ERIC ED528948: The Costs of Online Learning. Creating Sound Policy for Digital Learning: A Working Paper Series from the Thomas B. Fordham Institute

0.45 MB·English

by  ERIC

Creating Sound Policy for Digital Learning

A Working Paper Series from the Thom as B. Fordham Institute

Summary: It’s impossible to put a single price tag on

“online learning” because, like cars, colleges, and
cottages, it comes in widely varying levels of quality The Costs of Online Learning
and efficiency. Instead, this paper attempts to esti-

mate average costs—and a range of costs—for online
By Tamara Butler Battaglino, Matt Haldeman, and Eleanor
learning as currently practiced in the U.S. It’s widely
Laurans
believed that online teaching and learning will save

money compared with traditional schools, and that

may be true under some circumstances. Certainly it’s
Online learning, in its many shapes and sizes, is quickly
possible. But the choices, trade-offs, quality consider-
becoming a typical part of the classroom experience for
ations, and timelines matter enormously.
many of our nation’s K-12 students. As it grows, educators

In these pages, we estimate the costs of blended- and policymakers across the country are beginning to ask
learning models and fulltime virtual schools as the question: What does online learning cost? While the
currently operated in the U.S. We find that average answer to this question is a key starting point, by itself it
overall per-pupil costs of both models are significantly has limited value. Of course there are cheaper ways to
lower than the $10,000 national average for tradition- teach students. The key question that will eventually have
al brick-and-mortar schools—and that virtual schools to be addressed is: Can online learning be better and less
are cheaper on average than blended schools. Yet expensive?
there is wide variation in spending among both virtual
and blended-learning schools. So we express our cost Ultimately, new technology-rich education models will
estimates as ranges rather than precise figures—and need to be evaluated based on their productivity, that is,
we pay ample attention to trade-offs, start-up costs,
the results that they produce relative to the required
professional development, and other key variables.
investment. Unfortunately, within the nascent field of
These ranges are illuminating—from $5,100 to $7,700
online learning, this information simply isn’t yet available.
for virtual schools, and $7,600 to $10,200 for the
While embracing the need to understand and illuminate
blended version—but much better data on both costs
both costs and outcomes, our goal in this paper is to
and outcomes will be needed for policymakers to
explore the cost issue. We seek, to the extent possible, to
reach confident conclusions related to the produc-
compare the costs of digital education on various
tivity and efficiency of these promising new models.
dimensions with the costs of traditional brick-and-mortar

schooling in order to help lay the foundation for the

ultimate lens on productivity.
Additional papers appearing in this series include

“Quality Control in K-12 Digital Learning: Three
(Imperfect) Approaches” by Frederick M. Hess; This analysis is not straightforward, of course, because
“Teachers in the Age of Digital Instruction” by Bryan C. costs vary within digital education just as they do within
Hassel and Emily Ayscue Hassel; and “School Finance in brick-and-mortar schooling options. Educators and
the Digital-Learning Era” by Paul T. Hill. A forthcoming policymakers pursue online learning for different reasons
paper will tackle questions surrounding governance in and adopt different flavors of technology-rich models.
the digital realm. This working paper series is generously Broadly speaking, today’s policymakers and educators
supported by the Charles and Helen Schwab appear to pursue online-learning solutions for one or more
Foundation. of three primary reasons: to reduce overall costs (often in
response to budget shortfalls); to increase the range of

T amara Butler Battaglino is partner of The Parthenon Group and
c o-founder and co-head of the Education Center for Excellence;

Matt Haldeman and Eleanor Laurans are principal and senior
principal of The Parthenon Group, respectively.
course offerings available to students (such as achievement, graduation rates, or other outcome
advanced or remedial classes or unusual subject areas); measures. By contrast, while public-education reform
or, more radically, to use technology to rethink the has remained frustratingly stagnant, technology has
traditional teaching-and-learning model (primarily been arguably the major driving force of productivity
reflecting a leader’s instructional vision, but often improvement in many other parts of our economy.
linked to budgetary considerations). Of course, From investment banks to grocery stores to vacation
resource allocation varies significantly across these planning, big and small businesses have used
categories. Some models explicitly look for savings, technology to accomplish more with less.
while others aim to free up resources from one area for
use elsewhere. Therefore, we caution readers against Why has technology had so little impact on our nation’s
looking for one simple “price tag” for online learning, or public schools? Technology has been used
assuming that savings necessarily translate into a lower predominantly to supplement the traditional model—a
overall cost per pupil. For schools that deliberately use row of computers in the back of a classroom, or a smart
technology to reduce costs in one category in order to board at the front. (For existing schools, the time and
free up resources to invest elsewhere, the “savings” are costs required to transition to the use of technology as
often an important component of the school’s overall anything but an “add on” are often too difficult.)
resource-allocation strategy. Still, current and future Meanwhile, the fundamental classroom structure (one
economic pressures could require school models, both teacher standing in front of a group of students) has
traditional brick-and-mortar and online, to cut costs (or remained the same for the past fifty-plus years. Given
keep costs neutral) relative to today’s per-pupil funding the lack of improved student outcomes, this has
levels; this is possible, but further innovation in the field translated to the same output at greater cost—in other
is required to ensure that robust student outcomes are words, reduced productivity. In economics, this is
achieved. known as Baumol’s Disease: Too often, labor-intensive
organizations increase expenses without improving
With these important caveats in place, we use this productivity.1
paper to explore the costs and resource-allocation
strategies that have emerged in today’s online-learning As noted above, our hope is that any investment in
landscape. We present average cost figures for both classroom technology leads to an increase in student
virtual and blended models (for definitions, see “Types outcomes. Today’s limited availability of reliable and
of Models,” below). The goal of this paper is to consistent cost and outcomes data prevents robust
articulate the size and range of the critical cost drivers conversations related to productivity. Particularly for
for online schools in comparison to traditional brick- those entrepreneurs who aim to use technology to
and-mortar schools, in order to understand how cost rethink the classroom, an interesting debate has
categories have the potential to change when emerged in the field as to whether bold new models
technology is used in the classroom. The information must demonstrate that they are at least cost neutral at
presented here results from interviews with more than their inception. One camp contends that cost pressures
fifty entrepreneurs, policy experts, and school leaders. are what will ultimately drive wider-scale adoption, and
These interviews informed the set of estimates so new models must be cheaper from day one. Others
regarding the cost of virtual and blended schools across argue that the degree of innovation taking place in
a number of categories. As always, in a nascent, ever- some classrooms today requires a temporary respite
changing field like online learning, we emphasize that from focusing on cost. To them, this would ensure that
these figures represent at most a helpful starting point, solutions are designed to address the needs of students
rather than a definitive answer. and teachers, with the business model left to be
revisited once the appropriate solutions have been
Before diving into the discussion of cost, it is worth identified. Given current market dynamics and
sharing a few observations about the historic investments by philanthropic organizations, we will
productivity of education technology. Long before our likely continue to see a range of innovation that
latest wave of online learning and digital innovations, includes both cost-neutral and resource-intensive
school districts spent enormous sums to equip solutions. We will likely also see some innovations
classrooms with televisions, personal computers, laser- accompanied by lower net costs. This variation is
disc systems, VCRs, and more. Decades and billions of healthy for the field. Costs and resource allocation must
dollars later, it is difficult to point to any evidence continue to be an active topic for conversation as
suggesting that technology has impacted student innovation and evaluation unfold.
2 | The Costs of Online Learning
Types of Models Blended: In blended schools, by comparison, students
attend brick-and-mortar schools where they alternate
A decade ago, the majority of online learning was 100 between online and in-person instruction. (Examples
percent virtual in nature—i.e., carried out entirely include Carpe Diem, KIPP Empower LA, and Rocketship
outside of brick-and-mortar schools. Yet today, a wide Education.) In many of these schools, educators regard
range of online models currently exist. (In a recent technology as a tool used to personalize instruction
report, authors Michael Horn and Heather Staker that is integrated into the overall school model. In
profile forty-eight unique approaches.2) For the theory, though still in the early stages, technology can
purposes of examining costs, we will focus on two help to provide a range of content and modalities for
broad categories: virtual and blended. each student depending upon his or her academic
strengths, prior achievement, areas for development,
Virtual: In virtual schools (examples include Florida interests, and learning styles. We examine two main
Virtual, K12 Inc., and Connections Academy), all types of blended models, “rotational” and “flex.”
instruction takes place online. Students still interact
with live teachers, listen to lectures, work on Students in blended schools with rotational models
homework, ask questions, and more, but all activities spend a specific amount of time (typically one or two
occur at a distance, with interactions facilitated by periods a day) participating in online learning. The
technology. online-learning sessions are a defined portion of each
school day, and students receive technology-enabled
Virtual options currently serve both full- and part-time personalized instruction within those blocks of time.
students. The former often either: a) have significant This dubbed “rotational” blended learning given the
travel schedules or other constraints on their ability to predictable amount of time that is spent online.
engage fully with in-classroom learning on a regular
basis, or b) are frustrated (for whatever reason) with Example: Rocketship Education is a California-
their neighborhood schools. The part-time students based charter-school network focused on
often take one or more courses online to supplement parent empowerment, teacher development,
the offerings available through their local brick-and- and individualized learning. Rocketship com-
mortar education. This is necessary as many schools, bines traditional classroom teaching with
particularly smaller schools and those in rural areas, individualized instruction through its “Learning
struggle to provide students with a wide range of Lab,” in which students spend one-on-one time
course options (e.g., advanced or remedial courses not on computers utilizing online adaptive educa-
already offered, or specialized course topics). Although tional programs and receive instruction in
predominantly purchased by schools on behalf of their intensive tutor-led small groups to master basic
students, online learning can be and is purchased by reading and math skills. The Rocketship model
other agencies as well (e.g., prisons, hospitals, day-care generates approximately $500,000 annually in
centers, and military bases). cost savings per school of 450 students, which
can then be reallocated toward higher teacher
Example: Florida Virtual School (FLVS) is the salaries and professional development, among
nation’s first statewide, online public high other things. Additionally, as a result of these
school and currently offers options across all cost savings, Rocketship schools are able to
grade levels for both full-time and part-time operate sustainably on traditional public-school
students. Instruction takes place online; funding and without additional philanthropic
students select their courses and then complete funds.
assignments, quizzes, and tests at their own
pace. Home-schooled students in and out of Blended schools with a flex model utilize a “workplace
Florida can take online courses; Florida Virtual model,” where students follow their own path online,
has also partnered with many school districts checking in with an instructor when they have
nationwide to provide online supplemental questions. The amount and nature of the time spent
options for students. The school, for instance, online varies by student and by day—and sometimes
offers more than a dozen online AP courses for even by hour. The level of technology-enabled
high school juniors and seniors. personalized instruction is driven by the student needs
on any particular topic or day and is thus less
The Thomas B. Fordham Institute | 3
predictable, so these models are often referred to as Figure 1 outlines the variation in online-learning
“flex” models. models. The average per-pupil figure of approximately
$10,000, not including central administrative costs,
Example: At Flex Academy, a full-time combines all public-school types (elementary, middle,
California-based blended school using K12 Inc. and high school) across the U.S., without regard to
curriculum, the educator-to-student ratio is district or state variations.3 The virtual-school number
about one to twenty-five (with a credentialed- represents an estimate for full-time high school
teacher-to-student ratio of approximately one students. The blended figure represents middle school
to forty-two), but class size is typically five to students, as some of the most promising blended
eight students. Students often pursue online models are middle schools. Additionally, as scale can be
learning or work on projects with supervision by a critical factor in determining on-going costs, our cost
paraprofessionals, and spend only a portion of numbers reflect schools with enrollments of
their time participating in face-to-face classes approximately 500 full-time equivalent (FTE) students.
with credentialed teachers. Students progress
through online curricula at their own pace, As is evident in Figure 1, the traditional school model
complete hands-on projects and science labs, spends over half of its budget on labor, with the
and connect one-on-one or in small groups with majority of the remainder allocated to school
instructors when they need specific concepts operations. Content and technology costs combined
explained or when the teachers want to engage are a tiny fraction of overall costs. A blended model, by
or inspire the students with a certain comparison, has the potential to save approximately
educational activity. Flex Academy parlays its $1,100 per student (11 percent). By significantly
labor-cost savings into more spending on reducing school-operations costs, a virtual school can
curriculum and technology. potentially save approximately $3,600 per student, a
savings of more than a third over a traditional school.
Resource-allocation Cost Categories These cost estimates reflect the current variation in the
field. They are not a guarantee of quality, given
Historically, public-school districts have had relatively insufficient data on student outcomes associated with
little budget flexibility, due to so much of their budgets the range of models.
being tied into multi-year contracts, tenured staff, and
other fixed obligations. Recently, however, innovative Figure 1. Estimated Per-Pupil Expenditures
technology-rich school models have begun to
$12,000
experiment with new ways to repurpose limited dollars.
Many of these innovators are charter schools or
vendors to traditional schools, which have the flexibility
$10.0K
$10,000
to pursue options unavailable to many traditional Student
district schools. Services $8.9K
Student
School
Services
While we frame such cost changes as “savings” below, $8,000 Operations
many entrepreneurs in the field view online learning as School
Operations
an opportunity for reallocation of resources away from Content
$6.4K
an existing category and toward a new strategy aligned $6,000 Technology Student
with the school’s overall vision, which may or may not Content Services
School
yield net savings in the end. Rocketship Education, for Operations
instance, “saves” about $500,000 per school of 450
$4,000 Technology
students per year by decreasing teacher and facilities
Faculty &
costs relative to traditional elementary schools through Admin Faculty & Content
its online “Learning Lab.” But as part of its model, the Admin
organization reinvests this money in talent $2,000
Faculty &
development, academic deans, response to
Admin
intervention, higher teacher salaries, and future scaling.
Other virtual or blended schools have experimented $0
with reallocating savings toward lowering student- Traditional Model Blended Model Fully Virtual Model
teacher ratios, improving school facilities, and more. Variation: N/A +/-15% +/-20%

4 | The Costs of Digital Learning
One important note: For online and blended students, ratios, salaries, and more. At its most basic level,
costs are sometimes reallocated in different ways that calculating labor costs per pupil is a simple equation
do not mean savings from an overall systems with two variables: the number of instructors and the
standpoint. A virtual school, for instance, may not average costs associated with those instructors
charge for certain services (i.e., special-education (recognizing that these may vary at different points in
services) that are provided by the home district. This the school day). Reducing labor costs through the use
does not represent savings from a system level; it of technology necessarily involves either decreasing the
simply means that costs are divided between the virtual student-instructor ratio or reducing average instructor
school and a student’s home district. payout, typically by modifying the overall instructor
mix, combining the use of traditional teachers with
The cost figures outlined in Figure 1 represent other instructors such as paraprofessionals or aides.
estimates gathered from available public documents
and conversations with experts and vendors within the Two related costs that are often overlooked in blended
field. A wide variety of funding levels exists within and virtual schools are professional development and IT
online learning; for example, research on virtual-school costs. Training is a critical component for online
funding reveals that virtual schools are operating on schools, as most teachers (and other staff) must learn
funding levels that range from below $4,000 per new skills that allow them to be effective within a new
student to above $9,000 per student. Given this school model. Additionally, virtual- and blended-school
fluctuation, we also provide an estimate for variation models often require additional IT support—and many
within each figure (although outlier models at both the such schools employ one or more IT support staffers.
high and low ends do not necessarily fall within these
bands). Labor in the Virtual Model. As Figure 2 indicates, an
average estimate for labor costs in the virtual model is
Note once more that these figures outline current cost $2,600 per student, with potential variation of about 15
estimates within the field, as opposed to ideal or percent in either direction. Along this range are virtual
recommended expenditures. They do not speak to schools with relatively similar labor models compared
school quality or student outcomes, and are simply with traditional schools as well as those virtual schools
meant to provide a framework for important resource- with significantly reduced labor costs. Among those
allocation decisions at blended and virtual schools. with the relatively more resource intensive labor model,
Note, too, that state funding levels often drive the cost for instance, some virtual schools utilize a class-size
base for online learning; the ability and willingness of ratio of one teacher per twenty-five students (similar to
states to fund online learning sets the baseline for traditional districts) and pay virtual teachers according
online costs. In this analysis, we attempt to separate to the same pay schedules as teachers in brick-and-
costs and funding as much as possible. mortar schools, resulting in similar labor costs. At
times, the decision to invest in comparable levels of
The next few pages outline the five primary cost-driving instructional expenditures has been driven by state-
categories that differentiate schools’ resource- wide collective-bargaining agreements (required by
allocation strategies: labor, content acquisition, state law) and at other times by school leaders’
technology and infrastructure, school operations, and instructional vision (which could reflect typical student-
student-support services. Within each category, certain teacher ratios or varied approaches to staffing levels
expenses are non-negotiable, while others have the and structures).4
potential to be cost-savings levers. Figure 2, on page 6,
outlines the important key cost considerations for each On the other end of the cost spectrum, virtual schools
category (and is subject to the same caveats and with lower labor costs typically either a) increase
conditions as noted above for Figure 1). student-teacher ratios, or b) reduce teacher salaries by
transitioning to a part-time or paraprofessional
Cost Driver 1: Labor workforce. It is interesting to note that the student-
teacher ratios at virtual elementary schools is often
Labor (which typically makes up well over half of significantly higher than at virtual middle schools or
district budgets) represents the largest opportunity to high schools that have additional support expenses
rethink resource allocation and seek possible “savings.” such as guidance counselors and others. Elementary
Not surprisingly, online schools vary widely in terms of schools also often require that a parent or someone
human-capital structure, including student-teacher else on the ground play the role of a live “coach” who
The Thomas B. Fordham Institute | 5
Figure 2. Cost Bands for Virtual- and Blended-School Models

Virtual Model
Category Cost Estimate Fluctuation Cost Levers
Student-teacher ratio
Labor (Teachers and Teacher salary
$2,600 +/- 15%
Administrators) Professional-development delivery (virtual
or in-person)
Content quality (level of personalization)
Content Acquisition $800 +/- 50%
Inclusion of content-management system
Computer purchases or Internet subsidies
for students
Technology and
$1,200 +/- 25%
Infrastructure Additional instructional hardware (i.e.,
webcams) for teachers
Facility size (determined by whether
teachers work remotely)
School Operations $1,000 +/- 20%
Transportation (field trips and state
testing)
May potentially change depending on
Student Support $800 +/- 0% student mix, but a critical component of all
schools
$5,100 –
Total $6,400
$7,700

Blended Model
Category Cost Estimate Fluctuation Cost Levers
Time spent in computer-facilitated learning
Human capital during computer-facilitated
Labor (Teachers and
$5,500 +/- 15% learning
Administrators)
Human capital model for the remainder of
the day
Content quality (level of personalization)
Content Acquisition $400 +/- 50%
Inclusion of content-management system
Technology and Student-laptop ratio
$500 +/- 20%
Infrastructure Wireless needs
Potential small cost savings around
School Operations $1,700 +/- 5% facilities and transportation from
staggering student schedules
May potentially change depending on
Student Support $800 +/- 0% student mix, but a critical component of all
schools
$7,600 –
Total $8,900
$10,200

6 | The Costs of Digital Learning
assists the virtual teacher. The cost of the parent monitor and support students while they use
“coach” is not included in the cost estimates for the computers. At New York City’s School of
elementary school alternatives, which is why we have One, for instance, student-teachers or
focused our analysis on middle school blended models paraprofessionals (with lower average
and high school full-time virtual models. As an salaries) supervise online lessons, while
additional cost-saving measure, online schools may certified teachers are used to deliver live
resort to virtual professional instruction (i.e., instruction.
professional development using a webcam and online
forums), saving money on teacher training and (3) Human capital during the remainder of the
facilities. day. For many blended schools, the school
day beyond the online portion is unchanged.
Often overlooked, virtual schools typically have a However, some blended models have chosen
principal and other administrative supports. Although a to rethink the remainder of the day, often by
virtual school may potentially see some administrative repurposing funds that have been made
savings by eliminating an assistant principal position available by lower-cost online portions of the
(for example), the addition of necessary IT staff often day. For instance, some schools will
cancels out any potential savings. significantly lower class size; others will move
to a longer school day.
We observe some correlation between lower-cost labor
models and lower overall per-pupil funding, but also Cost Driver 2: Content Acquisition and Development
see different labor models in schools operating within
the same states with the same funding levels. Thus Content costs in a traditional brick-and-mortar school
external factors explain some, but not all, of the are relatively small compared to total per-pupil
variation in labor models. spending; some districts spend less than $200 per
student on instructional materials. However, the very
Labor in the Blended Model. The blended-learning definition of the word content changes significantly for
model typically has smaller labor savings than the virtual and blended schools. In a traditional school
virtual model, as blended schools inevitably have labor setting, content typically refers to the supporting
needs (i.e., lunch duty, detention) that virtual schools materials used by teachers for face-to-face instruction:
do not have. These blended schools are also unlikely to textbooks, workbooks, manipulatives, videos,
experience any cost savings in terms of reduced instructional games, and more.
administrative expenses. An estimate for blended-
school labor costs is $5,500 per student, again Online schools, by comparison, spend content dollars
fluctuating by approximately 10 to 15 percent on either on tools that traditional schools typically do not use,
end. Three drivers dictate labor costs at blended such as data integration/management tools—which are
schools: time spent by students in computer-facilitated often sophisticated (and expensive). Not surprisingly,
learning, the type of staff employed to supervise this costs in this category can vary tremendously. Some
computer-facilitated learning, and instructional staffing online schools spend even less on content than
models for the remainder of the day: traditional schools, utilizing mostly open-source and
teacher-created materials. Alternatively, other models
(1) Time spent in computer-facilitated learning. have opted to spend millions of dollars on content
Blended models vary dramatically in the development in order to produce unique, proprietary
percent of the school day that students spend learning-management systems that are often used
online. At flex models like AdvancePath or across multiple schools. There are three primary types
Flex Academy, students spend the majority of content, each used to differing degrees by full-time
of their time online (or working on virtual programs and blended programs.
independent projects); those attending
rotational school models like KIPP Empower Open-source/teacher-created content. This
only spend a period or two online daily. option is typically the least resource intensive;
content is either posted online for free (e.g.,
(2) Human capital during computer-facilitated web videos from Khan Academy) or developed
learning. Some school models have realized by teachers who are paid a small fee. A free
savings by employing lower-cost staff to content-management system (e.g., Moodle)
The Thomas B. Fordham Institute | 7
can be used to integrate teacher-created content-management system, and the cost of
content. Although schools can minimize or purchasing and shipping materials to students. Our
reduce expenditures on content through this estimates (visible in Figure 2 on page 6) reflect a school
option, they may invest more in labor to that has chosen to purchase content rather than
manage and maintain these homegrown develop its own—which is increasingly common for
systems. These labor costs are often under- virtual schools given the rise of the Common Core
stated as they use existing staff time, but the standards and wide variety of online-content vendors
opportunity costs associated with these efforts offering courseware to virtual schools. Given that labor
can be significant and should be considered. costs are already included in our model, we also assume
that the virtual school has chosen to purchase content
Off-the-shelf online content. Purchasing content offerings that do not provide access to an instructor, as
requires expenditures on individual courses or virtual schools typically employ their own teachers.
bundles of courses. For online content, the Although an individual course may cost about $75 per
major distinction is whether the course comes student, offerings for full-time virtual schools are
with a virtual instructor to assist students. typically priced on a per-seat (as opposed to per-
Course pricing is typically about $75 per course course) basis, and access to a full suite of courses can
without instructors, compared to between cost as little as $200 per student.
about $200 and $400 with instructors. (This is
calculated per semester-long course, though Even for schools that purchase off-the-shelf content,
courses can be bundled and/or priced on a per- however, price varies depending on the complexity of
seat basis as well.) The price of courses without the product and level of services provided. More
instructors continues to decline; once expensive courses are often highly personalized;
developed, these courses can be delivered to individual students receive different content in order to
almost any school for minimal cost and can be meet their learning needs more directly. For instance,
recycled over time. Courses with instructors, by for some content, results of student performance on
comparison, appear to have more stable (and integrated tests and quizzes fully or partially determine
recurrent) costs, as scale does not materially the content students receive. These vendors will also
impact the human-capital costs. often mail students a range of physical materials,
including textbooks and science equipment for
Large-scale development of content. At costs of experiments, as opposed to providing them with
millions of dollars (both public and private), electronic materials.
some districts, states, and school operators
have chosen to hire large content-development Content Acquisition in the Blended Model. As at virtual
teams to create courseware, proprietary schools, the cost of content at blended schools includes
learning-management systems, and more. courseware, a content-management system, and
Given the significant levels of up-front student material. Electronic or online content costs at
investment required, content development can blended schools are often lower than at virtual schools,
make sense to the extent that a district, state, however, simply because students spend less time
or school operator expects to achieve engaged with online courseware. For blended schools,
significant scale of enrollments and be able to we estimate a content cost of $400 per student
amortize the costs over time. (Our ongoing cost (fluctuating by 50 percent), which assumes a school
estimates consider only school content purchases off-the-shelf products (this would be in
purchases; for more on the issue of build vs. addition to the cost of content for the off-line portion
buy, see the “Start-up, Size, and Scale” section of the day). A handful of blended schools have chosen
below.) to develop their own online courses from a variety of
open-source content, which drives down the cost of
Content Acquisition in the Virtual Model. Many full-time content. For instance, eCADEMY, a district-wide
virtual schools choose one of the latter two options program within the Albuquerque Public Schools
listed above, either purchasing off-the-shelf content or system, represents a low-cost approach; the school
investing in large-scale development. We estimate that pays its teachers a small fee to develop their own
content costs for virtual schools average approximately courses. With the increase in open-source content, and
$800 per FTE student, but these fluctuate significantly. a variety of free online options, some schools choose to
Included in this estimate is the cost of courseware, a reallocate content dollars to other areas.
8 | The Costs of Digital Learning
One important cost tradeoff (in terms of both labor and (typically about 15 to 25 percent of total budgets) on
content) for a blended school is the amount of time non-instructional operations. In some cases, virtual and
that students spend online. More online time generally blended schools have managed to reduce these costs
means fewer teachers, but also requires robust (and to almost nothing; in other examples, they actually pay
often relatively expensive) content to substitute for more within these categories.
reduced teacher time. Typically, the shift toward more
online instruction tends to produce net savings for the School Operations in the Virtual Model. Virtual schools
school, as reduced labor costs outweigh increased typically spend far less on school operations ($1,000 per
content costs. student) than an average traditional school, and some
less resource-intensive models have found ways to
Cost Driver 3: Technology and Infrastructure reduce these figures further. Virtual schools experience
savings in terms of custodians and food-service
Technology, often a minimal portion of a traditional employees, but they do incur some operational costs.
school’s budget (about $200 per pupil) is a far more Virtual schools also have facilities costs; in most states,
significant expense for online schools. Infrastructure is they are required to have a physical location for school
often a critical roadblock as traditional brick-and- administration and staff. Some virtual schools require
mortar school systems look to integrate blended and teachers to work from a central location, while others
virtual options. For a traditional school looking to allow them to work from home—a decision which
transition to blended learning, the key question is what obviously has implications for facilities costs borne by
infrastructure (i.e., hardware, software, connectivity) the taxpayer. And some resource-intensive virtual
already exists. The answer could mean a difference in schools spend money on field trips, student get-
hundreds of thousands of dollars. togethers, and related transportation expenses.

Technology in the Virtual Model. Technology costs have School Operations in the Blended Model. In theory,
the potential to be a large portion of a virtual school’s blended schools have the potential to save money on
costs, with an average estimate of $1,200 per student. both facilities and transportation, but few schools have
Regardless of the virtual-school model, schools must begun to realize this potential. As a result, our cost
pay for teacher instructional devices (i.e., computers or estimate of $1,700 per student is only slightly lower
tablets); infrastructure costs (i.e., connectivity, storage, than the average at traditional schools. A system of
and servers), which are often outsourced to vendors; staggered student schedules could potentially reduce
and maintenance. Virtual schools may opt for the needed building size or the number of students
additional expenses either to a) offer their students requiring transportation on a daily basis—although
instructional devices (each his or her own computer or facilities and busing are typically managed at the
tablet), as well as Internet connectivity subsidies; or b) district level, sometimes even for charter schools.
offer teachers additional teaching aids, such as Rocketship Education and Carpe Diem are two of the
webcams or document cameras. pioneers in this space and have actually sought and/or
built smaller facilities as a result of the online options
Technology in the Blended Model. Technology is not they provide students.
necessarily a large cost for a blended school, with an
average of $500 per student. Like virtual schools, Cost Driver 5: Student-support Services
however, blended-school models must pay for teacher
hardware, infrastructure, and maintenance. Some Guidance counselors, special-education teachers, and
rotational blended schools do not need to pay more for other student-support services (which typically cost up
technology than a traditional school with a robust to about $800 per student in a traditional setting)
computer lab. On the other hand, models like Flex cannot be ignored when considering the costs of online
Academy or School of One demand a one-to-one learning. At blended schools, these additional costs
student-to-computer ratio and wireless connectivity (mostly labor) are more easily aligned to the regular
throughout the school building. school day. At virtual schools, these support services
can be significant expenses that require in-person visits.
Cost Driver 4: School Operations
Student-support Services in the Virtual Model. Student-
From transportation to custodians to food services, support services are often overlooked in virtual-school
traditional schools spend significant amounts of money cost models, but they can be a significant expense
The Thomas B. Fordham Institute | 9
when factoring in the appropriate teacher- and and other products à la carte from outside vendors
counselor-support ratios and the associated travel costs (some start-up costs and required ongoing vendor
for live support. In addition to teachers, guidance support); or 3) developing an entirely homegrown
counselors and special-education teachers have a solution including content (high start-up costs incurred
critical role within all schools (online and otherwise). by the state or district, investment in internal capacity
Some virtual schools have sought to reduce expenses required to sustain operations on an ongoing basis).
by combining roles (i.e., requiring principals and/or States and districts looking to develop an online school
teachers to play guidance roles in addition to their have to answer this ultimate “build versus buy”
traditional roles), though limited data are available on question: Should they spend millions in start-up costs
the efficacy of the various models. The cost estimate tailoring a product to individual needs, or build on the
we provide for virtual-school student supports is similar experience and research of an established vendor?
to the average for a traditional school, at roughly $800 Ultimately, the build-versus-buy question hinges on a)
per student per year, although it certainly varies the vision for scale, and b) the need for customization.
depending on the student populations served. States and districts that build their own online offering
Although, in reality, many virtual schools provide typically either expect sufficient enrollment to cover
student-support services at lower cost, this figure is initial investments or are working to develop an
representative of school models that are investing in innovative or customized model not currently offered
meaningful levels of student supports to ensure the by outside providers.
development of the entire student. We expect to
observe continued innovation in the area of student It is important to remember, though, that start-up costs
supports in the short and long term. don’t have to be a barrier to developing online-school
models. Today, states, districts, and school operators
Student-support Services in the Blended Model. Student- can benefit from organizations that have already
support services at blended schools are also likely to be developed effective models. In states such as Georgia,
in line with traditional support costs. We have assumed Wisconsin, and Pennsylvania, outside providers have
an estimate of approximately $800 per pupil, similar to set up virtual schools, bearing almost all up-front costs,
the virtual-school costs described above. Although in exchange for per-pupil funding typically between
blended-school models often find innovative ways to $5,000 and $7,000 (which includes a management fee
reallocate resources, given the current state of the of about 10 to 15 percent). In this arrangement, an
field, we have not assumed a reduction in student- outside vendor incurs the start-up costs and recoups
support services. Again, this is an area where we expect the investment over time, reflected in higher annual
to see ongoing innovation. operating costs for the state or district.

Start-up, Size, and Scale Aside from facilities (which are a significant start-up
cost for blended schools), the differences in these initial
Start-up costs are a critical component of virtual- and costs for virtual and blended schools are reasonably
blended-school development—as of any major similar. Course development and technology
innovation in education (and other fields). Online (hardware, connectivity, servers, etc.) are two large
learning offers new resource-allocation possibilities in cost buckets, but both can be acquired through leases
the long term, but it is accompanied by a number of from outside providers for an annual fee. Adequate
unique start-up costs, including content development planning time for the principal and school-leadership
and acquisition, hardware, software, storage, servers, team is another critical investment for blended, virtual,
and more. For a state or district looking to price out a and traditional schools. Often overlooked, professional
new virtual or blended school, the costs associated with development can also be a substantial additional cost
online learning before a single student enrolls can easily for virtual and blended schools. Most traditional
reach the millions. teacher training and preparation is geared toward
traditional models of instruction, and retraining
Policymakers and school operators have three options teachers (and rethinking instructor roles) is a new area
in tackling start-up costs for virtual schools: 1) that many schools are just beginning to tackle. Finally,
purchasing a complete turn-key solution from an recruiting and marketing to students, as well as
outside provider (limited start-up costs incurred by the community outreach, are often significant concerns for
state or district and ongoing expenditures with one or new, innovative school models that might potentially
more external vendor); 2) purchasing content, servers, face skepticism from parents.
10 | The Costs of Digital Learning