A Financial Analysis of the Competency-Based Education Business Model
Abstract: The changing face of higher education is exerting increasing pressure on institutions to move to new educational models that fit the vastly different conditions of the 21st century. Almost 85% of Americans enrolled in post-secondary education are considered post-traditional learners (Choy, 2015). For many, the challenges of time, distance, and cost make online learning more accessible (Online Learning Consortium, 2016). Competency-based education (CBE) is one of those alternate models that has recently garnered national recognition, for its potential to offer flexible, affordable and quality post-secondary education to a changing student population (Bonnie Ordonez, 2014). However, as these new models emerge in the higher education landscape, constituents increasingly demand greater evidence of the return on investment to the institution. To date, little research has been undertaken on the financial underpinnings of newer CBE business models (Desrochers & Staisloff, 2016). This study will analyze a profit and loss (P&L) statement that captures the revenues, costs and expenses incurred for the state of Texas first public, regionally accredited (SACSCOC) competency-based education degree program at Texas A&M University-Commerce over a period of five years, including startup costs. Although the program showed a net loss of approximately $50,000 last fiscal year, a growth of nearly 800% in semester credit hour production from year one to year two, allowed for a gain of approximately $133,000 after formula funding. Current forecasts show that the program may either reach its breakeven point or show a profit by the end of year. While a net profit in the fifth year is not a guarantee, formula funding estimates for the new biennium may potentially exceed one million dollars, a growth of more than 600%. This study supports the notion that institutions should expect their CBE program to break even by the 5th year of operation (Desrochers & Staisloff, 2016).
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