StraighterLine's challenge to the rising cost of college

Baltimore startup offers 'first year of college' online for $999

  • Elizabeth Smith, 42, took an online course to finish her degree with Baltimore-based Straighterline, where she was able to save both time and money.
Elizabeth Smith, 42, took an online course to finish her degree… (Baltimore Sun photo by Gabe…)
October 31, 2010|By Gus G. Sentementes, The Baltimore Sun

After putting off finishing her college degree for more than two decades, Elizabeth Smith this year needed just one more class — an algebra course — to earn her bachelor's degree in theater arts.

The full-time worker and single mother of two didn't have time or money to spare, so she signed up for a course offered by Baltimore-based StraighterLine Inc. She finished the course in seven days over the summer, working on her laptop as her kids frolicked in a pool. And the course cost only $138 — a fraction of the price for a similar course at a four-year or community college.

At a time when a year of college can cost as much as a luxury car, StraighterLine Inc. offers a cheap alternative: online courses starting at $138 a month, or $999 for a year of "101"-style classes typically taken by freshmen, ranging from mathematics to English to business statistics.

The startup has high hopes of altering the economics of higher education by solely offering online courses a la carte — and no degrees. It joins other for-profit companies that offer online education to students seeking lower prices and flexibility in course schedules.

StraighterLine and its competitors aim to become even more appealing to recession-weary students who continue to see huge tuition increases at traditional brick-and-mortar colleges, including some adults returning to school in hopes of making themselves more marketable in a tight job market.

"Most people now are really looking for the flexibility," said Smith, a 42-year-old Northeast Baltimore resident. "Online learning, to me, is natural. If I can shop at midnight, why can't I do my coursework then? I would much rather be using my computer to expand my horizons than buy a pair of shoes."

StraighterLine's business model depends on taking out almost all of the costs of running a college, from dormitories to professor tenure, and it has signed up nearly 2,000 students.

"There's a lot to be said for an immersive residential liberal arts experience, but it's also very expensive to deliver," said Burck Smith, StraighterLine's founder and chief executive. "StraighterLine is out there jostling to put a little pressure on the system. The reality is most students are nontraditional. They're not doing that expensive residential environment, but they're still being charged as if they are."

But StraighterLine's efforts to compete could be stymied by the fact that it isn't accredited. While that helps keeps costs down, it may give other colleges pause before granting credit to StraighterLine's students who seek transfers.

Company officials point out that its courses have been reviewed and recommended by the American Council on Education, the main organization that evaluates courses and their credit equivalency. So colleges could choose to grant transfer credit based on that.

And the cost of online education is a big draw. Tuition at four-year public institutions rose 46 percent, to $6,400 for in-state students from 2000 to this year, according to the National Center for Education Statistics. Four-year private nonprofit school tuition climbed 31 percent to $21,100 in that time. Even private for-profit institutions had a 20 percent jump in tuition, to $15,700.

And affordability is expected to continue to be a problem even as some colleges, such as the University of Maryland, freeze tuition.

That's because the $830 billion national student debt load — which recently surpassed total credit card debt for the first time in the U.S. — could mean that parents are still paying off their own loans when it comes time to send their children to college, said Mark Kantrowitz, a financial aid expert and publisher of FinAid.org.

The online education field is dotted with several for-profit companies, such as 2tor Inc. or Colloquy Inc., a division of Kaplan Inc., that are partnering with traditional colleges and universities outsourcing Internet offerings.

And more colleges are chasing after the "nontraditional" student — the working adult learner looking to complete a master's or certification program online, or the undergraduate student who can only take classes part-time while working. That kind of student, such as Elizabeth Smith, who received her bachelor's degree from Charter Oak State College, a public distance-learning institution based in Connecticut, is increasingly the norm.

In January, StraighterLine raised $1.3 million from investors, including an investment from Active Angel Investors Network in Northern Virginia. Burck Smith said his company is using the money to hire staff and ramp up marketing efforts, mostly on the Internet.

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