Our neighborhood is suddenly teeming with college kids. They were sent home after their campuses were locked down due to the coronavirus. Now they are living with their parents, taking classes from their bedroom couch, and doing their very best to squeeze maximum benefit from the hard-earned dollars they shelled out for their college tuition. This is not the college experience that they imagined, but is it possible that it is a preview of things to come?
Even before the coronavirus pandemic hit, I had been thinking about the state of higher education in our country. I had started discussing college options with my son, a freshman in high school, and was pushing him to understand the cost implications of his decisions. We spoke with family friends who have recently sent their children to college and learned that the fully loaded expense including tuition, room and board for a four-year degree at a private college could be two hundred thousand dollars or more! This made me wonder – what percentage of people going through this system are actually getting a good return on their investment? Is it time for a radical change in how we think about higher education?
When I went to college, the cost of an undergraduate education was low enough that you could pay off your student loans within a few years and move on with your life. Over the last few decades, this cost has grown way faster than median household wages, resulting in a skewed situation where someone graduating today could end up with a college loan obligation that lingers for as long as the mortgage on their house! This is just wrong. Going to college should not be a high stakes business decision where if you make a mistake, you could end up struggling with crushing debt for the rest of your life. College education should be accessible to all, with reasonable levels of financial risk, and a high probability of payback. Is it possible to evolve the system towards this desired state? I see three disruptive trends that could help.
Online teaching and collaboration tools are creating economies of scale. Tools like Zoom, Campus and Google Docs have evolved to the point that distance education and remote collaboration are now fairly seamless and easy. The coronavirus lockdown is rapidly pushing this evolution forward as many more people take classes online and realize that this model could actually work. As the tools continue to improve, we will likely see a hybrid education model emerge where students will take a majority of their classes remotely and only come in for courses that require interaction with other people or hands-on access to equipment. With fewer students on campus, schools should be able to right size their infrastructure and allocate costs more intelligently to people who are accessing their facilities. Which brings us to another big driver of college cost – salaries for instructors and professors. While this cost has risen steadily over the years, the overall productivity of the education process has remained somewhat stagnant with pretty much the same class sizes, semester durations and course densities (e.g. 15 credits per semester). An online tuition model can expand the reach of each professor to a much larger class size, hence allowing the institution to spread the cost across a larger set of students. Additionally, pre-recorded classes and automated quizzes can allow students to set their own pace, letting the more motivated ones compress the overall time it takes them to graduate. All of this can add up to an order of magnitude reduction in cost per student. Platforms like Coursera are already showing the power of this model and it is only a matter of time before this goes mainstream.
Industry change cycles are becoming more frequent. We now live in a time when multiple transformative changes can happen within a typical career span of thirty years. By one popular estimate, 65% of children entering primary school today will ultimately end up working in completely new job types that don’t yet exist. With this backdrop, does it really make sense to invest a huge amount of money on an undergraduate education that may become outdated and somewhat irrelevant just a few years later? Perhaps a better model of learning would be one that is spread out over many years, where new knowledge and skills are added just-in-time, based on the latest problems that are being solved. This “pay-as-you-learn” model of education would ensure the most optimal allocation of funds with clear line of sight to the expected returns. This approach would also provide more choice – instead of being forced to take all their classes at one institution, students could select the best courses with the highest rated instructors, some of which may be offered out of private companies who are at the cutting edge of their field. This would truly level the playing field with educational institutions competing hard to create relevant offerings and attract the most students.
Educational institutions are starting to put skin in the game: One of the quirks of college education is that the institution charging you a large sum of money does not provide any guarantee of a return on your investment. After you exit their premises, you are pretty much on your own to monetize your investment, and the school has little to no skin in the game. This was all well and good in the old days when the financial outlay for a college education was quite small. However, it is an altogether different proposition now. With the astronomically high costs at some of our elite institutions, it is reasonable to ask for some sort of assurance that we will get a return on our investment. Enter Income Sharing Agreements or ISAs. This is a concept that is really taking off, where some educational institutions are offering courses for free in exchange for a percentage of the student’s salary for two or three years after graduation. This innovative approach puts an onus on the school to not only provide a high quality education, but also help their students find a job. I expect the ISA model to really take off because it encourages people to invest in themselves without taking on too much financial risk. Employers may also get into the game by providing educational allowances coupled with contractual terms that require the employee to stay with them for two or three years after graduation.
The above three disruptive trends promise to change the look and feel of our college ecosystem. When combined, they will significantly flatten the higher education cost curve and make it much more accessible to everyone. This is illustrated by the below figure. The red line shows our current “Blitz Learning” paradigm where a huge cost is incurred in the first four years, followed by many years of debt. The blue line shows the new “Lifelong Learning” paradigm with much lower costs that are spread out over our entire career. The curve is deliberately drawn with an upward trend under the assumption that our spending ability will increase over time.
I have been discussing this radically new approach towards higher learning with my son. He has been quite cautious with his responses. He agrees that there is some merit in what I am saying, but he also feels that these changes will not happen by the time he is ready for college, which is only three years away. While he might be right about this, I am quite certain that things will be much closer to the new paradigm by the time his sister, who is currently in middle school, is ready for college.
Why am I so optimistic? Because I have personally experienced the disruptive power of online education. I recently took a machine learning course on Coursera. This was an eleven-week course that exposed me to the most important concepts and techniques in machine learning, along with hands-on programming assignments that ensured that I truly learned the material. The course was taught by a renowned AI expert at Stanford, which is one of the top technology schools in the country. I was impressed by the quality of the materials as well as the effectiveness of the pre-recorded sessions and have already recommended this course to many other people. Can you guess how much I paid? $70. Yes, you read that right. Seventy dollars! When I last checked, the course had 2,778,902 registrations from all parts of the world, and I am sure the low cost had something to do with it. There can be only one conclusion. Online platforms like Coursera are bringing about a true democratization of knowledge. And they will change the world of education as we know it today.
So here is a question for you. Imagine that you are looking to fill a position that typically requires a four-year undergraduate degree as a minimum qualification. Would you feel comfortable hiring someone who does not have this but instead has a highly relevant portfolio of real life experiences and continuation education credits? Why or why not? The world is changing rapidly around us. Are you changing with it?