September 1, 2015
UF's online university has become a 'cash cow'

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Higher Education in Florida

UF's online university has become a 'cash cow'

Mike Vogel | 5/28/2014

There’s real money in virtual education — both for Florida colleges and universities offering online courses and the private-sector providers selling technical services to the schools.

A Cash Cow for UF

Florida public universities have become national leaders in online education. What’s driving the trend? Online classes are lucrative — both for the schools and the companies that help them set up web-based coursework.

Florida Polytechnic isn’t the only new face on the public university scene this year. With $10 million in startup funding and $5 million for operating costs from the state, the University of Florida opened UF Online in January. It advertises fully online bachelor’s degree programs that will award degrees indistinguishable from those earned in Gainesville.

UF expects UF Online to be a profit engine that will break even in the seventh year and generate $14.5 million a year in profit on $76.6 million in revenue by 2024. By then it also expects to have racked up a cumulative $43.6 million profit after losing money for four of the first six years. By the way, all that’s after UF Online pays the parent university the standard 11. 31% of revenue the university charges to all revenue-generating enterprises to cover the parent’s general and administrative costs.

How does the program work?

Thanks, Non-Residents

The $112.50 per credit hour in-state tuition — capped by law at 75% of on-campus tuition — doesn’t cover near the cost of offering a degree. UF loses $48.65 every credit hour until economies of scale kick in. The real money for UF is in the $425 per credit hour for out of- state tuition. That has a $45.44 profit per hour, or a 10. 7% margin. By 2024, UF expects 24,100 students, with 43% of them those high-margin non-residents.

First Years

The UF Online enterprise hinges on attracting out-of-state students, but two-thirds of initial prospects were in-state. For the students who applied to start in January, all 586 were transfer students. For the academic year beginning in August, 48 applicants would be freshmen and 111 transfer students. Business was the most popular major.

Price

UF can set out-of-state tuition at whatever the market will bear.

The Cost Side

UF started in January with five majors. It says it needs to create 250 courses for 35 degrees by 2019. What does it cost to create an online course? As of December, $11,310. But UF expects that number to rise as it offers more expensive courses in science, technology, engineering and math. Originally, it projected spending $36,500 for faculty, production and technology for a standard class, which covers about 80% of the classes UF Online will offer, but as much as $156,000 for lab and other courses requiring a hefty amount of simulation, about 10% of classes.

Updates will cost $7,500 per course every three years. Any class that doesn’t pull an average demand of 100 students per term gets retired.

Fields

The first degrees are in business, health education and behavior, sport management, criminology and law and environmental management. The inaugural programs were chosen based on their ability to get up and running by last January and demand. Those on tap for the next five years either are from the top 15 fields in demand for jobs in Florida or from the top 15 most popular majors in Gainesville.

Profs

Faculty get paid out of the $50 per credit hour that goes to college departments. Every 110 students in a course means paying a teaching assistant, who make $8,000 per course per semester.

Pearson

UF hired the British company to provide a host of services, including market research, marketing, recruiting, student retention, training and development, tutoring and research. Pearson retention agents monitor student performance for signs of falling off — like going 12 hours without checking in, being late with assignments or bombing a test. The Pearson people check in with students regularly by email and phone. Pearson also runs a call center to recruit and retain students.

Pearson gets $3.5 million upfront and then $6 million spread over the next four years in fixed fees. Its real money is in its share of tuition revenue. Pearson gets 40% of in-state tuition the first years. That shrinks to 30% by 2024. But it gets 60% of the far larger out-of-state nut, a percentage expected to fall to 43% by 2024. UF projects Pearson will earn $28 million in 2024 alone from the deal.

Online Campus Life

UF Online has a mental health counselor available 24/7 by phone. Personal fitness training videos will be on YouTube while UF health services will have online information on alcohol education, stress reduction and time management.

Financial Aid

UF Online students can apply for financial aid just as any on-campus student would. If they qualify, they can get Bright Futures, Pell grants and federal loans. They also get subsidies from their fellow online students. Each online student pays a “financial aid” fee that’s projected to bring in $7,352 the first year, rising to $1.6 million per year in 2024, the exact amount UF plans to hand out in UF aid that year.

Value

UF says the university will benefit as will students who will “have access to an excellent education at an affordable price” and so will the state by having a deeper talent pool of workers. With no room and board to pay, UF says online students will pay about $10,800 less per year than on campus students.

 

Tags: Education, Higher Education

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