What are online education providers’ long-term credibility prospects? Take Kaplan University. Concord Law is part of Kaplan U and offers online JD degrees. As of 2 years ago graduates could, upon successful completion of online coursework, apply for admission to the California Bar. It may have complied and registered with other states’ bar examiner committees by now. Now I think that many people here would say these programs are a joke, but how many of you have used Schweser? I have, and I believe that they provide high instruction quality. Maybe Kaplan’s higher education courses are at least somewhat legitimate. Moreover, it’s been a cash machine for The Washington Post Company, with Kaplan bringing in upwards of half of total sales lately. Kaplan Higher Education revenues have mostly come from funds provided under the student financial aid programs that have been created under Title IV of the Federal Higher Education Act of 1965 (as amended). Do you think these programs have a bright future ahead? Title IV seems to offer somewhat of a backstop (although all loans aren’t guaranteed). However, if Kaplan U fails to meet eligibility requirements, it can kiss those revenues goodbye. Managment will do everything in its power to prevent that from happening, but what about defaults? If enough students default on their loans, Kaplan could lose eligibility for the Title IV funds. I believe the upper default rate limit is 40% for a single year or three consecutive years of 25% or higher. Furthermore, any for-profit post-secondary institution (a category that includes all of the schools in Kaplan’s Higher Education Division) will lose its Title IV eligibility for at least one year if more than 90% of that institution’s receipts for any fiscal year are derived from Title IV programs. Kaplan’s was about 73% in 2007. Do these post-secondary education programs have a future?
I think this model of education has a lot to offer. But there are some downsides. For one, it tends to “teach to the test,” which means it depends on having a test with an established, agreed-on curriculum. That curriculum must be in demand. And, that curriculum needs to be updated to meet requirements of the industry. All of that depends on actions and resources that are external to the school, such as an industry like the legal industry or CFAI’s industry putting in the time and energy to create the examinations. Not that that can’t happen, but you want to keep an eye on that when analyzing the value of this type of education and/or the companies that provide it. This does mean that non-commercially applicable knowledge is not likely to be delivered by this mechanism, which raises the question of whether it will be provided at all and by whom. However, for skills training in specific industries, I think it is a reasonable model with a lot going for it. I think the idea of a residential undergraduate college will survive, but the idea of taking two years off to do a masters’ degree (outside of Law, Business, and Medicine) is going to be a hard sell.