Thursday, August 9, 2018

How Academic Pricing Works: A Fantasy Dialog

I recently engaged in a Twitter conversation with respected colleagues about institutions that charge an extra fee for online courses. They were arguing that this fee was arbitrary and unfair and I agree totally. However, some of their comments suggested that they don't have the experience that I do with the (often arbitrary) fees that get charged. I immediately imagined how the conversation might have gone, Let me emphasize - this is imaginary, but based on my experience is a completely plausible scenario.

Date: 2010
Place: Provost's Office, Major State Unversity
Present: Dean, Provost

Dean: I think it's time we expanded our distance-ed courses. The students really want the option.
Provost: That's great! How much extra revenue can we pull in? We could really use it after the state cuts.
Dean: Well... it's not really going to bring in anything other than the tuition. And we have some expenses - we really need to hire an instructional designer, and we're going to need to license a better LMS. I was hoping you could find a way to provide some extra resources. I figure we need $250,000
Provost: That's a nice idea, but I got nothing. You need to figure out how to fund it. What if you charged a fee for the online courses?
Dean: That doesn't seem right - I mean, we charge the same for all our in-person courses no matter what they cost. These students aren't even going to take up classroom space.
Provost: Yeah, I hear you, but we need the money. How many students do you think you'll have online?
Dean: We'll easily have 2,500 in a year.
Provost: So, we can charge them $100 each and that should do it. I'll talk to the CFO And if this works out we can try to figure out another way to fund it in a year or two when the budget recovers.

Date: 2014
Place: Provost's Office
Present: Dean, New Provost (2013)

Dean: I wanted to talk about the fee for online courses.
Provost: Oh, OK. What about it? Do you want to raise it?
Dean: Well, we did it to start up our program, but the old Provost agreed it wasn't really fair and it was a stopgap. We should drop it.
Provost: How much does it bring in?
Dean: It's actually up to about $750,000 a year
Provost: Well, if you drop it, how are you going to make up the $750,000?
Dean: Don't you think we could get a baseline increase to cover it?
Provost: Not really. You want to hire new faculty don't you? And then there's the cost of the settlement for that tenure dispute, that's going to be at least $250,000. Revenue is revenue. If we can that, YOU have to make it up. I don't have that kind of money sitting around, despite what the Senate Budget Committee says.
Dean: Well, OK, they never complain about it so I guess it's not that big a deal.

Date: 2018
Place: Provost's Office
Present: New Dean (2015), New Provost (2017)
Provost: I want to talk to you about the online course fee
Dean: Yeah, I can't find anyone who even remembers why we have it
Provost: Well it's a good thing we do. The President has asked me to come up with a million we can give back to go into Advancement to support the Capital Campaign. I figure we can use $500,000 of that fee revenue. And I'm going to need $250,000 to support the consultant for our assessment project.
Dean: So I can keep $250,000? We really need that to pay the instructional designer. We could use another one but I'll hold that position open.
Provost: Thanks for helping out. And let's think about going to $150, it's not really that much and it's been $100 for a long time.


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