Limits and Opportunities of Online College Adoption

Online college adoption has grown over the past decade, but its expansion has been slower than many had hoped. That said, many are still optimistic that it can expand significantly and help drive down higher education costs through competition with traditional universities.

The majority of those who complete online degrees (at least before COVID) either work part or full-time, and/or support a family, as the flexibility and price point of online programs naturally cater to such students. To attract a greater number of “traditional students” and thereby materially expand, online programs will likely have to recreate some of the inherent advantages of a traditional learning experience:

  • Signaling Power. From an economist’s point of view, a college degree is generally thought of in two ways: 1) it actually makes a student more productive and valuable, or 2) it functions as a “filtering” mechanism. That is, college’s primary economic function is not to transform students into more skilled workers, but rather, to identify and select students who are were already bright, motivated and competent people before having entered college. While I think the reality is certainly a mixture of the two, at the end of the day, a degree’s most powerful function is its “signaling power,” communicating to employers in the form of a B.A. or B.S. behind one’s name that they should be considered competent.
  • To date, the signaling power of an online degree is still quite undefined and not nearly as credible to employers as that of a traditional degree (for a variety of reasons, including accreditation, standards and accountability around curriculums).
  • Social Network: For many students, the utility of a college degree, especially as it relates to establishing a career, does not stem from what is learned in class, but rather from the social capital and network that comes from being in contact with professors, alumni and recruiters.
  • “The College Experience:” Many students want to attend college in-person because there is a specific experience tied to it — living independently, expanded social life, partying.

Human Formation: part of the college experience is the hope that education is not merely a consumption good, but rather a process of human maturation and intellectual development. This is often more of a priority for parents than students.

  • College athletics. Unlike Europe, the U.S. has chosen to keep athletic teams tied to schools, not independent clubs. Doing a rough estimate, we can estimate that some 10% (460,000) of all *traditional college students in the U.S. are student athletes. While some of these athletes receive athletic scholarships (decreasing the incentive for online education), the majority do not.

Apart from these factors, I think there are two more general aspects of human nature that cut against online education as it’s currently offered:

  • The need for a physical community. This includes having face-to-face relationships with professors and peers, as the process of education is inherently relational.
  • The majority of students are not hyper-motivated and or self-disciplined. Many students already struggle to stay motivated and disciplined with in-person classes and the social they bring from peers and professors.

Market expansion

With a bit of a landscape in hand, we can now think about expansion in the online space. I think the market, represented below as a hexagon, will grow to the extent that online programs stretch the sides of the hexagon (the six challenges as outlined above), thereby incentivizing “traditional” students to choose online instead.

  1. Degree Signal: Semi-Flexible. While attitudes are warming somewhat in this regard, there is still a long way to go. That said, as long as the technology sector continues to comprise a bigger part of the economic pie, there should be a continued tailwind in this regard. That’s because employers in the technology sector often need employees with objective, measurable skills (fields like computer programming or mathematics). Online degrees are more conducive to such fields because they have more clear skill and training benchmarks.
  2. Social Network: Inflexible. Strong social networks stem from personal connections in which people take a liking/interest in each other, and usually share some experience in common (attending the same university or having a shared acquittance). While online programs and third parties can attempt to recreate this dynamic through networking/social events, I think it would be very difficult to replicate.
  3. “College Experience”: Inflexible. The college experience is not conducive to an online universe. While human formation can occur anywhere — including at home while completing an online degree — the social elements of attending college in person are invaluable with regard to this element.
  4. Athletics: Inflexible. Unless there would be a broad cultural shift toward club sports, I think there is little chance that huge, bureaucratic institutions like the NCAA and universities change their policies to more uniformly allow student-athletes to be enrolled online.
  5. Physical Community: Flexible. To me, this is the most exciting element and could have a material impact on online expansion if it can be addressed. One possibility could involve distance learning pods, similar to those that have become more widespread during the pandemic.

For example, imagine there are 10 engineering students in the Minneapolis-Saint Paul (MSP) area who are enrolled online at Iowa State University. At the beginning of each semester, there would be a weekend (Friday-Saturday) of orientation and socializing amongst students and professors. Then, day-to-day throughout the semester, students would follow their courses online. One or two evenings a week, the cohort of students could gather at a central location (coffee shops, university libraries that have co-op relationships with the online program) in MSP and attend their virtual lectures together. Once every month, the professor would come to MSP for two days of in-person classes (maybe a Thursday evening and Friday morning). This physical, personal contact would help students feel more connected to each other and their professors, especially when it comes to following daily video lectures on YouTube or Zoom.

  1. Increase Self-Discipline and Motivation: Inflexible. Sorry, I don’t think human nature is that flexible.

Putting it all together, online education’s expansion path is at best uncertain, and at worst bleak, in my estimation. A more exciting growth opportunity could involve partnerships between online universities and companies to offer employees a combination of online courses and on-the-job training that would allow employees to earn a degree while building their work experience (somewhat of an apprenticeship model).

That’s all I got. Let me know your thoughts.


*Traditional students are defined as students who enter within one year after high school, are enrolled full-time, and don’t have major work responsibilities. They make up about 20% (5 million) of the ~22 million total enrolled college students.

American hustler. Co-founder at and amateur writer.

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