$74B Online Degree Market in 2025, up from $36B in 2019.

Microeconomics of US Higher Education

COVID-19 has created incredible uncertainty about the future. Now, more perhaps than ever, is a time to zoom out and take stock of the long-run shape and direction of the market to help inform better data-driven decisions on ‘where to next?’.

The US is by far the largest online degree market as measured by dollars and a little larger than China for now, as measured by enrolments. According to U.S. Department of Education data, pre COVID-19, more than 20 million post-secondary students enrolled at over 6,000 institutions, each one of those institutions represented below as a bubble sized by the number of enrolments. The three charts below from our data platform represent mutually exclusive enrolments in one of three modality classifications; ‘pure offline’ on the left, ‘some-online’ in the centre or ‘pure online’ on the right. The formal US Dept Ed definitions are ‘exclusively distance’, ‘some distance’ and ‘not enrolled in any distance’. From left to right, each of the three charts are colored to show the institutional control classification; ‘Private-For-Profit’, ‘Private Not-for-Profit’ and ‘Public’.

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Scale

The charts above help to convey the hyper-fragmentation of US higher education. Over 6,000 institutions average 2,000 ‘offline’ enrolments each with a median of just over 300 enrolments.

Late to the party, but following almost every other industry on a bumpy digital transformation journey, is the emergence of online higher education. Compared to the offline modality, nearly 3,500 institutions average under 1,000 ‘online only’ enrolments each with a median slightly higher than their offline peers at 316 enrolments.

The biggest difference however is the scale players in online versus offline. A growing number of online institutions are operating across the US with truly national reach, and leveraging massive marketing engines and faculty networks to offer hundreds of degree offerings. The top 10 institutions by ‘online-only’ enrolments enroll 1 in 5 ‘online only’ students compared to the Top 10 ‘offline-only’ institutions enrolling 1 in 33.

So it makes sense to quickly compare the regionalization of online higher education.

National versus Regional

While the US is an impressive size and a digital scale play in post-secondary education seems obvious and overdue, regional forces are also at work.

Recent studies have suggested that the majority of online students live within close proximity of their home and visit campus to access services and support, or to attend events and in-person courses, representing a true blending of the online and on-campus experience.

Moreover, in 2019 we saw policy challenges, in one example California residents enrolled in distance education programs at out-of-state public and nonprofit institutions may have been considered ineligible from receiving federal student aid. These 2016 ‘distance education regulations’ were scheduled to take effect in 2018, but implementation was delayed until 2020, enabling further revisions.

These two trends together are potentially serious headwinds for any one institution achieving a disproportionate mega-scale and some argue represent ‘protectionist’ policy at a state level.

The charts below visually compare the number and size of the individual institutions in each of the top 9 states by total online-only enrolments.

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