As your college and university moves to increase its online learning offerings, you ask yourself the inevitable question “How do we assess the costs as part of our planning”? Once you have reached the point of answering this question, a number of other questions naturally follow:
- Will online learning be more work for faculty?
- Is online learning more expensive than face-to-face teaching?
- What do we need to invest?
- What fees should we charge to cover costs or make a profit?
- Can it save money? If so, what do we need to do?
Every case is different, and you need to develop a proper business model based on the unique needs and requirements of your institution, but there is enough experience and research now to be able to provide you a rough guide on what drives the costs of online learning, and how these differ from the costs of face-to-face teaching.
Factors Influencing the Costs of Online Learning
The standard answer to how much does online learning cost is: it all depends!
We don't ask how much driving a car costs, because we know it depends on the size and type of car, the kinds of trips we take, the price of gas and insurance, etc. Online learning similarly can come in many forms and many variables drive cost.
Nevertheless, we do know the factors that drive the costs of online learning. Here are top ten factors:
- The number of hours required for course development and preparation;
- The number of hours required to teach a course;
- The number of students in a course;
- The ratio of instructors to students (class size);
- The pay scale of instructors (in particular, ratio of tenured to adjunct faculty);
- Method of course design, development and delivery (e.g. 'Lone Rangers' vs. team work);
- The pedagogy used (e.g. recorded lectures, constructivist or objectivist approach);
- The choice of technology for delivery (e.g. lecture capture, LMS, Blackboard Collaborate);
- The assessment of the course and its outcomes; and
- Overhead costs (institutional administrative costs, network costs, etc.).
With these ten factors, you have the framework to develop a business model for your institution.
Types of Cost
Most of the factors above also apply to the costs of traditional campus-based teaching. Where online learning differs though is that it disaggregates activities that are integrated into traditional teaching (classroom, labs, field work, tutorials, etc.). This allows for some economies of scale under certain circumstances.
Online learning also avoids some costs that are imbedded in traditional campus-based teaching, such as buildings, heating and lighting, although it also adds some new costs, such as increased IT infrastructure and extra bandwidth.
There are five main costs in online learning:
- Design and Development
Let’s explore each main cost in more details.
This is no in the planning costs of online learning compared to campus-based teaching. Your new programs have to go through a whole set of processes to be approved, whether they are online or not. You can expect online programs or courses to take more time, because they tend to be more controversial, at least initially.
In practice, though, we never really consider these costs in the development of most credit courses and programs, although in terms of faculty time, this is in fact an expensive process. We consider these costs as 'sunk' or uncalculated costs. However if your aim is to develop a full cost-recovery or for-profit online program, you need to estimate and include these specific costs, whether it is a campus-based or online.
Design and Development
You choose and develop content materials, student activities, assessment questions, etc. This is where the big difference occurs between the cost of campus-based teaching and online learning. Although in both types of teaching, you need to choose and develop content, online learning content is permanently stored and easily reproduced. More and more you can access it for free, in the form of open content, i.e. content freely available over the web, or as specially designed open educational resources.
This means that with online learning, you get opportunities for economies of scale. Once you develop an online course, you can offer the content to an unlimited number of students without increases in the cost of content development.
For instance, this means you can easily share the same content and course structure across a number of sister institutions (or academic departments, e.g. statistics), and avoid duplication of activity. Thus in online courses, content costs are 'fixed' and independent of the number of students. This of course is the attraction of MOOCs (massive open online courses).
You need to deliver content to students. Teaching involves more than just delivering content. You need to facilitate learning needs and assess student learning outcomes. Modern pedagogical theory suggests that students learn best when they are active learners, engaged in discussion and receive prompt and regular feedback. Research has indicated that for online learners, the instructor online 'presence' is critical for success.
These factors effectively limit the number of students one instructor can handle (MOOCs have tried to get around this by automating assessment and feedback, with to date mixed results). As a result, online delivery costs are variable, i.e. influenced by the number of students taking a course.
You can reduce these costs in a number of ways:
- Increasing the instructor: student ratio. This may be possible by automating some of the instructor/student interaction, e.g. computer marked assessments or by transferring work to the students (e.g. group work, peer review); and
- Use of lower-paid adjunct instructors for course delivery (e.g. tenured professor teaches first section of 30 students; each subsequent section of 30 taught by adjuncts).
The extent to which these measures will be acceptable will depend on the philosophy of teaching, views of what constitutes quality in teaching and learning, and the ability of students to work independently.
Nevertheless, there are certainly opportunities for increasing productivity in the delivery of online learning. In particular, the marginal cost (i.e. the extra cost) per additional online student in a course starts to drop as numbers increase, if courses are well designed, and adjuncts are hired and trained to teach well online.
Although once created, digital materials are permanent and recoverable, all online courses will require some annual maintenance. Readings may no longer be available, URLs can change and, above all, content is often dynamic. Also feedback from students and/or analysis of data from assessments may require changes to course materials. Depending on the course, it is wise to set aside between 10% -25% of the original cost of development each year for maintenance activities (mainly instructor and support costs).
These cover costs not directly related to the teaching of an online course, but costs that need to be recovered by the institution as a whole. For many online credit courses, these costs may be ignored in the same way that campus-based courses are not charged overheads. However, if the online course or program is to be full cost-recovery or to make a profit, then overheads need to be calculated.
More importantly, it is in 'overheads' that the main cost savings to an institution may occur. In many campus-based institutions, non-teaching costs, such as buildings and ground maintenance, heating, lighting and other services, marketing, public relations, alumni services, financial services, etc. constitute almost half the operating cost. Some overheads, such as the President's office, IT infrastructure, telecommunications, etc., will apply to online programs; others, such as building and grounds maintenance, will not.
In particular, if an institution needs to expand enrollments, the cost of new capital projects, such as extra classrooms or labs, should be compared to the costs of absorbing extra enrollments through an increase in online learning. This may mean some shuffling, with some programs increasing online enrollment or hybrid courses to free up extra space for new enrollments. Also the use of online simulations or even remote labs may be another way to handle increased enrollments in science or engineering, by reducing but not eliminating time spent in labs.
How to Achieve Productivity Gains
One difficulty in assessing whether online learning is less expensive than campus-based teaching is that we rarely know the cost of campus-based teaching on a course by course or program by program basis (cost-recovery or for-profit programs are an exception). Generally public institutions do not track in detail the cost of different kinds of teaching, such as lectures versus lab classes.
However, this kind of analysis is essential if we are to look for increased productivity from online learning. This means moving to activity-based rather than expenditure-driven accounting (see Bates and Sangrà, 2011) so that the costs of different forms of teaching can be properly tracked and compared.
Second, whether there is room for productivity gains through online learning will also depend on how online courses are developed and delivered. While it is always possible to reduce costs, this is often at the expense of quality. This applies equally to online learning as to campus-based teaching.
Nevertheless, there are three areas where online teaching offers possible productivity gains:
- Economies of scale through sharing and re-use of materials and increased use of open content;
- Economies in the delivery of programs by maintaining content quality through the use of tenured or research professors for the design and development and monitoring of course delivery, but reducing delivery costs through the use of well-trained online adjunct professors, automated marking and course designs that move the work away from the instructor to the student; and
- Economies in capital expenditure and infrastructure costs, especially where institutions wish to expand enrollments.
If you require further information or have additional questions, please contact Dr. Tony Bates, Online Learning Associate, Contact North | Contact Nord at [email protected]. Dr. Bates will be pleased to respond to your e-mail.
References and Further Reading
There is little published on the costs of online learning in university or college settings, and even less hard research. The main study is:
Bates, A. and Sangrà, A. (2011) Managing Technology in Higher Education: Strategies for Transforming Teaching and Learning San Francisco: Jossey-Bass, particularly Chapter 7: 'Resources, money and decision making.'
Other publications that discuss costs of online learning include:
Bakia, M., Shear, L. Toyama, Y. and Lasseter, A. (2012) Understanding the implications of online learning for educational productivity Washington DC: Department of Education Office of Educational Technology
Bates, A. (2011) Is online learning a waste of space? Online Learning and Distance Education Resources, November 18
Bates, A. (2011) The cost of online learning: $12.50 an hour? Online learning and distance education resources, March 22
Bates, A. (2010) Open content and the costs of online learning Online learning and distance education resources, October 25
Bates, A. (2010) Where do the resources for technology-based teaching come from? Online learning and Distance Education Resources, May 2
Laurillard, D. (2007) Modelling beneﬁts-oriented costs for technology enhanced learning Higher Education, Vol. 54, No. 1, pp. 21-39
Rumble, G. (2001) The Cost and Costing of Networked Learning Journal of Asynchronous Learning Networks, Volume 5, Issue 2
Seybert, J. and Rossol, P. (2010) What drives instructional costs in two year colleges Planning for Higher Education Vol. 38, No. 3, pp. 38-44
Twigg, C. (2012) Improving Learning and Reducing Costs: Initial Project Outcomes from Changing the Equation The Learning MarketSpace, July
Twigg, C. (1999) Improving learning and reducing costs: re-designing large enrollment classes Troy NY: The National Center for Academic Transformation
Wellman, J. (2010) Improving data to tackle the higher education ‘cost disease’ Planning for Higher Education Vol. 38, No. 3, pp. 25-37