November 29, 2010

C.U. Online Program Posts Profits for Fifth Straight Year

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The continually expanding online education program eCornell has posted profits for the fifth consecutive year, enrolling a record 10,611 students in 26 Certificate Programs.As enrollment in higher education surges nationwide, the University is reinvesting eCornell’s recent earnings in expanding eCornell’s programming, according to eCornell President Chris Proulx.Established in 2000 with a $30 million investment from the University’s endowment, eCornell is a for-profit subsidiary of Cornell, which is a non-profit entity. The only program of its kind in the Ivy League, eCornell has seen a $2.3 million increase in revenue from 2009 — a 25 percent surge. This jump brings eCornell’s annual revenue to an expected $11.5 million,  two to five percent of which is expected to be profit, Proulx said.Proulx said there was no timeline for when eCornell would begin paying the University back for its investment. He said the trustees’ Investment Committee “has selected to have us reinvest the profits … to grow the institution,” although he added eCornell will pay a dividend to the endowment “at some point.”Kevin Carey, the Policy Director for Education Sector, a Washington D.C.-based think tank, questioned how eCornell’s profits might be used in the long-term.Carey said that reinvesting eCornell’s profits to give more people access to eCornell’s programs was good in the short term. Yet he said that, since Cornell’s non-profit status gives it tax exemption, it is essentially “being subsidized by the taxpayer.” Thus, he said the University faces “a significant ethical question [about] what to do with the profits of the for-profit online subsidiary.”He added that even the use of Cornell’s name with the eCornell program amounted to a “massive subsidy” for the for-profit enterprise, given that Cornell’s “very valuable brand name” was partially established through government funding.Proulx disagreed with the characterization since eCornell is “completely separate from any state or federal funding,” he said.“Cornell’s global brand is comprised of 150 years of educational research and outreach experience — some of that is of course from federal state subsidies, [but] most of that is from private funds or tuition dollars,” Proulx said. Proulx explained further in an e-mail that since eCornell’s board “is comprised of all Cornell people,” its profits “have only three potential venues: royalties to Cornell and faculty, the Cornell endowment via a dividend, or re-invested in the [eCornell] business which leads to more royalties, etc.”  “It is essentially a closed-loop system with Cornell as sole beneficiary … So, in many ways, we are for-profit in name, but operate more as a not-for-profit,” Proulx said.Proulx added that Cornell established eCornell as a for-profit because this “ensured  that eCornell has the flexibility in its governance to conduct its business in the more commercial market sector that we operate in, and in doing so, does not jeopardize the tax-exempt status of Cornell.”Similarly, Senior Vice Provost Ron Seeber said the purpose of eCornell was not to generate a profit for the University. eCornell “probably adds some revenue, but that’s not the principal goal,” he said.  “They produce enough revenue to run their own shop,” Seeber said. Seeber said the program is “more an outlet for faculty,” and helped establish Cornell’s “space in the world of online learning.”It is a world that is growing rapidly.Although Proulx said eCornell had a “brief stalling in growth” when the recession hit in late 2008, eCornell has “continued to see growth,” with the number of students enrolled increasing from 8,565 in fiscal year 2008 to 10,611 in fiscal year 2010, a 24 percent jump.eCornell’s expanding enrollments have mirrored the rapid growth of enrollment in online institutions of higher learning. According to The Chronicle of Higher Education, a 21 percent increase of overall online students last year brought the “total number of online students” to 5.6 million.Many education experts have predicted that, with streamlined costs, online education could eventually replace the physical institutions of higher learning.Harvard Visiting Assistant Prof. Zephyr Teachout, public policy, argued in a recent editorial that “colleges, like newspapers, will be torn apart by new ways of sharing information enabled by the Internet.”“Students starting school this year may be part of the last generation for which ‘going to college’ means packing up, getting a dorm room and listening to tenured professors,” Zephyr wrote in The Washington Post. She added that undergraduate education is “on the verge of a radical reordering” due to the ease of distributing information through new mediums.Higher education expert Prof. Katrina Meyer, leadership, University of Memphis, took a more optimistic tone, saying online education “may replace some things on the fringe, but won’t harm fully brick-and-mortar institutions.”“I think the people who say it will tend to overstate the rise of online education,” Meyer said.Yet just how many schools are included in the “fringe” has been the subject of much debate.Carey, for one, predicted that “no more than [10] percent of all colleges and universities have a strong enough brand name and selectivity” to be “immune [from] online competition.”“All the rest will be very vulnerable to online institutions that offer a learning experience of similar quality [at] a fraction of the cost,” he said.Carey added, for institutions of higher learning, the Internet may eventually come to be considered a “disruptive technology” — a term originally coined by Prof. Clayton Christensen, business administration, Harvard Business School, to describe new technology that when “first invented, isn’t good enough to replace existing technology,” but eventually comes to replace existing business models.Still, like many other education experts, Carey predicted Cornell and its peer institutions would survive.  “Many of [Cornell’s] most important aspects are non-destructible,” Carey said, explaining that Cornell’s alumni network and the selectivity of admission were two assets that would be unchallenged by the rise of online education.Proulx agreed that Cornell would continue to thrive even as online education grows. “Ninety-nine percent of people we serve are working adults, many rescaling for a new career or in between job opportunities,” Proulx said.“For the foreseeable future [there is] still going to be strong overall demand to be admitted to the leading universities,” Proulx said, adding that there is “no indication in online enrollment that 18 to 22 year olds are more predisposed to have an online education.”Proulx said, however, that the trend may differ for masters programs.“Relocating as an adult to Ithaca [for a master’s program] … might be a more overwhelming obstacle,” Proulx said. For these older students, he said, an online degree would likely be “more compelling.”

Original Author: Jeff Stein