Supply and Demand -- Online Programs in The Great Recession

It’s generally expected that economic downturns drive unemployed workers to enroll in degree and certificate programs that will, hopefully, enable them to acquire new skills which they will use to obtain new jobs; and that employees who still have jobs will enroll in degree and certificate programs in order to acquire new skills that will enable them to keep the jobs they already have.

A. Baselines
Given those expectations, we need answers to the following questions in order to establish baselines:

• Which types of institutions offered the most online or blended courses and degree programs as the Great recession began?
   
• What types of students enrolled in the most online or blended courses and degree programs as the Great Recession began?

Data about blended courses and programs isn’t readily available, so we focus on online offerings.

The National Bureau for Economic Research (NBER), the official scorekeeper for the U.S. economy’s ups and downs, proclaimed that the Great Recession began in December 2007 and ended in June 2009 by which the NBER meant the end of the decline in aggregate economic activity. While this proclamation of the end of the biggest economic downturn since the Great Depression was technically correct for the U.S. economy as a whole and for its corporate sector in particular, it missed the mark for many non-traditional students and for most state governments, the biggest buyers and sellers of online courses and online degree programs who faced continued high unemployment and low tax receipts, respectively.

Types of Institutions
The NCES report, Learning at a Distance (October 2011, NCES 2012-154), indicated the percentage of students enrolled in undergraduate programs by types of institutions during the 2007-08 academic year.  The distribution of student enrollments in online courses and degrees is shown in Table 1 (below)

Table 1. Enrollment Percentages by Types of Institutions for 2007/08

Types of Institutions (1)	Total Undergrad (2)	Online Course (3)	Online Degree (4)
Public 2-year	43.8%	53.1%	34.7%
Public 4-year	32.1%	27.7%	18.4%
For-Profit	9.9%	10.2%	35.2%
Nonprofit	14.2%	9.0%	11.6%
	100.0%	100.0%	99.9%

Source = NCES report, Learning at a Distance (October 2011, NCES 2012-154, NCES Table 2, p9)

-- Column (2) displays the distribution of all undergraduate students. Public 2-year colleges enrolled 43.8% of all undergraduates; public 4-year colleges enrolled 32.1%; for-profits enrolled 9.9%; and nonprofits enrolled 14.2%. In other words,public institutions enrolled the overwhelming majority of all undergraduate enrollments, 75.9%

-- Column (3) displays the distribution of all undergraduate students who were enrolled in at least one online course during the academic year 2007-08. As the reader can see, of all of the students who took at least one online course, 53.1% were enrolled in public 2-year colleges; 27.7% were enrolled in public 4-year colleges; 10.2% were enrolled in for-profit colleges; and only 9.0% were enrolled in nonprofit colleges. Again, public institutions enrolled the overwhelming majority of students who took online courses, 80.8%.

-- Column (4) displays the distribution of all undergraduate students who were enrolled in an online degree program during the academic year 2007-08. As the reader can see, 34.7% of these students were enrolled in public 2-year colleges; 18.4% were enrolled in public 4-year programs; 35.2% were enrolled in for-profits; and 11.6% were enrolled in nonprofits. Although public institutions enrolled the majority of degree candidates, 53.1%, the for-profit’s 35.2% share of enrollments in online degree programs is substantially larger than their 9.9% share of all undergraduate students, as shown in column (2)

Types of Students
The NCES report also examined a number of demographic characteristics of the students; but we will only consider their ages. The NCES age data appears in Table 2 (below)  

Table 2. Enrollment Percentages By Student Ages for 2007/08

Student Ages (1)	Total Undergrad (2)	Online Course (3)	Online Degree (4)
23 or Younger	59.7%	44.2%	22.0%
24 or Older	40.3%	55.8%	78.0%
	100.0%	100.0%	100.0%

Source = NCES report, Learning at a Distance (October 2011, NCES 2012-154, NCES Table 3, p11)

-- Column (2) shows that 59.7% of all undergraduates were 23 years old or younger. This is the conventional range for “college age” students.

-- Column (3) shows that 44.2% of all of the students who took at least one online course were 23 or younger. 

-- Column (4) yields the expected result. Of all of the students enrolled in online degree programs, 53.0% were 30 or older – a non-traditional college student by any definition and more than twice their 23.0% representation in the total student population shown in column (2). If we adopt the conventional definition of college age students as 18 to 23, then 24 and is the conventional non-traditional range. Column (4) then shows that 78% of online degree candidates were non-traditional students, which is almost twice their 40.3% share of total enrollments, as per column (2).

B. Higher Enrollments
Table 3 (below) displays data from the latest Babson Survey Research Group’s annual report, Going the Distance – Online Education in the United States, 2011, that is consistent with expectations that the current economic downturn has driven higher enrollments in online programs.

The Babson report included graduate programs as well as undergraduate, so its enrollment percentages differ from those in the NCES report.

Unlike the NCES report, the Babson report focused on enrollments in online courses and provided limited information about enrollments in degree programs; nor did it consider the ages of the students taking the courses, so it provided no indication as to their traditional vs. non-traditional status. However, the Babson report provided more recent survey data than the NCES report, data that covers the peak years of the Great Recession.

Online courses are more accessible to non-traditional students than face-to-face programs, but they provide no comparably strong advantages for traditional campus-based students; hence we can infer that a surge in enrollments in online courses during the Great Recession would mostly come from non-traditional students.


Table 3. Enrollment Growth Rates – Total vs. Online

Fall (1)	Total  Enrollments (2)	Total Growth Rates (3)	Online Enrollments (4)	Online Growth Rates (5)	Ratio of Online  Growth Rates to  Total Growth Rates (6)
2007	18,248,133	n/a	3,938,111	n/a	n/a
2008	19,102,811	4.7%	4,606,353	17.0%	3.6
2009	19,524,750	2.2%	5,579,022	21.1%	9.6
2010	19,641,140	0.6%	6,142,280	10.1%	16.9

Sources
           * Columns (1), (2), and (4) contain data from the table, “TOTAL AND ONLINE ENROLLMENT IN DEGREE-GRANTING POSTSECONDARY INSTITUTIONS --- FALL 2002 THROUGH FALL 2010” inGoing the Distance – Online Education in the United States, 2011, p 11
* Column (6) is derived from the data in columns (3) and (5)

-- Column (2) in Table 3 (below) shows the Babson data for the total number of enrollments in online courses from fall 2007 to fall 2010; and column (3) shows the growth rate of the total number of enrollments from year to year during that period.  Column (4) shows enrollments in online courses; and column (5) shows the growth rate of online enrollments from year to year during that period. Column (6) shows the ration of the online growth rates to total enrollment growth rates.

-- Comparing the data in column (5) with the data in column (3), it’s clear that online enrollments grew at much higher rates than overall enrollments. Indeed, the ratios of these growth rates in column(6) start at 3.6 and end at 16.9

-- Column (5) shows that between fall 2007 and fall 2008, online growth rate was 17.0%; and growth between fall 2008 and fall 2009 was even larger at 21.1%. This was the anticipated surge, i.e., increasing growth rates in online enrollments.

-- Between fall 2009 and fall 2010, column (5) shows an unexpected decline in growth rates from 21.1% down to 10.1%. The authors of the Babson report conjecture (on page 15) that, “The slower rate of growth in the number of students taking at least one online course as compared to previous years may be the first sign that the upward rise in online enrollments is approaching a plateau.”

-- Column (2) shows that total enrollments only increased by 116,390 between fall 2009 and fall 2010; whereas column (4) shows that online enrollments increased by 563,258 during that period, i.e., by almost 5 times as many. Indeed, column (6) shows that the ratio of online growth rates to total growth rates between fall 2009 and fall 2010 reached 16.9, its highest value. In other words, the slower growth rates for online enrollments overcame the much slower growth rates for the underlying total enrollments. So the good news is that the upward rise in online enrollments does not seem to have reached a plateau.

-- But this good news raises a bigger question, “Why was the growth of underlying total enrollments reaching a plateau in the Great Recession?” We have to consider the possibility that the problem really concerned the producers’ supply, rather than declining consumer demand. Perhaps the supply of courses was limited, over-priced, or lower quality? The next sections provide data that suggests that all three factors may have been involved.

C. Public Supply … Declining Support from State Governments
Given that public institutions enrolled almost 80 percent of the students enrolled in undergraduate programs, appropriations by state governments for higher education had substantial impact on the capacity of our system of higher education to deliver enough courses to meet increasing demand during the Great Recession. Table 4 (below) presents total enrollments in public colleges and universities together with state appropriations for higher learning from fiscal 2007 to 2010. (Note that the appropriations for FY 2010, FY 2011, and FY 2012 also included federal stimulus funds for higher education that were allocated to the states.)

Table 4. Enrollments at Public & For-Profit Institutions, State Appropriations, and Growth Rates

Fiscal Year (1)	Fall Enrollments at Public Institutions   (2)	Enrollment Growth Rates (3)	State Appropriations $000s (4)	Appropriations Growth Rates  (5)	For-Profit Enrollments (6)	For-Profit Growth Rates (7)
2007-08	13,490,780	n/a	$77,800,730	n/a	1,186,198	n/a
2008-09	13,972,153	3.6%	$78,527,989	0.9%	1,469,142	23.9%
2009-10	14,810,642	6.0%	$78,239,457	-0.4%	1,851,986	26.1%
2010-11	15,142,809	2.2%	$78,390,541	0.2%	2,018,397	9.0%
2011-12	n/a	n/a	$72,543,813	-7.5%	n/a	n/a

Sources * Columns (1), (2), (6), and (7) for FY 2007 through FY 2010 contain data for public and for-profit degree-granting institutions from the Digest of Education Statistics, Table 198, “Total fall enrollment in degree-granting institutions, by attendance status, sex of student, and control of institution: Selected years, 1947 through 2010”

** Column (4) from Grapevine National Tables, Table 1, for FY 2007 and FY2010, FY 2011, and FY
     … Data for FY 2008 and FY 2009 from Grapevine Historical Tables 2008-2009 – an Excel spreadsheet

-- Column (2) contains fall enrollments in degree programs at public institutions for each fiscal year. (Note: The  figures for fall 2011 are not available yet.) Column (3) shows the percentage growth in total enrollments from one year to the next. Column (4) shows the total funds appropriated by the states during each fiscal year for higher education; and column (5) shows the percentage growth in state appropriations from one year to the next. Columns (6) and (7) show enrollments and growth rates at degree granting for-profit programs.

-- As the reader can see, the growth rates for state appropriations was well below the growth rates enrollments for FY 08, FY 09, and FY 10. What’s worse, the appropriations actually decreased between FY 09 and FY 10; and worst of all, when the federal stimulus funds ran out, the appropriations dropped between FY 2011 and FY 2012 by 7.5%, down to a level below the funds appropriated by the states in FY 2008, three years earlier. Given the current uncertainties in the national economy, this adverse situation is not likely to improve in the near future.

(Note: For a comprehensive, pessimistic assessment of the financial conditions of all public and private nonprofit institutions in the country, see the recent report from Bain & Company, "The Financially Sustainable University" 7/6/12)

How did public colleges and universities cope with these worsening budgetary constraints?

• Public institutions responded with an array of cost-saving tactics that made their courses and programs less accessible, more expensive, and less appealing to potential students ==> by raising tuition, reducing the number of courses offered, assigning students to larger classes, reducing and/or consolidating degree programs, and terminating faculty. Many of these cost-saving initiatives were noted on a dedicated blog that was set up by the Chronicle of Higher Education, “Campus Cuts”
   
• Three states -- Indiana, Texas, and Washington -- outsourced their excess demand from non-traditional students for online degree programs by establishing partnerships with Western Governors University (WGU), whereby they adopted WGU's online programs, component courses, and competency exams. Presumably the “rental” fees for the WGU courses and exams were cheaper than developing these resources in-house.
   
• Some institutions enrolled more students in online courses that were equivalent to face-to-face courses on the same subjects; but online equivalents to every face-to-face course don’t exist at most institutions. Online courses require substantial investments of faculty time and support staff to develop, but once they become operational, they arguably cost less per enrolled student than their face-to-face equivalents. However, when budgets are tight, development funds are scarce.
  
  
  • A notable exception is the University of Wisconsin (UW) system that will develop its own self-paced, competency-based, online degree programs that will be more affordable and more accessible than its current programs. (See "Governor Walker and UW System Announce Revolutionary Online Degree Model" on Governor Walker's Web page, 6/29/12)
    
    This initiative is especially noteworthy because UW will encourage students to use free MOOCs developed by the nation's leading universities to learn the materials, then pass Wisconsin's competency exams in order to obtain course credits towards their degrees. (See "Another State to Assess Skills" in Inside Higher Education, 7/9/12) This is, perhaps, the first major university system to declare its intentions to use MOOCs in this manner.

D.  For-Profit Supply -- "Damaged Goods"
One might have expected that for-profit institutions would have capitalized on the financial weakness of the public colleges and universities, the providers of over 75% of all course offerings and over 80 percent of online courses at the start of the Great Recession, as per Table 1 (above). One would have expected the for-profits to have expanded their share of the higher education market, both face-to-face and online, by offering attractive discounts and mounting extensive ad campaigns that highlighted the availability of popular courses and programs for which there were fewer and fewer openings in similar programs at the public institutions -- even if these long-term investments  required  short-term decreases in their revenue streams. But this didn't happened.

It didn't happen because the reputations of the for-profit institutions were severely damaged by abuses in their operations that were disclosed in;

• Investigations conducted by Senator Harkin's committee, e.g., "For-Profit College Investigation"
   
• GAO reports, e.g., "For Profit Schools, Experiences of Under Cover Students Enrolled in Online Classes at Selected Colleges"(October 2011)
   
• Analysis that provided the context for regulatory reforms proposed by the U.S. Department of Education, e.g.,"Obama Administration Announces New Steps to Protect Students from Ineffective Career College Programs" (U.S. Dept. of Education Website, June 2011)

The federal government has a strong interest in for-profit colleges and universities because 80 to 90 percent of their revenue comes from federal grants and loans to their students. In addition to federal critiques, adverse positions have recently been taken state governments, e.g. California's pending restrictions of state financial aid to students enrolled in for-profit institutions. (See "Crackdown on For-Profits," Inside Higher Ed, 2/23/12). Regional accrediting bodies have also expressed concerns, e.g., Western Association of Schools and Colleges' denial of accreditation to Ashford University. (See "Western Accreditor Denies Ashford U. Bid for Accreditation" in Inside Higher Ed, 7/9/12)

As consequence of these adverse developments, rightly or wrongly, an increasing segment of the public perceives the for-profits' courses and programs as over-priced, of questionable quality, and leading to unsupportable debt instead of providing bright new career opportunities for their graduates.

Column (7) in Table 4 (above) shows that growth rates for enrollments in public institutions hardly budged; they inched down -0.4% then inched back up 0.2%, between FY 2009 and FY 2010, and between FY 2010 and FY 2011, respectively -- thanks to federal stimulus funds. But growth rates at for-profit institutions plunged from 26.1% down to 9.0% for the same years -- as their bad publicity began to catch up to them.

______________________
Related Notes:

•  MOOCs in Brief