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The disruptive potential of online learning: Comparing the cost and quality of online and traditional education

David Deming, Claudia Goldin, Lawrence F. Katz, Noam Yuchtman 05 February 2015

With the potential to bring higher education to the masses, online learning has been hailed as revolutionary. The worry is that the quality of education will be diluted. This column presents evidence that online learning can bring substantial cost savings without much drop in quality – but employers do not value an online degree as highly, especially when coming from a private institution.

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Online learning has been viewed as the disruptive innovation in higher education today, with traditional classroom instruction at risk of being replaced by superstar professors teaching elabourate courses developed by teams – or by Massive Open Online Courses (MOOCs) offering instruction to students worldwide (see, e.g., Christensen and Eyring 2011, Cowen and Tabarrok 2014). Even if they do not revolutionise higher education, online courses are a potentially important source of cost savings in higher education, with the primary channel being reduced labour costs through larger class size and less face-to-face interaction (Bowen 2012).

The potential for disruption can be seen in the tremendous recent growth in the granting of online bachelor’s degrees – 2012 saw 23 large for-profit online campuses award nearly 75,000 bachelor’s degrees in the United States, more than 5% of the total and nearly twenty times as many online bachelor’s degrees as were granted just a decade before.  Although the growth of online education has until recently occurred mostly in the for-profit sector, public institutions are increasingly competing for students online – perhaps in response to cost pressures (Hoxby 2014).

What do we know about the performance of online education thus far? Scholars have been stymied in evaluating online education because:

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