why the university of phoenix makes money: reflections on a thanksgiving conversation

I have the usual academic prejudices against diploma mills. Nevertheless, I have had a number of conversations with extremely satisfied University of Phoenix students. One was a group of employed Black adults who were working on business management degrees with an eye to career advancement. They felt they were getting a good education that fit into their needs and resented the negative talk about the school. And most recently I spoke at length at a Thanksgiving party with a new acquaintance who is working on an undergraduate degree through it. The thing that impressed me about what she said was the extremely high level of personal contact she has with the school. To stay enrolled in a class, she has to log into it at least four days in every seven, and she gets constant feedback from her instructor. Students are also required to post comments to a class forum and to respond to other students’ comments. Students who make it into the upper division have to learn how to express themselves in writing. Even more, there are three different college advisors who call her every week to chat with her and see if she is having any problems or concerns. She is very satisfied, both because the on-line format permitted her to maintain educational continuity while following her spouse’s employment and provides an avenue for upward mobility for people who are working, and because she feels like people are paying attention to her and care how she does. She feels like she is getting her money’s worth.  I was impressed. This is a lot more than I can say for the experience a lot of the students have on my very large state university campus.  I said to myself, “I can see why they make money.”

This is NOT an evaluation of the academic content of their courses, about which I have no direct information.  If you read the Wikipedia page about it, you will learn mostly about the cases in which it has been accused of fraud. Specifically the accusations are that it collects tuition (including especially federally-insured student loans to pay tuition) from or for students who do not complete its courses and that it overstates the job prospects and likely income improvements for the students who do complete. If you explore the University of Phoenix web site  you will discover that it uses cookies tracks your choices so that it is hard to backtrack and pretend to be interested in a different field; that it stresses the high quality of its courses, faculty, and support; and that every page of the web site also tells you that you can get financial aid.

When I graded correspondence school in the 1970s, students paid for the course up front but I only got paid for lessons they actually completed. The modal student who wrote 0 or 1 of the 25 lessons in a course generated a profit which subsidized the tiny fraction who actually completed the course and got course credit. Those state-sponsored correspondence courses were a bargain for the people who actually completed them. I am assuming all on-line courses incorporate a similar basic business model that pays instructors on a piecework basis counts on non-completers for a large share of revenue.

I believe there are genuine moral/ethical problems with high-cost for-profit schools that live off persuading low income people to take on high levels of federally-insured loans that they will be paying for the rest of their lives. So what are the costs? I told the web site that I wanted to earn a bachelor’s in English and I had no transfer credits. It told me that it would take me five years to get a degree for a total cost of $52,400. Tuition was listed as $450 a credit or $9720 a year for 24 credits. How does that compare with the alternatives? In-state tuition at my publically-subsided state university is $9670 + $1180 in mandatory fees = $10,850 a year for 12-18 credits. So the private on-line school is cheaper that the public university for the student who takes 12 credits a term. Out-of-state tuition at the university is much higher, $25,600 a year including fees, higher than the $22,000 in tuition and fees charged by the small Catholic college down the street. A cheaper option for the first two years is the two-year public technical college where liberal arts college-transfer courses cost $150 + $8.50 a credit or $3780 (plus some other fees) for 24 credits.

What about refunds for students who start but do not finish courses? At the two-year technical college, the refund is 80% up to 11% of the course period, 60% up to 20% of the course period, and nothing thereafter. At the University, the refund for complete withdrawal is 100% in the first two weeks, 50% in the third and fourth weeks, and nothing thereafter. At both institutions, you can get a refund only by filing a formal withdrawal. Failure to attend class does not constitute withdrawal; you still owe the money.

In short, the for-profit on-line school is cheaper than the tax-supported public university even for in-state students. How can this be? Partly the on-line instructors are largely part-time stringers who do not earn a huge amount per course, but then so are the majority of people who are standing in classrooms and grading the papers and exams of the students at the big public university, not to mention the majority of the people teaching at the technical college. But the other big factor is whether the institution is only delivering instruction or is also paying for faculty research. Undergraduate tuition at expensive prestigious private research universities subsidizes faculty research and graduate education; whether it also does so at public universities is more contested, but it is certainly the case that large research universities are supporting research and graduate education alongside undergraduate education. Universities also have buildings, grounds, heating plants, and the like.

So my bottom line is that a rational student of modest means might well invest in an on-line school if the product is good. Thus we are back to the “quality” issue where we face two very separate issues. One is the actual content of courses which, as I said, I know nothing about. Another is the reputational value of a degree, where elite schools are selling exclusivity itself as a product. And a third is the quality of the human interactions and the educational experience that make learning from a teacher different from studying on your own. I was surprised that an on-line school seems to be delivering a personal educational experience that is more like a small private college that costs much more, or a small tax-supported public college with caring teachers that costs about the same.

I just realized that I’ve been mentoring a very smart and enthusiastic first-generation student who is now at my university who transferred in as a second-semester junior after several years taking classes from a different on-line college while working full time. I referred her to the McNair program after she did well in an honors course she talked her way into, and she’s applying to grad school. I should ask her about her experiences.

Author: olderwoman

I'm a sociology professor but not only a sociology professor. It isn't hard to figure out my real name if you want to, but I keep it out of this blog because I don't want my name associated with it in a Google search. Although I never write anything in a public forum like a blog that I'd be ashamed to have associated with my name (and you shouldn't either!), it is illegal for me to use my position as a public employee to advance my religious or political views, and the pseudonym helps to preserve the distinction between my public and private identities. The pseudonym also helps to protect the people I may write about in describing public or semi-public events I've been involved with.

3 thoughts on “why the university of phoenix makes money: reflections on a thanksgiving conversation”

  1. OW- this is a (typically) fascinating post. Thank you for writing about this and your experiences; what you write is truly enlightening.

    One thing that you say:

    “But the other big factor is whether the institution is only delivering instruction or is also paying for faculty research.”

    I would add the obvious that maintaining a physical plant also adds substantial costs. Univ. of Phoenix outsources university office space to adjunct professor’s homes (thus reducing the real salary of adjuncts further; again, not different from some institutions, but certainly not all brick-and-mortar schools), the costs of meeting space for classes (none in U-Ph., substantial for brick-and-mortar — especially for urban schools), and even things as simple as paper for assignments.There might be other costs that offset these, but my guess is that maintaining the physical plant is *the* major difference on the expense side of the ledger.

    It is also troubling that some of these gains in productivity come at the expense of adjuncts and students, though one can make the argument that the total cost/benefit might balance out for both (e.g., no commuting costs might offset the additional space requirements for home office space). I would be interested in an accounting from the employee and student POV like you start to do here.

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  2. Update in case you care: ever since writing this post, which involved perusing the U of P web site several times, I have been inundated with email from U of P, other on-line schools, and programs that are telling me I am eligible for scholarships, all at my official university address which, I suspect, was harvested from my IP when I searched. I’m talking a minimum of 2 and upwards of a dozen emails a day. Maybe this is a coincidence, maybe everybody else has suddenly also seen this kind of junk mail explosion in their inboxes.But I’m guessing not.

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    1. I had a similar experience. I did a little research on them to inform a blog post I was writing and I got at least three or four phone calls regarding enrolling in their MBA program. All of the calls said something to the effect that I had requested that they called me, which I certainly had not, though they might have stretched the truth by interpreting an IP log as an implicit request for info.

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