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Georgia Tech’s MOOC Masters: An end to high cost higher ed?

Georgia Tech’s new online Masters of Computer Science substantially undercuts university offerings. Flickr/IlonkaTallina

For those still believing that MOOCs (Massive Open Online Courses) pose no threat to established universities, Georgia Tech has launched the first accredited fully online Masters of Computer Science based for a cost of slightly less than US$7,000. By comparison, Georgia Tech’s current charge for this degree to out-of-state students is US$40,000. At one Australian university, the cost of a Master of Computer Science degree for international students is around AU$56,000 for tuition fees alone.

The course is being put on through a collaboration between AT&T which has invested $2 million in the project, Udacity which will host and run the MOOCs, and learning companies like Pearson which will provide proctored testing. Students will still need to satisfy admissions requirements, which include holding a relevant prior degree and possibly taking and passing remedial courses.

Thus, strictly speaking, this is not an “open” course since it comes with prerequisites and has a fee.

It is not hard to see the potential disruptive nature of this offering. A total of 10,000 students at $7,000 each is a theoretical income of $70m for a single course. The impact on other universities is amplified however. If all of those students potentially were going to take a traditional Masters course at a university somewhere in the world, nearly $600m has effectively been taken out of the market. It is the same impact that Wikipedia had on the Encyclopedia Britannica, effectively dragging the price of encyclopedias towards zero.

For those who have long been claiming that there is no “business model” for MOOCs and that no quality university would “dilute” their own brand by offering world-wide degrees, the offering from Georgia Tech is going to come as a shock. This is no longer the same as online education that has been offered up to this point. Online courses may have been available for some considerable time but those that involve credit upon completion have always been charged at the same rates as on-campus courses.

The option of a vastly cheaper path to accredited higher education couldn’t have come at a better time for students facing a lifetime of debt from their studies.

Internet technologies writer Clay Shirky has written about how student debt has increased in the US with tuition fees at public universities increasing by 72% between 2000 and 2010 while average earnings for full-time workers with a Bachelor’s degree decreased by 14.7%. Commenting on this trend, Westpac has released a report that assesses the impact that this increase in student debt will have on the economy of the US. The rate of delinquency on student loans has increased with the number of loans that are overdue by 90 days doubling in recent years.

In Australia, student debt has also risen to record levels of $26.3 billion, an increase of $10 billion since 2007. Of this, $6 billion is never expected to be repaid.

Although student debt is tied in with how governments fund universities and other economic factors, universities themselves are tacit in maintaining levels as high as possible to meet their ever-increasing costs. These costs are likely to keep increasing because of the so-called Baumol effect where university staff costs keep increasing with little-to-no gain in productivity.

UK universities have recently come in for special criticism for treating international students as cash cows. They are charged substantially more for a place at university than a domestic student. They can charge these amounts because there is a market for foreign students trying to gain some advantage through a UK degree and also finding a way to assist in visa applications with their country of study.

Australia is no different. Cash-strapped universities see international students as their primary way of making money given that international student places are uncapped by the government and the fees are up to the university to set. Together with living costs, this has led Australia to be ranked as the most costly destination for international students.

The offering from Georgia Tech starts to address this imbalance. International students can gain foreign qualifications for a fraction of the price using a technology that would allow them to continue working or to indeed work in a different country for substantially lower cost than enrolling as an international student in an on-campus course.

The idea that elite universities won’t enter into this business and provide cheap accredited degrees on a mass scale is somewhat fanciful. Differentiating and maintaining separate brands for online courses and on-campus obtained ones is essentially what most high-end brands do without a second thought. Preserving quality, or the perception of it, on a mass scale is what Google and Apple do to earn revenues that dwarf the entire university sector.

This is marketing 101, something that those defending a system that is clearly not sustainable will have to come to terms with sooner rather than later.

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