Thanks to Matt Miller and Kevin Carey for telling the Straighterline story!
Matt Miller points out Straighterline’s real innovative potential here.
The juicy part of Kevin’s Senate testimony is below:
“Consider the company Straighterline. It was created by an education entrepreneur and is located here in the Washington, D.C. area. Straighterline offers online courses to students for a flat subscription rate of $99 a month plus a one-time charge of $39 per course, for all the courses students can take. They can enroll in accounting, statistics, calculus, biology, and other introductory classes. The textbooks and course materials all come from the same major commercial publishers that regular colleges use. Individual tutors are available, online.
Straighterline’s prices are so low because, as I noted earlier, once you make the initial investment in online course development, the cost of serving additional students is very small. And also because Straighterline isn’t paying the sunk costs of maintaining football stadiums, research departments, vice-provosts, and so on.
Straighterline currently serves several thousand students and is growing. This education comes at no cost to the American taxpayer because students aren’t allowed to use federal financial aid to take Straighterline courses.
That’s also the problem. Straighterline is a victim of higher education regulation. Not the kind of regulation that traditional colleges like to complain about, where they are required to disclose basic information about themselves in exchange for billions of dollars in federal funds. This is the regulation that traditional colleges cherish — regulation that protects them from competition from innovative companies like Straighterline.
Federal financial aid like Pell Grants and subsidized loans can only be spent at accredited colleges. Who controls the accreditation process? Existing traditional colleges and universities. What incentives do they have to allow innovative low-cost competitors into the market? None. What incentives do they have to keep them out? Many. And the more expensive traditional colleges get, the bigger those incentives grow.
Straighterline has managed to make a business by laboriously forging partnership agreements with accredited colleges who agree to accept their credits. But this just illustrates the absurdity of the system.
The higher education market needs many new, high-quality, low-price competitors to act as a counter-weight to traditional colleges and universities bent on increasing prices forever. To be sure, students also need consumer protection. One kind of innovative affordability policy would open up the federal financial aid system to low-price entrepreneurs who are willing to be transparent about and accountable for the quality of the services they provide. This policy would include educators and companies who only provide individual courses. If you can specialize by providing the world’s greatest college calculus class, and only that, why should you be excluded from the system?”