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

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Centre for Distance Education lunchtime seminar - conducted by Ormond Simpson, CDE Visiting Fellow.

This seminar shows that student support need not be a pure institutional cost in distance education. If properly designed and evaluated it can actually make a financial profit for the institution as well as enhance its reputation. Heath warning - this presentation contains some mathematics....

Audio of the seminar can be found here: www.cde.london.ac.uk. More information on Ormond's work can be found here: www.ormondsimpson.com.

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

  1. 1. 1 ‘Following the money’ -the cost benefits of student support in distance education Ormond Simpson Visiting Fellow CDE
  2. 2. 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
  3. 3. 3 Student numbers may double from 2012 to 262 million by 2025?
  4. 4. 4 How much does it cost to produce successful graduate? Production cost of a graduate?
  5. 5. 5 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
  6. 6. 6 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
  7. 7. 7 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%
  8. 8. 8 What is the resale value of your degree?
  9. 9. 9 Sustainability (Roy et al 2007) distance education conventional education distance education conventional education Energy use CO2 production 13% 18% BUT... 87% 82%
  10. 10. 10 82 39 61.5 15.7 22 5.3 2.5 0.5 14 6 0 10 20 30 40 50 60 70 80 90 100 Conventional institutions Distance institutions Conventional and distance graduation rates compared The ‘distance education deficit’
  11. 11. 11 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
  12. 12. Probability of suffering depression, unemployment and (women) partner violence, according to educational experience (Bynner, 2002) Probability of: 12 What happens to students who dropout? - effects of dropout on full-time students in the UK dropouts
  13. 13. 13 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
  14. 14. 14 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
  15. 15. 15 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?
  16. 16. 16 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
  17. 17. 17 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
  18. 18. 18 18 (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
  19. 19. 19 19 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%
  20. 20. 20 20 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
  21. 21. 21 21 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
  22. 22. 22 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
  23. 23. 23 In 2013 the UK Government will give nearly £1 billion to private HE providers Who will have 90% dropout rates
  24. 24. 24 London International Programmes ‘Motivational’ emails? ‘Proactive Motivational Support’ (PaMS)
  25. 25. 25 ‘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
  26. 26. 26 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
  27. 27. 27 Students on 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)
  28. 28. 28 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)
  29. 29. London University International Programme Annual module income (from students) Registration fee = £F Exam fee (paid by students completing module)= £E Annual module expenditure Fixed overhead for programme = £V Expenditure on students = £S per student So if N students start in programme: Total income = £NF Total expenditure = £(V+NS) Surplus income (if any) = £[NF-(V+NS)] = £[N(F-S)-V]
  30. 30. 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) Example Say E = £200, F = £800, S = £200 np > 100P/(200+800-200) np > 0.125P (ii) 30
  31. 31. np per cent increase in retention £P retention activity cost per student np > 0.125P Return greater than cost np < 0.125P Return less than cost Graph of np = 0.125P London University International Programme 31
  32. 32. np per cent increase in retention £P retention activity cost per student np > 0.125P Return greater than cost np < 0.125P Return 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% 32
  33. 33. 33 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
  34. 34. 34 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?
  35. 35. 35 • Follow the Money - Money follows retention • Not just retention but retrieval • Outsource retention? – the Noel-Levitz Model
  36. 36. 36 www.noellevitz.com
  37. 37. 37 www.rantandrave.com
  38. 38. 38 Thanks! ormond.simpson@gmail.com www.ormondsimpson.com

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