Key points:
- Online learning needs to be a core competency to compete in today’s market
- 4 areas poised to impact the future of higher education
- Online learning isn’t about juicing enrollment–it’s about transforming outcomes
- For more news on online learning models, visit eCN’s Teaching & Learning hub
More than ever, higher education is high stakes. Evolving to keep up with the market is imperative for universities to remain competitive and financially stable. But this strategic shift presents significant challenges, requiring substantial investments in areas where institutions may lack the expertise they’ve developed in their campus programs–like online learning.
Online learning programs are growing more sophisticated and increasingly intertwined with the strategic goals and vision for higher education.
At many universities, departments continue to expand their online offerings and refine digital capabilities across undergraduate, graduate, and professional programs. At other institutions, where online programs may still be in their nascent stages, schools are scrambling to catch up to their peers.
No matter where institutions are at in their digital journey, sustaining online learning programs–and ensuring their long-term viability–requires ongoing investment and smart financial planning.
Higher education leaders face a critical decision about how to invest in online programs: fee-for-service (FFS), a revenue share model, or a hybrid approach that blends the best aspects of each approach. Many schools aren’t entirely sure of the answer–or how to assess the risk and reward of each model to determine the best fit for their long-term objectives.
What’s the best finance model for your institution? Ultimately, the right choice depends on your institution–and how it fits with your unique financial situation, online learning experience, and strategic priorities.
Fee-for-service vs. revenue share: Understanding the pros and cons
Neither an FFS or revenue share model is inherently better than the other. They simply function differently and offer their own distinct advantages and disadvantages.
With FFS, you’re essentially operating on an agency model. You pay for services upfront–like marketing, enrollment, and student support–and in return, you receive full transparency and oversight. That’s great for institutions that already have a strong online learning infrastructure and want to refine their approach, mature programs, or eventually run online learning independently.
But for schools still finding their footing in the digital education space, FFS may not be a great option. Although FFS offers more control over spending and operations, it also comes with a large upfront investment and requires ongoing resources to sustain programs.
Revenue sharing, on the other hand, allows universities to launch and scale online programs without a major upfront investment. In this model, the provider shares in the financial risk, funding the marketing and recruitment efforts in exchange for a portion of tuition revenue. As a result, these agreements help align incentives and foster accountability, with both the institution and the provider invested in the program’s success.
A revenue-sharing model can offer significant advantages for schools looking to build online programs and sustain enrollment over many years. If your university is looking to get a program off the ground and demonstrate success before you scale, revenue sharing is often the most effective approach.
Selecting the right model starts with asking the right questions
By understanding the full range of financial options available–and how each can apply to your institution’s unique needs and capabilities–you can make a more informed decision about financing online learning.
The process begins by asking the right questions. So, as you weigh the pros and cons of FFS vs. revenue sharing, here are four key questions to ask yourself about online learning.
1. What are your institution’s most important goals?
Every university has unique priorities and objectives for online learning–and these goals should be at the center of choosing a financial model.
For example, are you looking to rapidly grow enrollment to bolster your brand and accelerate market expansion? Revenue sharing might make the most sense. If you’re more focused on building internal expertise and capabilities, FFS is likely the better option because it allows you to maintain greater control over your operations.
2. What are your current resources and bandwidth?
FFS often offers more transparent and potentially more cost-effective services in the long run, with universities paying directly for specific services. That makes it an appealing option for schools with established online programs and internal marketing expertise.
The downside? FFS requires significant upfront investment and internal resources dedicated toward online learning, and it comes with greater potential for risk: Your university assumes the financial burden regardless of the program’s outcomes. Successful FFS models necessitate that your institution has the financial means, buy-in from leadership, and organizational capacity to support online learning from the start.
Revenue sharing, on the other hand, functions as a no-interest loan, where the provider assumes the financial risk in exchange for a portion of future tuition revenue. This model can be particularly attractive if your institution has a constrained budget or lacks internal capabilities such as in-house marketing, recruitment, and student support services.
When money’s tight–and competing institutional priorities may take precedence over online learning–revenue sharing can provide a higher level of external expertise and a more accessible path to launch online programs without the high up-front costs.
3. Where do you want your online program to go?
Ultimately, you want to support online learning programs in a way that will lead to long-term viability and alignment with your institution’s broader mission.
For some institutions, that could mean a self-sufficient online program that is eventually managed independently. If that’s the case, an FFS model could provide a clear path to help build internal expertise, refine capabilities, and maintain transparency over operations.
Other institutions may be more focused on sustaining programs without overseeing operations on their own. In this scenario, it’s critical to maintain continuous investment in student recruitment and retention as online programs often experience an initial surge in enrollment before hitting a plateau.
If that’s the case, a revenue-sharing model is likely your best bet–providing performance-based incentives, accountability measures, and aligned goals to support ongoing marketing and continued enrollment growth into the future.
4. What options do you have at your disposal?
Fortunately, institutions no longer have to make a rigid choice between FFS and revenue-share models. Hybrid models are emerging as an increasingly attractive option, offering a balanced approach that blends aspects of both FFS and revenue sharing.
Some universities are embracing co-investment models, where they contribute to marketing costs in exchange for greater transparency and control. This hybrid approach incorporates per-credit fees with performance-based incentives, ensuring both cost efficiency and provider accountability.
Others, particularly those looking to build internal capabilities over time, are exploring hybrid models that provide short-term support without long-term commitments.
For instance, a new “bridge” FFS model is specifically designed for institutions that want to take their online learning in-house but need an interim solution to get their programs off the ground. This hybrid model provides the flexibility–combining institutional control with external expertise–to create sustainable online programs on your own terms.
Sustainable online programs come down to clarity
By now, virtually all higher education leaders know that online learning needs to be a core competency to compete in today’s market.
As you consider how to financially support online programs going forward, it’s critical to have a clear understanding of your institution’s goals, resources, and broader vision.
What do you need to start or expand online learning? What are your short-term needs and long-term goals for online learning? And which model is the most sustainable way to get there?
Answering these important questions is the best place to start. From there, you can chart a path forward that will set up your online programs and your institution to thrive.
Remember: FFS, revenue sharing, and hybrid models all have their place. The right approach is about finding a tailored solution that will advance your institution’s mission and long-term success.
