Why Higher Ed's Global Brands Are Starting Nondegree Online Programs

Maintaining brand equity through scarcity while also scaling (sometimes with OPMs) to meet global demand.

November 7, 2018

Are we at the leading edge of a trend that will see demand for master's programs from regional institutions eroded by the emergence of nondegree/non-credit-bearing online programs from elite institutions?

A drop in the demand for master's degrees would have significant consequences for many colleges and universities. Over the last 45 years, the number of master's degrees conferred annually by colleges and universities in the U.S. has more than tripled, from 236,000 in 1970 to 759,000 in 2015.

Many schools rely on revenues from master's programs to offset the costs associated with undergraduate degrees, and in particular, the growth of undergraduate tuition discounting. Whereas over 80 percent of undergraduates receive some institutional financial aid, less than 40 percent of master's candidates have their tuition discounted. The average annual tuition for a master's program is around $15,000 per year and over $20,000 at private institutions. At many regional universities, the tuition for master's programs runs much higher.

It is a reasonable question to ask if those looking to signal competencies and ambition by getting a graduate degree might instead start favoring alternative credentials from institutions with high-status brands.

Is it better to get a degree from a regional institution or a nondegree credential from a global institution?

How does the answer to this question change when that nondegree credential from a highly selective institution can be earned online?

We don't know the level of demand for nondegree programs from top institutions. Nor do we know the extent to which nondegree online programs are substitutes or complements for master's degree programs for schools outside of the top 20.

What we can start to get a handle on, however, are what factors may be driving the supply of nondegree online programs at top schools. Why would a university with a strong global brand enter the market for nondegree online programs?

For highly selective institutions, a nondegree online program is unlikely to decrease demand for many existing master's programs. The supply of spots relative to the demand for entry into graduate programs is so skewed that schools have their pick of candidates.

Alternative credentials are complements, not degree substitutes, at top schools.

Alternative credentials also might provide a better matriculation funnel than traditional methods. The supply chain management master's program at Massachusetts Institute of Technology is paired with a MicroMasters credential from edX. This alternative credential allows MIT to admit students to the master's program who have demonstrated strong competence. For students, participation in the MicroMasters shortens time to degree while significantly reducing the cost. (Although participation in the MicroMasters is not a prerequisite for admission into the degree program.)

I think that we will start to see many more elite schools adopt MicroMasters-like options for admissions for specialized master's degrees.

A second reason why top universities are growing their nondegree online portfolios has to do with scale. Traditional master's programs, either residential or online, are limited in size. There is only so much classroom space for residential or low-residency degree programs.

Elite schools are reluctant to have courses taught by noncore faculty members. Part of the reputation that highly ranked schools build is through having classes taught by highly accomplished full-time professors.

Nondegree/alternative credential online programs do not face the same scarcities as traditional degree programs. If a nondegree program has a residential component, then the in-person sessions can be held at someplace other than a campus academic building. Cohorts can meet in other buildings on campus. Programs can convene at hotels or convention centers in whatever global city from which students are drawn.

The other scale advantage for nondegree online programs is that they usually don't require the sort of intense core-faculty participation as traditional master's programs. Core university faculty members may be utilized to create video lectures and other asynchronous digital content. Industry professionals or other academics can then facilitate the courses. The opportunity cost for core faculty at top universities is exceptionally high. Substituting noncore faculty course facilitators for core faculty in these programs overcomes the scarcity of faculty time.

The elimination of both space and core faculty time constraints means that the supply of nondegree online programs can scale to meet demand.

Matching supply and demand at elite institutions is something new. The primary reasons that a few schools have elite status is the scarcity of the credentials that they offer. Status depends on scarcity. Allowing a university to maintain its status, while also meeting demand, is like both having and eating the cake.

The other driver for the growth of nondegree programs at schools with global brands is the growth of the online program management industry. OPMs can accelerate the entry of top schools into the nondegree online space. They do so by derisking the entry into these markets by providing up-front capital, expertise and labor. Schools can jump into the nondegree space without making up-front investments or hiring new staff. In exchange for sharing the revenue that these programs generate, schools can extend their reach and quickly go to market.

The entry of OPM providers into the alternative credentials market may accelerate the speed and breadth with which institutions with global brands enter the nondegree online space. Some evidence that this trend is poised to take off include the purchase of GetSmarter by 2U, the growing number of top-20 institutions working with Emeritus on online nondegree programs and the growth of alternative credentials options from edX and Coursera.

The growth of the OPM industry may further concentrate wealth among the relatively few already wealthy colleges and universities by catalyzing a shift in the market to alternative online credentials at a few highly recognizable institutions.

Can you advance the counterargument that nondegree programs from globally branded schools are not a threat to master's programs at regional institutions?

How should schools outside of the top 20 respond to this challenge?

Do you think that alternative credentials will cannibalize the market for master’s degrees at regional institutions?


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