College for $1,000 a Year?

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Editor’s Note: Lately we’ve been exploring “disruptive innovation“: major changes that improve a product or service or lower the cost in such a fundamental way that it has the ability to permanently alter the playing field. Earlier this week, we showed you a company that’s now offering Health Care Without Insurance for $50 a Month. In this installment we explore “college without loans:” a partial solution for spiraling tuition.

Start by watching the video below, then read more on the other side.

Ten years ago, college students paid an average of $12,922 a year in tuition and fees to attend a 4-year school, according to the National Center for Education Statistics. That number has gone up by almost half since then, to an average cost of $19,362 in 2008. For a lot of people, college has become more about getting loans than getting grades. It’s simply become too expensive.

But maybe it doesn’t have to be.

Straighterline is a company that provides college classes online for a tiny fraction of typical college costs – for example, you can take courses for either $99 a month plus $39 per course, or a flat rate of $999 for 10 courses – essentially your entire freshman year. You don’t have to ace Algebra 101 to see the savings: that’s up to 92 percent off what you’d pay on average for a year of college at a public or private institution, and done at your own pace. This woman breezed through a course in one week, but you can spend months on it if you want to. And if you can’t finish and have to drop a course? You’ll waste $138, rather than thousands.

There are a few catches – you’ll obviously still have to buy textbooks, for example (See Where to Find Free or Cheap Textbooks) – but the credits you earn are real, and they can be transferred to many traditional colleges and universities.

As mentioned in the video above, you can’t earn a degree straight from Straighterline, which only offers general education courses you would normally take in a freshman or sophomore year of college. But you can get a jump start on those classes – which you’ll have to take regardless of your major area of study – even before you get accepted into college.

Since you will ultimately have to enroll at a college to finish your degree, though, you’ll want to check with prospective schools and make sure the credits will transfer. Straighterline partners directly with 20 colleges who guarantee all courses will carry over. A much wider network, including hundreds of universities, could potentially accept Straighterline courses which have been validated by the American Council on Education (ACE), an organization used nationally as a standard to evaluate comparable courses for transfer credit.

Depending on your degree, the nine classes eligible for transfer through ACE include things you’ll probably have to take no matter where you go:

  • Accounting I
  • Accounting II
  • Business Statistics
  • Macroeconomics
  • Microeconomics
  • English Composition I
  • English Composition II
  • College Algebra
  • Pre-Calculus
  • General Calculus I (Spanish Version)

Online learning like that offered at Straighterline isn’t new, of course: As the use of broadband internet has become widespread, many universities now offer these types of classes. The innovation here is in the price.

According to Straighterline CEO Burck Smith, freshman and sophomore classes, whether online or taught in a classroom, are cash cows for colleges.“If you think about what a college really spends in a lecture course, a 101 type course, one professor in a large lecture hall, they spend $100 per student or so. So all we’re really doing is pricing closer to the cost of college for these big, general education courses.”

In other word, packing students into giant lecture halls keeps costs low and escalating tuition keeps income high. Universities use these “profits” to offset a myriad of other campus expenses, from research to dormitories. But the way college works today, you pay for those services whether you use them or not.

What straighterline is doing is essentially “unbundling” the college experience. And it makes sense: why should you pay $19,362 for the same classes that Straighterline can profitably offer you for $999? More to the point: why should any student burden themselves with massive loans when they could work a part-time job and afford to pay cash?

Of course, college is more than credits, and Smith is the first to admit that. He’s not trying to deprive anyone of the traditional on-campus, four-year experience. That will always be available for those who can afford it. What Straighterline is trying to do is to play a part in putting a degree into the hands of those who can’t.

Straighterline will probably never offer a full degree, because unless the rules around accreditation change, they can’t. One of the requirements to be an accredited college is that you must have a physical campus – and that’s something Straighterline won’t have. In addition, in order for its classes to have value, they have to be able to transfer. So Straighterline needs the cooperation of traditional universities.

Imagine the pushback from today’s current system – one built on escalating tuition financed with taxpayer-guaranteed loans. Today’s higher education Goliaths won’t take kindly to low-overhead start-ups like Straighterline that offer four-year degrees for 90 percent less than they charge. And through the accreditation system, today they have the power to limit competition.

But like so many other traditional business models from newspapers to long-distance providers to health insurers, disruptive innovation may ultimately force change whether they like it or not.

Other shortcuts to a degree

While we’re waiting for Straighterline and other disruptive innovators to change the way we get our degrees, there are other ways to cut college costs. Two other options that are available today include advanced placement (AP) courses and the College-Level Examination Program (CLEP). AP classes are basically college-level classes taken during high school which wrap up with an exam for the college credit, and the offerings vary from school to school. Each exam costs $87, but the class itself is obviously free if taken at a public high school.

With CLEP, there is no class – just a test. You can take a CLEP test for a wide variety of classes and prove you already know the material in exchange for credit. Each CLEP exam costs $77 and some schools charge a fee to administer the exam.

For more ways to save on the cost of college, check out our stories Is the Cost of College Worth It? and 6 Tips to Pay Less for a College Degree.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • ILuvSavingMoney

    Terrific info, and Great site. I have a Website and Blog about saving people money. It’s ILuvSavingMoney.com. It’s still new and a bit rough, but I am working on it. I shall spread the word about Straighterline… John

  • http://twitter.com/lefrere lefrere

    Kudos on yet another money-saving article. The approach you recommend can lead to substantial savings for college students who take your advice. Well done.

    I infer from your article that some universities treat high-enrolment entry-level courses as cash cows. What do they do with the profits?
    - If universities use the profits to subsidize their specialized courses, those courses could go up in price a lot. So I read into your article that people should not delay taking such courses.
    - If universities use the profits to pay for research that does not feed into courses or credentials, then they should stop this, and give learners better value for money. Or lose their students to Straighterline and other such organizations.

  • Anonymous

    This article details almost everything about the rising cost of college. Universities and colleges have been increasing their tuition, housing, etc. prices at a faster rate than inflation for many years. All the costs added up, students are being asked to pay for a lot. But why does it cost so much? For a different perspective in a shortened summary, check out this article: http://j.mp/cizIMC

  • http://pulse.yahoo.com/_3ON5Q5K3HO3622XY7TAXRVDHMA God's Friend

    This is good State prices really vary for community colleges California is $26 per unit. so idealistically it is probably lower But many states are higher. If you are in a state where your cost per unit is much higher than this ball your politicians out. It isn’t how low my taxes are it is what I have access to in my community. If you aren’t using your community Find out what is around where you live. These are pretty fair prices. For computers their is Safari online books for students for $10 a month you have access to 5 books. Which is all most people can handle anyways if it is complicated ideas.
    There is also VTC.Com for $250 a year and Lynda.com which looks promising.