Online Higher Ed. Hyper Fragmentation and the US Post Secondary Market

By the time we reach 2025, more than 1 billion people on earth will have attained a post-secondary qualification throughout their lifetimes.

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The online degree market is one of the fastest-growing segments of global higher education, which we forecast will reach $74B in 2025.

By the time we reach 2025, more than 1 billion people on earth will have attained a post-secondary qualification throughout their lifetimes. Over the next decade 280 million more people will graduate with a post-secondary qualification and more and more learners around the world will opt to study online, with better offerings from colleges, increasing acceptance by employers and advancements in technology.

The largest market, for now, is the US, where more than three million students pursue higher education fully online, representing a $20B+ market today and growing fast. Pure ‘online only’ students are still only about 15 percent of all higher education enrolment in the U.S but that is changing as more and more smaller colleges close reducing local offline ‘supply’ and as more offer online degrees. The biggest players are gaining market share on the strength of their national reach and brands but there are forces for and against this trend too. Let’s zoom out to see the big picture.

Microeconomics of US Higher Education

According to U.S. Department of Education data, in 2017, 20.1 million post-secondary students enrolled at 6,526 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 middle 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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Offline Learning

13.5 million enrolments across 6,472 institutions. Top 100 institutions by represent 20% of total enrolments in 'Offline Learning'.

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Some Online

3.5 million enrolments at 3,438 institutions. Top 100 institutions represent 29% of total enrolments.

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Fully Online

3.1 million enrolments at 3,491 institutions. Top 100 institutions represent 46% of total enrolments, with the Top 10 institutions representing 20% of the total.


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 too.

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 play.

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, just last week, the Department of Education announced that California residents enrolled in distance education programs at out-of-state public and nonprofit institutions will be 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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9.73% of national 'online only' enrolments

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8.13% of national 'online only' enrolments

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7.02% of national 'online only' enrolments

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6.64% of national 'online only' enrolments

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4.04% of national 'online only' enrolments

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4.03% of national 'online only' enrolments

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3.67% of national 'online only' enrolments

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3.3% of national 'online only' enrolments

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New Hampshire

2.88% of national 'online only' enrolments

Global Giants in the Future?

We’ve all heard predictions from the likes of Clay Christensen (Harvard) and Sebastian Thrun (Udacity) that in the future as few as ten, or perhaps only half of the Universities that exist today will be delivering post-secondary education as we know it.

It’s much more likely that the charts above will only represent 3,000 institutions in 2030 than the 6,000+ we see today as Clay Christensen has suggested will happen over the next few decades, compared to a scenario Sebastian Thurn put forward, that by 2050, there will only be ten Universities in the world delivering higher education (and that Udacity had a shot at being one of them).

However fast the pace of change, it is hard to imagine, especially in the current political environment, that the hyper-fragmentation we see in US Higher Education today will consolidate as significantly as some suggest.