Who’s Paying For The Online University Boom?

Open Universities Australia as the name suggests offers most students open entry into online undergraduate programs regardless of their Australian Tertiary Admission Rank. OUA represents a number of Australian tertiary providers such as RMIT, Monash and Macquarie Universities, trading on their brand recognition to attract students. But what consequences does open enrolment have on Australian tertiary education?

In May last year, Daniel Edwards of the Australian Council for Educational Research released a report that suggested ATAR scores were no longer indicative of who had access to tertiary education. Put simply, when the Gillard government removed caps on the number of Government funded places offered by Australian universities, ATAR scores became a less relevant indicator of tertiary eligibility.

As a consequence students with ATAR scores lower than 50/100, effectively below a pass grade, were now being offered university places. The Governments initiative has certainly been successful in terms of increased enrolments, with 84% of school leavers being offered a place in 2013. But does enabling students to study at university regardless of what score they achieved erode the quality of education itself?

Paul Wappet the CEO of OUA weighed in with a counter argument published The Australian. In the article Wappet makes a number of points about what steps universities could take to ensure that standards would not fall when entry was available to anyone who chose to study. What wasn’t made explicit is that OUA is a profit driven company that sells units of online study on behalf of Australian tertiary providers.

“Universities can commit to set assessment standards on which they are unwilling to compromise, even if that means that completion rates are adversely affected. At its heart, of course, education should be more about what’s good for the learner and less about what’s good for the teacher or institution,” said Wappet.

At its heart yes, that is what education should be about, hence Daniel Edwards drawing attention to the risk of declining quality in tertiary education. What’s interesting about the Wappet quote is the reference to completion rates. OUA doesn’t publish its completion rates, making it impossible to reconcile them with OUAs 20% per year growth rate.

When you have students enrolling in a university program with a limited concept of what tertiary study is like, the chances are some of them are going to fail. The ATAR and the Secondary Education system that supplies it is designed to groom students for University study. Thus we can expect students who are less successful at a secondary level will be less successful at a tertiary level.

Wappert asserts that “The notion that the score we achieve at the age of 18 ought to be tattooed on our foreheads and used thereafter to determine which forms of further learning we undertake,” is insidious, and while this is true to an extent the score exists to serve a purpose: to assess the capability of secondary students to undertake tertiary learning.

If a student enrols independently of this assessment then of course their ability to complete is questionable. This is compounded by the online learning environment lacking the same degree of support offered by a program delivered in a classroom. The reality is it can be hard for a tutor to elucidate information remotely, particularly if the student doesn’t have an aptitude for learning.

Whether the student passes or fails doesn’t affect OUAs bottom line: Either way the company gets the money. So while it’s in the businesses best interest for the student to pass in order to progress to other units, even if the student fails revenue is still added. And revenue is OUAs key concern.

I’m going to take a moment to unpack OUAs business model. Though OUA advertises university degrees, what it’s actually selling is individual subjects, or ‘units’ as they are known. These are cumulatively acquired until a degree is completed, provided that the student understands the degree structure and takes the appropriate units.

Though Commonwealth Supported Places are available, most of the units are charged at the full-fee paying rate. The majority of these students undertake a FEE-HELP loan, similar to a HECS-HELP loan but more expensive, to cover the cost.

It’s not hard to see the potential for profit for both OUA and their partner institutions. The universities don’t need to supply a campus so the overheads are greatly reduced. Add uncapped classroom numbers to that equation and you can see why OUA is experiencing significant growth. This growth can also be attributed to OUAs aggressive sales philosophy.

In addition to the ubiquitous viral marketing campaign “Student Advisors” are trained to view every call as a sales opportunity. That means if a student calls in to get a new student card, or request an enrolment statement, it’s likely that the advisor will try to enrol them in another unit. It’s a standard sales strategy, like when a Telco attempts to get you to upgrade your phone.

But there’s one major difference. The FEE-HELP loan offered by OUA is funded by the taxpayer. These loans are repaid for by students once they begin earning $47,000 a year. A percentage between 4% and 8% is calculated per annum and deducted from the students pay cheque by the ATO. The ATO doesn’t release statistics on how many students are in or above the $47,000 a-year-pay bracket. Nor do they actively promote that if students don’t ever earn that much money they never pay back the loan.

This isn’t new. Many students from on campus university programs never pay back their loans. However one of OUAs core demographics are students who failed to qualify for an on campus program. Given this it’s possible that they will not only fail to complete their online degree but also never make enough money to pay it back.

Of course no one can say for sure. In lieu of the ATO not divulging how many students actually repay their loans, it’s impossible to quantify how much these online students cost the Australian public. And herein lies the quandary: how is OUA permitted to aggressively market their product when the taxpayer foots the bill?

It will be interesting to see what happens if Labor is given the opportunity to implement $3.8 billion worth of university funding cuts to finance the Gonski education reforms. As Universities tighten their belts, any potential push to reconcile the amount of Government funding with measurable academic outcomes will inevitably bring OUA under scrutiny. Perhaps then OUA will have some questions to answer about how it markets its product.


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