California Experiment Could Open U.S. Market for Online Courses

"Massive open online courses," or MOOCs, are touted as a potential revolution in higher education.

By Jon Schuppe
|  Tuesday, Mar 19, 2013  |  Updated 8:07 PM PDT
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A California proposal to use online courses to soften a higher-education funding crisis has the rest of the country watching for lessons in how to deal with the rapid expansion of high-tech learning.

The experiment, floated by a Sacramento lawmaker last week, would allow the nearly half-million students on waiting lists at the state's public universities and colleges to take online courses instead.

The bill has been touted as a way to release pressure on a system overwhelmed by a surge in enrollment and crippling budget cuts. But it could also open the door to free "massive open online courses" (known as MOOCs) developed by private, third-party vendors — a development that could spark massive changes in the the country's education system.

Many other states are grappling with issues of limited money and higher enrollments — both of which are functions of the country's economic downturn — and are toying with ways to offer online courses, but none so much as California. They view the California proposal as an experiment that could help guide them, warily, into an uncertain future.

"They're all a little spooked at what's going to happen," said Eric Hanushek, a fellow at the Hoover Institution of Stanford University who studies the economics of education. "We have these MOOCs, and no one understands the business model behind them, how to charge for them, who pays for them, who gets credit for them and in what way."

The results, he said, could lead to a revolution in the higher education industry, with Silicon Valley startups rushing to meet demand.

Like many innovations, the California experiment was born of calamity. The state's three-tiered system of universities and colleges was created to give students of all talents and means a way to earn a degree. It was a huge success, but relied on massive amounts of state funding to keep tuition low. Starting in the late 1970s, taxpayers and lawmakers began to reduce that flow of cash. Tuition and fees went up. So did student debt. Faculty were laid off, and course offerings reduced. Officials estimate that 470,000 students at California's community colleges cannot get into classes required for graduation.

The crisis coincided with the rapid growth in the number of online courses developed by private for-profit startups, many of them free.

Advocates of the California proposal say that if it succeeds, it could lead more states to try MOOCs, especially as pensions and health benefits eat up a growing amount of state money, and the Obama administration pushes for ways to make higher education more affordable.

California "is probably a bellwether for what's going to happen across the country, because the business models for these public institutions are broken," said Michael Horn, director of the Innosight Institute, a Bay Area think tank that pushes innovation to solve education problems. "These startups are going to see an opportunity and want to meet it."

"I think what you're going to see in terms of a trend is the state tinkering with online courses," said Matthew Smith, policy analyst at the Education Commission of the States. "They'll watch the failure and dropout rate, and then if they find success there will be a large scaling."

Officials in many of those other states are watching with a mix of interest and skepticism.

"California is in a much different situation than we are," said Karen Hunter Anderson, vice president of the Illinois Community College Board, which has seen a surge in enrollment over the last five years and has its own internal system of online courses. "I think that the community colleges and university administration and faculty in Illinois are very wary of using MOOCs as a solution to the current higher education issues."

Steven Johnson, the vice president of public affairs for the Texas Association of Community Colleges, which has lobbied against state funding cuts at a time of higher enrollments, said the system's existing online offerings suited students fine.

But Hanushek, of the Hoover Institution, said that any states that fail to take MOOCs seriously are in danger of getting "run over."

"Some of these online courses are really well done," with higher production values and better teaching than some traditional core courses at public universities, he said. And they could be cheaper than what the brick-and-mortar school is charging.

"Of course, there's still the question of what is the business model," Hanushek continued. "How do you pay for the development of these courses, and get the returns you need?"

That, he said, is why "California could be the experiment that everyone watches."

To see a "Class Action" video on a Silicon Valley startup, Coursera, which is one of the largest platforms in the booming industry of online classes, and its founder, Andrew Ng, click here.

View more videos at: http://nbcbayarea.com.

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