursera and EdX -- have major investment capital, with Udacity having received at least $21.5 million, and Coursera $43 million. EdX, although technically a nonprofit, has bankrolled $60 million from MIT and Harvard.

But while they falsely promise to increase access to underserved populations of students and expand educational opportunities, what MOOCs really seek to do is simple: make money for companies and the investors backing them. In the rush to provide "innovative" ways of delivering education, many have failed to stop long enough to analyze long-term consequences -- a move that could prove catastrophic.

Just look at the subprime mortgage crisis.

For years, banks doled out problematic loans in the name of the admirable goal of expanding middle-class access to home ownership. Failing to look beyond the rhetoric harmed both homeowners and the national economy.

A similar parallel could be argued when it comes to online higher education offerings such as MOOCs. While on the surface they appear to open access to seeking higher education, behind the hopeful language lies private companies who stand to make millions on the backs of the American public.

Before falling for glittery corporate discourse about the glory of online higher education, more analysis of profit potential and the true motivation behind this sector is not just needed but critical. The future of higher education, and taxpayer dollars, depend on it.