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One Silicon Valley college is offering lower tuition and partnering with Udacity after a new tax initiative was passed in California. This is one of the first times Udacity will be able to offer college credit for its courses. In response to increasing strain on the California state budget and university system, a pilot program at San Jose State University seeks to move some of its remedial and introductory courses online. The university has turned to Udacity, one of the leading providers of Massive Open Online Courses (MOOCs), to supply its course delivery platform. Students will be able to complete courses such as pre-college algebra and introductory statistics entirely online, at a significantly reduced cost of $150 for three credit hours.

The initiative is backed by Gov. Jerry Brown, who is a strong proponent of the belief that online education offers at least a partial solution to the state’s education crisis, including soaring student debt and reduced funding for institutions. Some of the funding for the pilot is due to the successful passage of Proposition 30 last November, which raised tax levels in order to earmark funds for education.

A major factor in the pilot’s success will be the completion rate of students. The major MOOC providers currently report a dropout rate of approximately 90 percent. This may be due to the fact that many people sign up for MOOC courses merely out of curiosity, with nothing concrete at stake in completing the course. If the reduced cost is motivating to students, Udacity may be able to use the results of the pilot to continue generating revenue the same way. This approach also benefits the university, as San Jose State will keep 51 percent of all revenue.

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