Following the money - the cost benefits of student support in distance education

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‘Following the money’ -the cost benefits of student

support in distance education

Ormond SimpsonVisiting Fellow CDE

Why invest in higher education?

1.Increased GDP and international competitiveness

2. Increased welfare of graduates (longer life, better health, higher pay, more society support such as volunteering) 2

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Student numbers may double from 2012 to 262 million by 2025?

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How much does it cost to produce successful graduate?

Production cost of a graduate?

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Costs of distance education to UK government

- graduate production costs compared

Conventional

education

Open University

UoLIP(UK students)

Cost of a graduate to UK Govt.

£70,000 £20,000 £0?

Total income tax

paid by student during studies

£0 £20,000 £20,000

Net cost to Govt

£70,000 £0? - £20,000

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Costs of distance education to students

Conventional UK

university degree

OU degree UoLIP(distance version)

Fees £27,000 £15,000 £4000

Loss of earnings whilst studying

£40,000 0 0

Total cost to student

£67,000 £15,000 £4000

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Financial implications for students - returns on investment (RoI)

Full time students – increased income of £100,000 over lifetime (‘graduate premium’)

RoI = (100,000-67,000)/67,000 = 49% OU students – increased earnings by 15% after graduation (Woodley, Simpson 2000). Increased income ~ £60,000 RoI = (60,000-15,000)/15,000 = 300%

UoLIP students? – if increased income the same as OU students ~ £60,000 RoI = (60,000-4000)/4000 = 1400%

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What is the resale value of your degree?

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Sustainability (Roy et al 2007)

distance education

conventional education

distance education

conventional education

Energy use CO2 production

13% 18%

BUT...

87% 82%

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82

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61.5

15.722

5.3 2.5 0.5

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0102030405060708090

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Conventional institutions

Distance institutions

Conventional and distance graduation rates compared

The ‘distance education deficit’

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For students, investing in distance higher education

is riskier than wildcat oil well drilling

Distance education - 80% chance of losing all investment

Wildcat drilling – 10% chance of losing all investment

Probability of suffering depression, unemployment and (women) partner violence, according to educational

experience (Bynner, 2002)

Probability of:

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What happens to students who dropout? - effects of dropout on full-time students in the UK

dropouts

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Implications of dropping out for students

Dropouts are likely to be:

in debt – with no increased earnings to pay it off

more likely to be unemployed so unable to pay off debt

more likely to suffer health problems esp. depression.

- which might affect up to 10% of the UK age cohort

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Implications of student dropout for institutions

‘Willing to Pay’ Recruitment issues - Given risk will students or parents be willing to pay the investment?

‘Value for Money’ Will students (and parents) want better value for their money?

‘Inst. Income’ Dropout may reduce institutional income and government support

Case study - the Dutch Open University is threatened

with government cuts because of high dropout rates

Open Universiteit Nederland

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Financial implications of student dropout for Governments

Inefficiency – grants to universities ‘wasted’?

Social expenditure – cost of increased unemployment & physical and mental ill-health

Losses - in income tax and GNP

Cost - £billions each year?

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Student retention - ‘Why should we care?’ -implications of student dropout in UK

dropout students – financial losses and worse health

institutions – financial losses and possible recruitment problems

Government – financial losses in tax and GNP and increased health expenditure

- all amounting to several £billions a year

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Making the financial case for institutional investment in retention

‘Return on Investment’ - investing in student retention?

1. Costs – mostly student support services (?)

2. Benefits to the institution:

- increased student fee income

- possible increased Government grant income

- savings on recruitment costs

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(i) Institutional retention activity - costs

Say an activity costing £P per student increases

student retention by n% amongst N students

Then the total cost of the project is £NP

Number of students retained by the project is (n/100)N So ‘Cost per student retained’

= £ NP/[(n/100)N]

= £100P/n

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Example 1: Cost-benefits of retention activities

Proactive pre-course phone contact in UKOU

Year Students in trial

Increase in retention experimental group over control (%

points)

2002 2866 3.9%

2003 1354 5.1%

2004 931 4.2%

2005 10,131 7.6%

Totals 5151 5.04%

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Example - Institutional retention activity - costs

Cost per student retained’ = £100P/n

Eg in UK OU an initial ‘proactive phone contact

- to 2000 new students,

- cost £10 per student (P) in staff time and

expenses

- increasing retention by 5% (n)

Cost per student retained = £100P/n = £(100 x

10)/5

= £200

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Example - Institutional retention activity - benefits (OU example pre-2012)

• Student fee income – neutral against costs

• Govt grant income to OU – about £1100 per student completing each year

• Savings on recruitment – recruitment cost per new student ~ £500

Perhaps £200 of that to replace students who’ve

dropped out (50% each year)

Total benefit ~ £1300 per student retained

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Return on retention investment in UKOU of a proactive phone contact (pre 2012):

Cost of activity = £200 per student retained

Benefit of activity = £1300 per student retained

So net benefit ~ £1100 per student retained

Return on investment (1300-200)/200 = 550%

Net surplus if activity applied to 30,000 new students

~ £1.6m per year

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In 2013 the UK Government will give nearly £1 billion to private HE providers

Who will have 90% dropout rates

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London International Programmes

‘Motivational’ emails?

‘Proactive Motivational Support’ (PaMS)

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‘Study Tips’ – Introduction

1 ‘Are you fixed or malleable’?

2 ‘What to expect from studying the LLB with the International Programme?’

3 ‘Motivating yourself to learn’

4 ‘Getting organised for study - a Funnel in your mailbox?’5 ‘Finding your best study methods’

6 ‘Finding time when getting behind’

7 ‘Getting organised - making lists’

8 ‘I’ve those ‘why-am-I-trying-to-study-blues…’

Motivational emails – sent to students every 2 weeks

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9 ‘Survival Guide for You and Your Family’

10 ‘Managing your procrastinitus’

11 ‘Self-Discipline!’

12 ‘Learning to concentrate on learning’

13 ‘Are you a lucky student?’

14. ‘Study Anxiety Syndrome’

15 ‘Tactics In The Exam Wars’

16 ‘Don’t stop now!’

Full texts on www.ormondsimpson.com

‘Motivational emails’ - continued

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Studentson 2012-13 Law module

Initial numbers

Entered at least 1

exam

Sat at least 1 exam

Passed at least 1

exam

Control group 1691 74.4% 66.0% 55.2%

Experimental group 1683 76.6% 68.3% 57.6%

Increase in retention in experimental group

  +2.2% +2.3% +2.4%

Results of the motivational email project 2012-13

Average increase in retention 2.3% points(32 students)

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Cost Benefits of the Proactive Motivational Email Support Project

Increase in income due to more students sitting and paying the exam fee

= 32 students x exam fee £232 = £7424

Increase in income due to more students carrying on to a second module

= 32 students x regn. fee £351 = £11,232

Total benefit = £18,656

Profit £(18,656 – 600)

= £600

= £18,056

~ 3000%Return on Investment

Cost of project (approx)

London University International Programme

Annual module income (from students)Registration fee = £FExam fee (paid by students completing module)= £E

Annual module expenditureFixed overhead for programme = £VExpenditure on students = £S per student

So if N students start in programme:Total income = £NFTotal expenditure = £(V+NS)

Surplus income (if any) = £[NF-(V+NS)] = £[N(F-S)-V]

London University International Programme

Surplus (if any) on project = nE+n(F-S) – NP

To be self supporting or make a profit nE+n(F-S) – NP > 0 or n(E+F-S) > NP

n/N > P/(E+F+S)The % increase in retention np = 100(n/N)

So for break-even or surplus

np > 100P/(E+F+S) (i)

ExampleSay E = £200, F = £800, S = £200

np > 100P/(200+800-200)

np > 0.125P (ii) 30

np per cent

increase in retention

£P retention

activity cost per student

np > 0.125PReturn greater

than cost

np < 0.125PReturn less than cost

Graph of np = 0.125P

London University International Programme

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np per cent

increase in retention

£P retention

activity cost per student

np > 0.125PReturn greater

than cost

np < 0.125PReturn less than cost

London University International Programme

Example – if activity cost is £15 per student then any retention increase

above 1.9% is self-supporting

1.25%

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Cost benefits of retention

If F = students fee per year, S = institutional expenditure per student, V = total institutional overhead then if the number of students in year 1 is N1 and in year 2 is N2

Income Year 1 = N1F – (N1S + V) Income Year 2 = N2F – (N2S + V)

Reduction in income due to student dropout between years

= N1F – (N1S + V) – [N2F – (N2S + V)] = (N1 – N2)(F – S)

Then if there is a retention activity costing £P per student it will cost N1P. If that increases retention by n students so that N2 becomes N1 + n then the reduction in income is now:

[N1 – (N2 + n)](F - S)

So the reduction is itself reduced making a saving of

(N1 – N2)(F – S) – {[N1 – (N2 + n)](F - S)} = n(F – S)

For the retention activity to be self-supporting n(F – S) > N1P

Or np > 100P/(F – S) where np is the per cent increase in retention

For example P = £10 F = £2500, S = £1000 then np > 100x10/(2500-1000) = 0.67%

So if a retention activity costing £10 per student produces an increase in retention of more than 0.67% it will be self-supporting

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Funding learner support – increasing funding from students

$ Fund student support and teaching

Increases student

retention

1. Increased student fee

income

2. Students willing to pay

more?A positive funding triangle?

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• Follow the Money - Money follows retention

• Not just retention but retrieval

• Outsource retention? – the Noel-Levitz Model

36www.noellevitz.com

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www.rantandrave.com

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Thanks!ormond.simpson@gmail.comwww.ormondsimpson.com