Online courses, instructional quality, and economics: a conceptual  (Page 6/8)

Roi and institutional enrollment

Of course, to administrators, the most important perceived outcome of online courses is increased enrollment. Increased enrollment, however, does not necessarily equate to increased revenue even if the cost of online courses is held constant with the cost of on-campus courses. A situation Raisman (2007) referred to as “Churn and Burn” can occur in which students do not enroll in a sufficient number of credit hours to recoup the cost of their recruitment.

To illustrate, we can calculate ROI using an average cost of recruiting a college student of $5,460 (Raisman, 2007). Although this estimate may seem high, most administrators in higher education forget to include indirect recruitment costs. These costs are both high and increasing rapidly as universities engage in an all out recruiting war for the best students (Newman et al., 2004). Indirect costs include expenditures such as new residence halls, recreation centers, and so forth. For example, land is expensive. Demolishing an old high rise residence hall and replacing it with apartment style housing involves, not only construction costs, but the cost of the additional land required to house the same number of students.

At the time Raisman (2007) calculated the average cost of recruiting a student, one institution of higher education estimated that a student taking 15 hours (i.e., one FTE) would pay $2855 in tuition and fees per semester, and a student taking 12 (.8 FTE) hours would pay $2291. Note that if either of these students left after only one semester the result would be a net loss of $2605 for the student taking 15 hours and $3169 for the student taking 12 hours. If these students remain a second semester, the 15 hour student becomes a very small net gain of $250, the student taking 12 hours remains a net loss of $878. Thus, after one academic year, these students would have produced a net loss of $628. Let’s assume that this university recruits 100 students with half of these students taking 15 hours and half taking 12 hours, although the actual number of credit hours is likely to be less. The recruitment cost for these students is $546,000. After one semester, these students provide $278,000 in tuition and fees. This institution has a 78% freshman to sophomore year retention rate. Let’s also assume that six students leave from each group after the first semester, the remaining students who complete the first year provide an additional $212,940 in tuition and fees. This circumstance leaves the university $55,060 short of its recruitment costs for these students after one year. This institution is state supported. Although increased enrollment can also increase state funding, this increase is not included in the calculations related to offsetting recruitment costs. Any increase in state revenue is better included in calculations related to offsetting the cost of educating students than in offsetting the cost of recruiting them.

Of course, these losses would be covered if the students enrolled for an additional semester. Continued enrollment, however, is not guaranteed. Students do not make a one-time decision to enroll at a university. This decision is on-going and many students will drop out or transfer. Roughly 70% of students who leave a university do so due to dissatisfaction with the university (Raisman, 2007). A critical issue underlying student dissatisfaction is a belief the university is only interested in their money. If a university begins offering large numbers of online courses without investing what is required to offer them properly, this is likely to convince students that the university is interested in their money rather than their education. Thus, attempts to increase enrollment with online courses could convince students to leave before the costs of recruiting them have been recouped.