For-Profit Fiasco: California Public Colleges Turn to Web Courses

Tim Goral's picture
Monday, March 18, 2013

Here’s how California treats its public colleges and universities: first, cut public funds, and thus classes; then wait for over-enrollment, as students are unable to get the classes they need to graduate; finally, shift classes online, for profit. That’s the way Laila Lalami, UC Riverside creative writing professor, explained it in a recent tweet, and that’s pretty much the whole story behind the bill introduced this week by the Democratic leader of the state senate, Darrell Steinberg. His bill requires California’s community colleges, along with the twenty-three Cal State schools and the ten-campus university, to allow students to substitute online courses for required courses taught by faculty members. The key to the proposal: the online courses will be offered by profit-making companies.

Steinberg argues, correctly, that the state’s colleges and universities have an obligation to offer the courses they require for graduation. Right now hundreds of thousands of students are prevented from graduating on schedule because they can’t get into required lower-division courses. That’s shameful, and intolerable. But it’s a crisis created by the legislature, when it cut hundreds of millions from the state’s higher education budget over the last few years.

Advocates of the new plan downplay the for-profit aspect and emphasize instead that they want to “mobilize technology” to “help students achieve their dreams.” But National Review Online rightly emphasized the key element of the plan (while providing their own ideological spin): the proposal will “break the higher education cartel” by bringing in profit-making corporations with a different “business model.”

Advocates of the plan told the Los Angeles Times that it represents “a watershed moment for higher education” that will encourage the rest of the nation to take similar steps. Since the Democrats hold super-majorities in both houses of the California legislature, the bill is sure to pass—and Governor Jerry Brown is likely to sign it into law.

The companies that make a profit by providing required courses online include Coursera, edX and Udacity, the big three. Coursera is “the leader of the pack,” according to The New York Times. In less than a year, it raised $22 million in venture capital. The big issue for investors, the Times reports, is whether “anyone can figure out how to make money” in this new business. James Grimmelmann, a New York Law School professor who specializes in computer and Internet law, told the Times, “I expect all the current ventures to fail…. it’s maybe a decade later that somebody figures out how to do it and make money.”

A big problem for Coursera’s profits is that it currently promises to keep some courses available to poor students worldwide for free—although qualifying for credit towards graduation costs money.

Replying to the doubters, one Coursera “financier” told the Times that “monetization is not the most important objective for this business at this point.” What is important, he said, is that “Coursera is rapidly accumulating a body of high-quality content that could be very attractive to universities that want to license it for their own use.” Potential investors should therefore “invest with a very long mind-set.”

The profits in this new online course business come not only for “certificates of completion” paid by students—which can be $50 per course—but also from licensing fees from universities that replace their own faculty with online video instructors. Under Coursera’s contract with colleges, the Times explained, “the company gets most of the revenue; the universities keep 6 percent to 15 percent of the revenue, and 20 percent of gross profits. The contracts describe several monetizing possibilities, including charging for extras like manual grading or tutoring.”

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