THE NEW “NORMAL:”

DISTANCE LEARNING AND NEW EDUCATION OPTIONS

–
WHAT IT MEANS TO HIGHER EDUCATION AND
STUDENT CHOICE

Frank F. Britt, CEO, Penn Foster

February 2013
 Todays Objective and Scope?
• The objective of the webcast is to provide you with an
overview of the landscape of distance learning and it’s
growing importance in higher education
 We will cover how it is changing and the implications for
existing ground based schools, and more importantly why
it is an option for a growing subset of alternative students.
• More than 6.7 million students — roughly a third of all
students enrolled in postsecondary education—took an
online course for credit in fall 2012, an upturn of nine
percent. Increasingly, distance learning is being embedded
into traditional learning programs and as a stand-alone
option for a subset of students.
• Today in the world there are many options for learning
designed for a broad range of students that offer significant
value. Understanding the potential paths will help better
tailor advice for each student and their family.
2
A thought to frame the
day…

“The primary aim of

education is not to only
enable students to do
well in school, but to help
them do well in the lives
they lead following
* Raymond McNulty, Chief Learning Officer, Penn Foster and formally with
Bill & Melinda Gates Foundation, International Center for Leadership in Education
 Today’s Agenda:

• How and Why Higher Education

Changing?
• Online and Hybrid Education: Is it real?
• How Should Students Options be Framed
in the New Education Economy?

4
 HOW AND WHY IS HIGHER
EDUCATION CHANGING?

A marketplace poised for substantial

disruption

5
 The “consumerization” of higher education has begun..

• Higher education is increasingly recognized as a consumer

purchase based on value translated into quality, price and
expected returns
• For lower income and at-risk students, in most
instances the decision is driven by employment needs
and the ability to secure a job
• Greater expectations for value, viable multi-channel
delivery models, and need for sustained employability

• Providers of education (colleges, universities, career schools,

distance learning, etc) are being required to justify rising
prices and provide a higher level of quality and service
commitment and a certain ROE (return on education). This is
the is the essence of the new consumer education relationship

6
 Historically, there has been a direct link between
learning and earning. The new knowledge economy will
affirm that correlation and increase returns on higher
education
Average Annual Salary Unemployment Rate
by Level of Education, 2011 by Level of Education, 2011
$100K
15%
14%
$87K
$81K
80

$66K
10 9%
60
$55K 9%

7%
$40K
40 $37K
$33K
5%
5
$23K
4%
20
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Note: Salary data is for ages 25 and older; Earnings are for full-time wage and salary workers
Source: Bureau of Labor Statistics
However, important demographic trends and K-
12 dynamics will alter post secondary
education
• Minority populations are growing
 Hispanics: Significantly high participation of Hispanics entering
workforce as the fastest growing population with both consumer and
employment implications, e.g., multilingual solutions, etc.
 Nearly half of minority undergraduates attend community college

• High School Model Still Needs Improvement: Nearly 1 million kids

that start high school every year don't make it to graduation
 4 million children will start kindergarten this fall and only 63k will make
it to post secondary schooling
 Over a lifetime, a high school dropout will earn $200,000 less than a
high school graduate; $1 million less than a college graduate.
 A 4 year degree in STEM based upon current trends
 Common core standards for high school will raise the bar for college
and career readiness and impact student assessment and teacher
evaluation
 In the meantime, higher education has steadily increased
tuition levels well in excess of inflation to cover higher
operating cost; changes are required to reset the value
equation
Growth in Published Tuition Fees by
Institution Type, CAGR, 2000-01 to 2010-
11
Private Private
Public
Nonprof For-
it Profit

Source: IPEDS; Community College Times; U.S. News & World Report; Chronicle of Higher Education; InflationData.com
Inflation rate is 2010-2011 based on CPI
Consumers are acting; there is accelerated growth
in those attending college to not complete a four
year degree

Only about half of the credentials awarded by

undergraduate institutions are traditional bachelor’s
degrees.
The rest are either associate’s degrees or certificates,
the vast majority of which are in applied fields.
 In fact, certificates awards have risen 22% in
post secondary education over the past few
years*.
• Certificates are the fastest growing form of postsecondary credentials
in the nation, surpassing associate and master's degrees as the
second most common award in higher education after the B.A.
• Postsecondary certificates made up 22 percent of awarded
credentials in 2010, compared with just 6 percent in 1980. Over
that time, the number of certificates awarded annually has
increased from 100,000 to one million.

• The appeal is growing because they are affordable, take less than a
year to complete, and often lead to higher earnings, compared with
receiving an associate and sometimes even a bachelor's degree*.
• The most common occupations of certificate holders are
business/office work, transportation, health care, and metal
working, the report says.

11
* 2012, Georgetown University Center on Education and the
 In response, many institutions are acknowledging the
tectonic shifts in learner’s needs and making
changes….(1of 2)
Examples:
1.Courses: Self-paced learning and greater education “modularity to
support learner emerging employability requirements – adult students
matter more than ever

2.Course Selection: Students will be empowered to “test drive”

programs, faculty and majors before making significant commitments

3.Educators: Abundance of ‘free’ resources and relationships made

easily accessible via the Internet will change the roles of educators

4.Student Projects: The world of school is increasingly collaborative,

driving changes in the way student-partner projects are structured.

12
 In response, many institutions are acknowledging the
tectonic shifts in learner’s needs and making
changes….(2 of 2)
Examples:
5. Measures: New educational productivity metrics on student ROI and
emergence of alternative authoring, publishing, and researching
models

6.Digital: Digital literacy rises in importance as a key skill across

almost every discipline and profession and reshapes student and
faculty experience

7. Content & Curriculum: Education requirements increasingly driven

by employers, more than educators, with emphasis on effective and
practical employment skills. Content is designed with mobile-first
principles for a multi-screen learner with interactivity

8. Experience: Adaptive courseware powered by data analysis and

pattern recognition software will tailor content/exercises
13
 ONLINE AND HYBRID
EDUCATION: IS IT REAL?

The Role of For-Profit Education and

Society as Accelerants of Online Learning
Demand

14
In the period before For-Profits and On-line,
education was traditional
• Schools beholden to faculty and tenure/research took
precedence over student engagement
• Education adhered to traditional delivery models
 Highly bureaucratic, slow enrollment process
 Ivy tower mentality – you chase us!
 Lack of innovation in the classroom
 Tenured professors had little incentive to push the
envelope on any front
• Post-secondary was aimed primarily at high school
graduates – very little adult education, very little program
choices
• Few if any schools offered career & trade training
The For-Profit’s changed the model and
became the original catalyst for promoting
online education
• Two different initial targets, each has evolved traditional ground
based, or correspondence modalities to online or hybrid formats
 Higher Education aimed at the working adult
• Example: University of Phoenix (Established in 1976)
 Trade / Career Readiness programs
• Example: Penn Foster
• Filled niches and created new demand that were created by
traditional higher education’s focus on the high school student
transitioning to college
 With the advent of the online offerings, these schools/businesses saw the
potential of efficient expansion and scale
How has it worked out for For-Profit education
players?
1. Market Value:
• Enterprise value of top 13 public schools exceeds $10B (recently
declined)
2. Demand:
• Represent 12% of all post secondary students (2.4 million)
– University of Phoenix has more than 325,000 students currently
enrolled—22 times the number at the University of Chicago
3. Regulations:
• Substantial disclosures and performance requirements such as
gainful employment and performance measures (loan repayments,
etc.)
4. Iconic Influence:
• 2015 Super Bowl being played at University of Phoenix
stadium
5. Built Cultures of innovation and market focus
In the meantime, innovative Non-Profits have
also decided to enter the marketplace for
Online College
• Several non-profits decided to place an emphasis on
building fully online programs
 Liberty University Online is one of the best examples

• Spin-off units from ground-based schools

 Penn State World Campus, Drexel University Online,
Southern New Hampshire University
 University of Maryland University College was created
by the state
• But for traditional schools it requires re-evaluating the
faculty relationships and charting a new path for
curriculum design and delivery
At the same time…society and
education are changing

19
The rate of change in society is changing life
across all demographics…and will reshape
education
• Access: YouTube’s EDU portal has been viewed 22
billion times
• Data: More data has been created in the last three years
than the previous 40,000.
• Mobilization of Consumers and Workers: there will be
five billion Internet devices by 2013. Most people in the
world will experience the Internet in their hand, not their
desktop or their lap.
• Socialization of Everything Online: There are 960
million social network users; eight years of video
uploaded every day to YouTube.
• Gamification: Use of game-like thinking exploding with
use of game mechanics and dynamics like badges,
These dynamics
leaderboards, etc. will lead to the reimagination of education
And at the same time, kids today are very
different

GenY sensibilities:
• Multi-screen & social is becoming the defacto
way for life
• Learn anywhere, anytime, with and from
anyone including peers
• Always on, always connected, expecting
collaboration
• Need to be engaged and involved
• Demand personalized learning experiences
• They are tech dependent – not tech savy
Disruption never looks inevitable
until it suddenly is
Disruption never looks inevitable
until it suddenly is
Disruption never looks inevitable
until it suddenly is
 Online/Hybrid
Learning
• Who is out there and what
do they offer?

25
 Education is being re-imagined. Providers are
introducing online learning, hybrid learning and
collaborative models that broadly target wide
audiences with different needs.
Online Hyflex/localized Traditional /
Only Learning Ground Based
One-to-many Self-Serve One-to-many Incubator / Traditional Universities
Instructor-Led Shared Space
Peer Learning

Self-serve Online
University Courses
Online-Enabled
Peer Learning
Community Colleges
Accredited Online-Enabled
Traditional Online
Self-Learning Corporate
Universities
Training

Alternative education delivery options focus on a range of consumer

targets, content types, price points, and accreditation standards
26
 The new education economy will include
various delivery models at a class specific and
course level
Course Level – Split Model
Class Level

1. Pure Brick & Mortar (100%)

2A. Blended
Mixed Delivery

Supplement classroom
lectures and activities
with online content (80%-20%)

Online lectures with a local

facilitator providing
2B. Hybrid
support on the ground (20%-80%)

3. Pure Online (100%)

 ON-LINE & HYBRID DELIVERY
CASE STUDY: WHO IS PENN
FOSTER?

28
We believe we can create a better world through
knowledge and skill with a focus middle skilled
students
We stand for possibilities through knowledge . . .
PREPARE MOTIVATE ELEVATE

Learners with Learners to Learners to

relevant take on the the goals
knowledge and challenges that you’re reaching
skills. come. for.

. . . With the belief that a good education should not be a

privilege
 A history of helping working men and women
In 1890, a newspaperman named Thomas J. Foster recognized that
working adults needed a more convenient way to learn advanced skills. He
developed the distance-learning method to help anthracite coal miners
become mine superintendents and foremen.
The school became a stunning success. By 1945, 5,000,000 students had
enrolled in Penn Foster training programs. Today, that number has grown to
more than 13,000,000. In fact, Penn Foster is now one of the oldest and
largest learning institutions in the world.

30
We service the nontraditional student within a
typically underserved demographic

• Ethnically diverse (often 1st generation)

• At-risk of being “Left behind” by traditional
educational models
•“Burdened” by familial obligations and “restrained”
by financial realities (e.g., underbanked)
•Value/require support on career, academic, and
financial issues
•Younger have GenY sensibilities - multi-screen &
social
75% enroll with Penn Foster to get a better job/find a new
job
We have created a range of on ramps for
learners on their path to training, re-skilling
and personal achievement

High School College Adult

Degree programs in
high growth technical 200+ certification and
Largest high school in careers. Best value diploma programs. #1
the U.S. associates degree market share in career-
options focused distance learning
43,000 28,000 63,000
Students Students Students

Licensed by the Pennsylvania State Board of Private Licensed Schools

Courses designed to train individuals for
today’s workforce

Health Avocation
• Medical Coding and Billing
• Gunsmith
• Pharmacy tech
• Gourmet cooking
• Medial Assistant
• Travel Agent
• Physical Therapy Aide

Penn
Business Foster Industrial
• Welding
• Marketing Course • Diesel engine repair
• Paralegal Families • Utilities
• Bookkeeping
• Facilities Management
• Criminal Justice

Trade Other Relevant

• Auto mechanic Courses
• HVAC technician • Small Business Management
• Motorcycle repair • Health and Safety Courses
• Plumbing • Customer Service
 HOW SHOULD STUDENTS
OPTIONS BE FRAMED IN THE
NEW EDUCATION ECONOMY?

A Path to Helping Traditional and Non-

Traditional Students

34
 The framework for college matching is well
established
Traditional Factors

1. Major/degree type 6. Size of school

2. Geographic/Distance 7. Other activities
3. Cost (net price, with (abroad programs,
financial aid) sports)
4. Reputation 8. Standardized test
requirements
5. Cultural Fit
9. Type of school –
private, public,
community
Traditional post secondary options assume four year
college10.
andAccreditation
35 ground-based delivery approach
However, a broad set of valid alternatives
extend well beyond traditional post secondary
paths
Risk Factors
High Medium Low

Traditional College
Path

Alternative Path*

36
* community colleges, vocational, apprentice and certificates
 For example, a career focused on the
Manufacturing sector is undervalued, yet has
amazing options
• After decades of outsourcing, the United States is
enjoying a manufacturing revival – re-shoring has
arrived
 US and foreign firms (Samsung, Toyota) building
in the US
 Moving production to US for cost advantages
(energy, etc.)
 By 2017, total cost of producing many products
with 10-15% of China even on US east coast
• Wages are rising and skills gap growing
 Examples: South Dakota School of Mines and
Technology 2012 graduate earns 16% higher
than Yale University
• Middle skill and industrial labor shortage getting
worse, even as youth unemployment reaches
record levels
 Industrial and middle skilled employment and
37 education opportunities are significant
The merits of sub-baccalaureate programs for a
subset of high school grads is real and growing
What? Apprentices Certificate Community
• Formal, on-the-job Pathways Colleges
training • Range from 900 to • Associate degree
3,600 contact • Certificates
hours

How Many
• ~465k • ~1-2 million • ~10 million
Enrolled?

• Employment • Employment
Goal? • Marketable craft,
• Stepping stone to • Stepping stone to
trade and vocation
degree education degree education

• Worksite, campus or • Campus, online

How? • Campus, online
online (hybrid) (capacity
(delivery) (hybrid)
(often paid a wage) constraints)

• “organized
• State-level/federally • Associates degree
Credential? program of study”
38 recognized • Certificates
certification
Even for college bound students, many could be
better served with an interim step before major
financial commitments
Of students who enter a four college, 83% believe they will
finish in four years
• 35% of students will drop out during the first year
• 38% of students complete college in four years; 56%
within six years
• Only 32% of all students leave high school ready for
college level material
• An even smaller proportion among Hispanics and
blacks
• 1/3 of all first year college students are required to
take remedial courses - states vary significantly in
how to handle remedial development programs
"Pathways to Prosperity" study by the Harvard Graduate School of Education, 2011 &
Getting to Graduation: The Completion Agenda in Higher Education
 Online schooling can play a role across
traditional and new pathways

High School

Associate
Certificate
Degrees
Apprentice
Vocational, Community College,
Online School
4-Year
College

Grad
School
Employment
40
 Which students should be considered for
distance or hybrid learning pathways?
Which students should be advised to at least consider making a
different choice?
Candidates:
• Remote locations
• Special populations (not ethnicity)
• 1st generations, disability, etc
• Complex life factors/circumstances
• Time scarcity (inter-day and elapsed) due to job, family,
etc
• Affordability pressures
• Learning models
• Peer preference, hands-on orientation, extreme
individuality
For candidate where life demands constrain ability to attend
• Desire to start a career without debt
traditional school retaining control of learning pace and
delivery is essential and for others it could be the best option
41
 How do you evaluate distance learning? What
to look for?

 Accreditation: What type of accreditation does it carry? What is

the portability of the credits?
 Community: Who are the students? Are they engaged? What do
they think?
 Leadership: What are the credentials
 Career-focused: What do employers think? Are there strong
employer relationships and feedback?
 Track record: Is it proven?
 Support system: How does it work?

42
Summary
• Education changing
• Students are freed from traditional “one path only”
education
• Return on Education Investment becoming core
issues
• Career progression mindset becoming even more
essential
even to affluent students
• Online schools and hybrid delivery are valid options not
limited to the adult learner – can be a great compliment
traditional school
• Change is happening in higher education and online
learning is a major disruptor to traditional pathways
QUESTIONS?
 Appendix – School
Profiles

45
Originally Correspondence – Career Training has
Gone Online

School Name Penn Foster Ashworth U.S. Career Institute Career Step

• Online institution offering
career diplomas,
Description certificates, associates,
bachelors, and maters
degrees
• 180+ course offerings in
Diploma/Course business, health care,
Types marketing, technology,
trades, and education
• Regionally accredited by
Middle States and
Accreditation Nationally accredited by the
Distance Education and
Training Council
• Online institution offering
career diplomas,
certificates, associates,
bachelors, and maters
degrees
• Large variety of areas of
studies including business,
health care, marketing,
technology, trades, and
education
• Nationally accredited by the
Distance Education and
Training Council
• Online provider of
certificates for various fields
• Wide range of career
training programs
• Nationally accredited by the
Distance Education and
Training Council
• Provides online courses to
be completed in as few as
two months
• Offers six different programs
in medical and
administration fields
• None

Title IV Funding • No • No • No • No

Delivery Method • Online only • Online only • Online only • Online only

Price Range • ~$500-$1,500 • ~$500-$1,500 • $500-$2,000 • $1,500-$2,000

• Monthly payment plans • Monthly payment plans • $5 down payment • Monthly payment plan up to
Payment Options available available 12 months

• Significant discounts for up- • Significant discounts for up- • Significant discounts for up- • Limited time $400 discount
front payment and auto-pay front payment and auto-pay front payment and auto-pay for up-front payment
Note:
Discount Cost assumes noover
Strategy credit given
timefor past academic work over time over time
Source: Company websites and interviews
Career-focused Online Schools

School Name ITT Technical Institute Lincoln College Online Western Governors Allied American

• Career-focused private
college systems with 6
different schools: IT,
Description Business, Electronics,
Criminal Justice, Drafting and
Design, Health
• Offers Associate’s,
Diploma/Course Bachelor’s and Master’s
Types degrees
• Online campus of Lincoln
Technical Institute
• Associate’s and Bachelor’s
degrees offered
• Not-for-profit online university • For-profit institution offering
in education, business, IT, Bachelor’s and Associate’s
and healthcare degrees, and certificate
programs
• Bachelor’s and Master’s • Certificates offered in
degrees criminal justice, business,
computer information
systems and health care

Number of • ~70,000 • N/A • ~18,000 • N/A

Students
• Nationally accredited by the • Regionally accredited by the • Regionally accredited by the • Nationally accredited by the
Accrediting Council for New England Association of Northwest Commission on Distance Education Training
Accreditation Independent Colleges and Schools and Colleges Colleges and Universities Council
Schools
• Yes • Yes • Yes • For degree-seeking students
Title IV Funding only
• 140 U.S. Campuses • Online only • Online only • Online only
Delivery Method
• Online Option
• ~$40K for two year • ~$2,890-$4,250 per semester • $5,040-$16,800
Price Range associates degree
• Payment plans devised with • Payment plan for the length
Payment Options financial aid of the course
• No discounts • No discounts
DiscountNote: Cost assumes no credit given for past academic work
Strategy
Source: Company websites and interviews
 New Delivery Models and Funding Models
Emerge from Schools and Education Delivery
Channels
New Charter Southern New
Rio Salado
Straighterline University Hampshire Coursera Udacity MITx
College
(UniversityNow) University

Description • $99/month for • Accredited AS, • Community • Online • Free university • Free university- • Free online MIT
college courses BS, BA, and college accredited classes from level classes courses
($999 for entire Master’s offering online undergraduate partners like online • Also provides
freshman year) • Fixed tuition Certificate and and graduate Stanford, • Backed by online tools for
• Fully ($796/4 mos. for Associate’s degrees Princeton, U. of Charles River current on-
transferrable to undergrad) for degrees Penn., U. of Ventures campus MIT
partner colleges unlimited courses Michigan students

Online • Over 4,000 • Degrees in • Enrollments of • Over 80 liberal • 30 classes • 130K enrolled in • 120K students
Enrollments students served business and 20K in 20 arts and through early first 2 courses in its first course
through 2011 public policy program areas business majors 2013 as of March in March 2012
2012

Online • Self-directed • Online, self- • Uses • Experience run • Video lectures • 7-week classes • Interactive
Experience online courses paced with RioLearn, a through (10-15 min.) • Video lectures instruction,
with readings, exams via customized Blackboard • In-video quizzes with quizzes, online labs, and
presentations, webcam online LMS, • Access to with auto- homework due communication
review activities, • Personal advisor, for commun- resources like correct regularly among students
and homework direct faculty ication an online library • Q&A community • Online forums and professor
access assignments, for students
and tracking

Reviews / • Named one of • Subsidiary of • The largest • Only university • Raised $16M in • Twice profiled • Reviewed by
Press the "10 Most UniversityNow, online public on 2012 Fast venture capital by the New the New York
Innovative (affordable high- community Company list of in April 2012 York Times Times and
Companies in quality postsec. college in the the World's 50 • Highlighted in Boston Globe,
Education" for ed. advocate) nation Most Innovative TechCrunch, among others
2011 by Fast • Profiled by Companies, the Wall Street
Company Forbes ranked #12 Journal, etc.
 There are many different paths to the student
specific end game of 21st century career
readiness

Leaner
Capabilities*

Support
Systems*

Goal: a blend specific core academic skills, technical

and employability skills and expertise
* Learner capabilities: four proven skills needed to sustain “employability” (arches of the rainbow).
* Support systems: four areas including standards, curriculums, professional development, etc (pools at the bottom)
49
Online and Ground-based programs can be
evaluated based on accreditation

Paths to Accreditation
Department of
Education

Specialized Regional
Accreditation Accreditation
How Does the DETC stack up against Regional
Accreditors
•DETC is recognized by the US DOE under the same criteria as the
regionals
Recognition •DETC is recognized by CHEA, as are the regionals
•NACIQI has recommended that DETC’s accreditation be renewed
without condition

•DETC standards for degree programs track with and meet or exceed the
standards of regional bodies
Accrediting Standards •In addition to meeting these standards, DETC schools meet specialized
standards for distance learning

•DETC requires the same amount of credit hours and general education
credits for degree programs as the regional accreditors
Program Offerings •DETC reviews all programs before being offered; the regional
accreditors do not

Faculty •DETC standards for faculty are the same as each of the regional bodies

•DETC requires schools to employ frequent proctored exams to better

measure comprehension
Assessments •DETC schools utilize frequent online interactive activities with
instructors, which provide further measures of assessment

•DETC institutions undergo rigorous review every five years for renewal
Institution Review •Regional accreditors use 7 or 10 year review cycles