DataDrivenInvestor
Mar 21
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While in some parts of the world, higher education is intended to develop citizens — as evidenced by taxpayer subsidized universities — , within the United States, higher education is viewed as an individual’s investment in their career, not a social good with civic benefits.
As such, rather than subsidize education outright, American federal programs provide loans for students which they pay back in monthly installments following graduation. Students as young as seventeen, and sometimes even younger, take on this financial responsibility with the intention of paying them back later as they work. Lenders assume students are acting rationally and will generate a healthy return, enough to pay back the principal and interest on their loans. Despite university tuition ballooning over the past few decades, for a long time, employer demand for university credentials led students to willingly embrace burdensome debt to attain long-term financial security.
However, education as consumed historically, is experiencing a big shift.
Many prospective students have found themselves unable to afford high sticker prices for a degree or unwilling to take on burdensome life-altering debt.
Additionally, as limited capacity prevents traditional universities from admitting every possible student, underserved communities are becoming a market of interest for modern educational products.
Another critical factor driving change, especially acute in the burgeoning tech sector, is the gap between industry demanded skills and academic knowledge. Most entry-level jobs require little collegiate level knowledge. For specialized jobs like software engineering, focused hands-on training is more effective in imparting job-ready skills.
Employers are realizing this and adapting.
Lastly, while traditional universities provide students access to career platforms and host career fairs for employers and students to mingle, there is no job-guarantee for students.
This presents a schism in the ROI model:
However, the logistics of funneling talent into the job market isn’t so clean. For many new graduates, It’s quite a messy experience involving countless hours of interview prep, applying to jobs, networking, and learning job-specific skills.
Hours more efficiently spent learning or earning.
Given the following constraints: rising education costs, limited on-campus capacity restricting access to underserved communities, demand for targeted everchanging skills, and lack of direct pipeline for guaranteed employment, traditional university education needs to be revamped to meet labor market demands for future jobs.
To address the distribution problem, notable ed-tech disruptors like Coursera, edX, and Udemy have partnered with universities and industry partners — in the case of Udemy created a direct course marketplace — to deliver educational content for students to consume bypassing geographic or time constraints.
Employment-focused market players have also grasped the need for workers to continue upskilling. Upwork, a freelancing site, allows users to take courses in specific skills. LinkedIn also offers courses through LinkedIn Learning letting LinkedIn users add certifications directly to their profile.
Some universities, such as MIT through MITOpenCourseWare, have opened up course content for the public to access online, either for free or a fee much more affordable than an in-person offering. Partnering with ed-tech platforms, some universities and companies created completely digital learning experiences for learners on a myriad of topics. The Massively Open Online Course (MOOC) format popularized in the early 2010’s, has become the standard for online educational content, at least until now.
While MOOCs solve for distribution, cost less, and can accommodate busy lifestyles, results are mixed.
Firstly, they do not provide a direct employment pipeline. MOOCs also promote the university lecture style of learning which focuses more on broad theory and less on direct upskilling.
Platforms like Udemy address this by opening up their platform to the market: anyone can teach anything.
As a result, ‘teachers’ sell specialized courses on niche subjects and technologies. However, courses on Udemy, as with those of its more academic-oriented peers, are not seen as credible replacements for college degrees or practical experience.
Existing MOOC style learning is also plagued with a host of other issues. Flawed assessment & grading systems, as well as limited, if any, interaction with teachers limits the learning experience. Learners often encounter few hands-on opportunities or projects which limits learning potential greatly.
‘Bootcamps’ have stepped in to address the needs of job-seekers and market demands. Their business model revolves around training students in a specific technical skill, helping them build a marketable portfolio, and often even placing them in jobs with partner companies. Many operate on Income Share Agreements (ISAs) which favor those with lower discretionary income and ample time. Some new services even provide housing, living expenses or paid projects during the course of the program, repaid upon successful employment.
Yet, despite these benefits, Bootcamps still face one of the same constraints as universities: throughput. They can only accept a limited number of students. As such, scaling drives up costs. This can drive new players in the market to provide ample choices for customers though with little it can also create a brand/reputation issue for Bootcamps as a whole.
To compete with these entrants, universities like Georgia Tech and UT Austin have started offering online degrees at similar price points.
However, the biggest advantage traditional universities continue to hold over other educational offerings and one reason they can charge so much more even for online degrees, is prestige. Some people have — rightfully — argued that when you pay tuition to a university, you buy a degree, a network, and social status.
This public perception may not last much longer as job-seekers prioritize results and relevant skills within relatively short time-frames over intangibles and life-limiting debt.
On the flip side, employers, especially within the lucrative tech sector, are becoming much more receptive to non-traditional candidates and recognize the need to hire for skill rather than prestige. For roles where performance is more important than showmanship, portfolios, demonstrated experience, and passion are given greater weight. For example, just coding bootcamps have grown 10x in popularity between 2013 and 2020, according to CourseReport.
Technical skill-based labor is seeing a resurgence partly thanks to the burgeoning tech sector, partly due to less appealing opportunities elsewhere. To meet the needs of evolving market demands, education in the United States must adapt.
The biggest challenges faced by each of the modes of education seem to be the following:
Throughout civilized history, formal education has played an important role in nurturing and developing a citizen, yet in a system where financial outcomes and consequences are borne by the individual, institutions must focus their products and curricula around maximizing the financial return on investment for their students. This is leading to a rethinking across the distribution, the style, and the deliverables educational institutions offer their customers.
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