StraighterLine's challenge to the rising cost of college

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.

StraighterLine doesn't have direct partnerships with other higher education institutions, but it does have agreements with 22 colleges and universities across the country — none yet in Maryland — that will award credit for its students' coursework. It also recently partnered with a company in Kentucky, which approved its coursework for tuition reimbursement for its employees. The company, however, doesn't offer federal financial aid.

"I don't think StraighterLine has a peer," said Jim Selbe, assistant vice president of lifelong learning at the American Council on Education. "I don't know of any other organization that is offering courses in these general requirements. The convenience of being able to sign up for those courses and not having to worry about an open seat available is of great value to many students."

Nonetheless, the company may face a long road of gaining acceptance among many colleges and universities.

"It's just easier to do transfers with other accrediting institutions," said Joseph S. Wood, provost and senior vice president of academic affairs at the University of Baltimore. "The accreditation is what gives me the assurance of the integrity of the academic program."

Before University of Baltimore students take a StraighterLine course, he said they should clear it through the university, which awards credit on a case-by-case basis. Similarly, StraighterLine students would have to petition the relevant departments at the Community College of Baltimore County for credit for a course, said Dennis Mitchell, coordinator of transfer evaluation services.

Smith said his company may be seen as a threat by colleges who fear it will poach students. But he also said that StraighterLine could be a partner to community and four-year colleges, offering them a pipeline of students who want to take more specialized courses and need an accredited institution to award them a degree.

StraighterLine students don't have a single teacher guiding their courses. Instead, they have access to instructors with doctorates and master's degrees who are available whenever a student needs help.

And students get access to tutoring offered by another company, Smarthinking, which Smith co-founded in 1999. The Washington-based firm offers online tutoring and writing services to education institutions, including several in the Baltimore area.

Smith is confident that the company's courses will stand up to scrutiny.

"The academic validity of our courses is kind of a moot point at this point," he said. "There's nothing that we're doing different from an academic perspective than what colleges are doing themselves."

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