Centre for Distance Education lunchtime seminar - conducted by Ormond Simpson, CDE Visiting Fellow. This seminar shows that student support need not be a pure institutional cost in distance education. If properly designed and evaluated it can actually make a financial profit for the institution as well as enhance its reputation. Heath warning - this presentation contains some mathematics.... Audio of the seminar can be found here: www.cde.london.ac.uk. More information on Ormond's work can be found here: www.ormondsimpson.com.

1. 1
‘Following the money’
-the cost benefits of student support
in distance education
Ormond Simpson
Visiting Fellow CDE

2. Why invest in higher education?
1.Increased GDP and international competitiveness
2. Increased welfare of graduates (longer life,
better health, higher pay, more society support such
as volunteering)
2

3. 3
Student numbers may double from 2012
to 262 million by 2025?

4. 4
How much does it cost to produce successful graduate?
Production cost of a graduate?

5. 5
Costs of distance education
to UK government
- graduate production costs compared
Conventional
education
Open
University
UoLIP
(UK students)
Cost of a
graduate to
UK Govt.
£70,000 £20,000 £0?
Total income
tax paid by
student
during studies
£0 £20,000 £20,000
Net cost to
Govt
£70,000 £0? - £20,000

6. 6
Costs of distance education
to students
Conventional UK
university degree
OU degree UoLIP
(distance
version)
Fees £27,000 £15,000 £4000
Loss of earnings
whilst studying
£40,000 0 0
Total cost to
student
£67,000 £15,000 £4000

7. 7
Financial implications for students - returns on
investment (RoI)
Full time students – increased income of
£100,000 over lifetime (‘graduate premium’)
RoI = (100,000-67,000)/67,000 = 49%
OU students – increased earnings by 15% after
graduation (Woodley, Simpson 2000). Increased
income ~ £60,000
RoI = (60,000-15,000)/15,000 = 300%
UoLIP students? – if increased income the same
as OU students ~ £60,000
RoI = (60,000-4000)/4000 = 1400%

8. 8
What is the resale value of your degree?

9. 9
Sustainability (Roy et al 2007)
distance education
conventional education
distance education
conventional education
Energy use CO2 production
13% 18%
BUT...
87% 82%

10. 10
82
39
61.5
15.7
22
5.3 2.5 0.5
14
6
0
10
20
30
40
50
60
70
80
90
100
Conventional institutions
Distance institutions
Conventional and distance graduation rates compared
The ‘distance education deficit’

11. 11
For students, investing in distance higher education
is riskier than wildcat oil well drilling
Distance education - 80% chance of losing all investment
Wildcat drilling – 10% chance of losing all investment

12. Probability of suffering depression, unemployment and (women) partner
violence, according to educational experience (Bynner, 2002)
Probability of:
12
What happens to students who dropout?
- effects of dropout on full-time students in the UK
dropouts

13. 13
Implications of dropping out for students
Dropouts are likely to be:
 in debt – with no increased earnings to pay it off
 more likely to be unemployed so unable to pay off debt
 more likely to suffer health problems esp. depression.
- which might
affect up to 10%
of the UK age
cohort

14. 14
Implications of student dropout
for institutions
‘Willing to Pay’ Recruitment issues - Given risk will
students or parents be willing to
pay the investment?
‘Value for Money’ Will students (and parents) want
better value for their money?
‘Inst. Income’ Dropout may reduce institutional
income and government support
Case study - the Dutch Open
University is threatened with
government cuts because of
high dropout rates
Open Universiteit
Nederland

15. 15
Financial implications of student dropout for
Governments
 Inefficiency – grants to universities ‘wasted’?
 Social expenditure – cost of increased unemployment
& physical and mental ill-health
 Losses - in income tax and GNP
Cost - £billions
each year?

16. 16
Student retention - ‘Why should we care?’
-implications of student dropout in UK
dropout students – financial losses and
worse health
institutions – financial losses and
possible recruitment problems
Government – financial losses in tax
and GNP and increased health
expenditure
- all amounting to several £billions a year

17. 17
Making the financial case for
institutional investment in retention
‘Return on Investment’ - investing in student retention?
1. Costs – mostly student support services (?)
2. Benefits to the institution:
- increased student fee income
- possible increased Government grant income
- savings on recruitment costs

18. 18
18
(i) Institutional retention activity - costs
Say an activity costing £P per student increases student
retention by n% amongst N students
Then the total cost of the project is £NP
Number of students retained by the project is (n/100)N
So ‘Cost per student retained’
= £ NP/[(n/100)N]
= £100P/n

19. 19
19
Example 1: Cost-benefits of retention activities
Proactive pre-course phone contact in UKOU
Year Students
in trial
Increase in retention
experimental group over control (% points)
2002 2866 3.9%
2003 1354 5.1%
2004 931 4.2%
2005 10,131 7.6%
Totals 5151 5.04%

20. 20
20
Example - Institutional retention activity - costs
Cost per student retained’ = £100P/n
Eg in UK OU an initial ‘proactive phone contact
- to 2000 new students,
- cost £10 per student (P) in staff time and expenses
- increasing retention by 5% (n)
Cost per student retained = £100P/n = £(100 x 10)/5
= £200

21. 21
21
Example - Institutional retention activity - benefits
(OU example pre-2012)
• Student fee income – neutral against costs
• Govt grant income to OU – about £1100 per student
completing each year
• Savings on recruitment – recruitment cost per new
student ~ £500
Perhaps £200 of that to replace students who’ve
dropped out (50% each year)
Total benefit ~ £1300 per student retained

22. 22
Return on retention investment in UKOU
of a proactive phone contact (pre 2012):
Cost of activity = £200 per student retained
Benefit of activity = £1300 per student retained
So net benefit
~ £1100 per student retained
Return on investment (1300-200)/200
= 550%
Net surplus if activity applied to 30,000 new students
~ £1.6m per year

23. 23
In 2013 the UK Government will give nearly
£1 billion to private HE providers
Who will have
90% dropout rates

24. 24
London International Programmes
‘Motivational’ emails?
‘Proactive Motivational Support’ (PaMS)

25. 25
‘Study Tips’ – Introduction
1 ‘Are you fixed or malleable’?
2 ‘What to expect from studying the LLB with the
International Programme?’
3 ‘Motivating yourself to learn’
4 ‘Getting organised for study - a Funnel in your mailbox?’
5 ‘Finding your best study methods’
6 ‘Finding time when getting behind’
7 ‘Getting organised - making lists’
8 ‘I’ve those ‘why-am-I-trying-to-study-blues…’
Motivational emails – sent to students every 2 weeks

26. 26
9 ‘Survival Guide for You and Your Family’
10 ‘Managing your procrastinitus’
11 ‘Self-Discipline!’
12 ‘Learning to concentrate on learning’
13 ‘Are you a lucky student?’
14. ‘Study Anxiety Syndrome’
15 ‘Tactics In The Exam Wars’
16 ‘Don’t stop now!’
Full texts on www.ormondsimpson.com
‘Motivational emails’ - continued

27. 27
Students
on 2012-13 Law module
Initial
numbers
Entered
at least 1
exam
Sat at
least 1
exam
Passed
at least 1
exam
Control group 1691 74.4% 66.0% 55.2%
Experimental group 1683 76.6% 68.3% 57.6%
Increase in retention
in experimental group
+2.2% +2.3% +2.4%
Results of the motivational email project
2012-13
Average increase in retention 2.3% points
(32 students)

28. 28
Cost Benefits of the
Proactive Motivational Email Support Project
Increase in income due to
more students sitting and
paying the exam fee
= 32 students x exam fee £232
= £7424
Increase in income due to
more students carrying on
to a second module
= 32 students x regn. fee £351
= £11,232
Total benefit = £18,656
Profit £(18,656 – 600)
= £600
= £18,056
~ 3000%Return on Investment
Cost of project (approx)

29. London University International Programme
Annual module income (from students)
Registration fee = £F
Exam fee (paid by students completing module)= £E
Annual module expenditure
Fixed overhead for programme = £V
Expenditure on students = £S per student
So if N students start in programme:
Total income = £NF
Total expenditure = £(V+NS)
Surplus income (if any) = £[NF-(V+NS)] = £[N(F-S)-V]

30. London University International Programme
Surplus (if any) on project = nE+n(F-S) – NP
To be self supporting or make a profit
nE+n(F-S) – NP > 0 or n(E+F-S) > NP
n/N > P/(E+F+S)
The % increase in retention np = 100(n/N)
So for break-even or surplus
np > 100P/(E+F+S) (i)
Example
Say E = £200, F = £800, S = £200
np > 100P/(200+800-200)
np > 0.125P (ii)
30

31. np
per cent
increase in
retention
£P
retention
activity cost
per student
np > 0.125P
Return greater
than cost
np < 0.125P
Return less
than cost
Graph of np = 0.125P
London University International Programme
31

32. np
per cent
increase in
retention
£P
retention
activity cost
per student
np > 0.125P
Return greater
than cost
np < 0.125P
Return less
than cost
London University International Programme
Example – if activity cost is £15 per
student then any retention increase
above 1.9% is self-supporting
1.25%
32

33. 33
Cost benefits of retention
If F = students fee per year, S = institutional expenditure per student, V = total
institutional overhead then if the number of students in year 1 is N1 and in year 2 is N2
Income Year 1 = N1F – (N1S + V) Income Year 2 = N2F – (N2S + V)
Reduction in income due to student dropout between years
= N1F – (N1S + V) – [N2F – (N2S + V)] = (N1 – N2)(F – S)
Then if there is a retention activity costing £P per student it will cost N1P. If that
increases retention by n students so that N2 becomes N1 + n then the reduction in income
is now:
[N1 – (N2 + n)](F - S)
So the reduction is itself reduced making a saving of
(N1 – N2)(F – S) – {[N1 – (N2 + n)](F - S)} = n(F – S)
For the retention activity to be self-supporting n(F – S) > N1P
Or np > 100P/(F – S) where np is the per cent increase in retention
For example P = £10 F = £2500, S = £1000 then np > 100x10/(2500-1000) = 0.67%
So if a retention activity costing £10 per student produces an increase in retention of
more than 0.67% it will be self-supporting

34. 34
Funding learner support
– increasing funding from students
$ Fund student support and teaching
Increases student
retention
1. Increased
student fee income
2. Students willing
to pay more?
A positive funding triangle?

35. 35
• Follow the Money - Money follows retention
• Not just retention but retrieval
• Outsource retention? – the Noel-Levitz Model

36. 36
www.noellevitz.com

37. 37
www.rantandrave.com

38. 38
Thanks!
ormond.simpson@gmail.com
www.ormondsimpson.com