EdTech: Higher Education is Overdue for Disruption

Abdullah A.Kareem
Oct 2, 2018 · 7 min read

The Status Quo:

In the midst of a student debt crisis that has been ballooning over the past decade, many prospective students are having to evaluate the ROI (“Return on Investment”) of a college education. Too many students are faced with tens of thousands of crippling student loan debt and a career that will take decades to pay them off. For those consumers, the return of a college education is negative despite the doors it has opened. The inflation-adjusted cost of a college education has more than doubled over the past 30 years. As universities continue the “race for rankings” the increase in tuition cost isn’t expected to slow down anytime soon. With costs increasing at a rate far above inflation, millennials today are facing a decision that will impact their lives and families for generations to come.

The effect of a rising cost of education is multiplied by the requirement to include general education (“GenEd”) courses as part of the degree. Colleges and Universities often rely on GenEd courses to help produce well-rounded students. While that is true, GenEd courses have become part of a large bundle coming at exorbitant prices. According to Student Loan Hero, the average cost per credit at a higher ed Institution is ~$600. Usually, 42 to 60 credits are allocated to GenEd courses for each degree; this estimates a total cost of $25,200 — $36,000 to courses that do not have a direct relevance to one’s career. It is crucial to note I am not dismissing the value of GenEd courses, but I am questioning the ROI of such courses if they are coming at the cost of tens of thousands of dollars. Such courses can and should be delivered at much lower costs as opposed to becoming part of a large all-or-nothing bundle package being sold to students. Today, education is considered a staple good that comes at luxury prices.

As we have seen before, incumbents who provide an inefficient model create the perfect environment for disruptors to thrive, but disruption will not come easily. Higher ed institutions still have a competitive advantage that will make it difficult to instill change.

The University’s Competitive Advantage:

Two factors give universities a competitive advantage over unconventional education solutions such as bootcamps and online solutions:

  1. The “college experience” has been a cornerstone of US culture, the college experience is regarded as a right of passage that welcomes students into adulthood. We often reminisce over our college years for the rest of our lives and exhibit long-lasting loyalty towards our alma mater. This cultural belief is one of the reasons why most families don’t even think twice about sending their children to college.
  2. Employers require the degree, nowadays with credentialism and educational inflation, it is uncommon to land an entry-level job without an undergraduate degree. Even if one were to land a job the growth prospects for that position are most likely severely limited. If anything, many jobs 30 years ago that required a high school diploma now require at least a college degree, and many foresee that standard shifting towards master’s degrees in the future.

Disruption is Coming

The university’s key advantage against potential disruptors is not without merit. At the moment most employers look to recent graduates to fill entry level positions. But what if employers begin to acknowledge the value of unconventional educational programs? That scenario is imminent especially in fields facing a shortage of skilled workers. High profile employers adopting creative recruiting methods will trigger a domino effect that will pave the way for even more companies to respond to the new educational solutions.

Online — Affordable, Effective Education:

The proliferation of knowledge has commoditized much of the university’s value proposition. Massive Open Online Courses (“MOOCs”) like EdX.org, KhanAcademy.org, Coursera, and others provide the same knowledge one would receive from a university degree at a fraction of the price. MOOCs eliminate the massive overhead that comes from running a university campus and deliver content to each student at a negligible marginal cost. As a result MOOCs are able to almost exclusively invest in the content, curriculum, and student engagement in order to extract the maximum value from a course.

Bootcamps — Purpose-driven Education:

Many novel educational solutions focus on providing a lean, structured curriculum that serves one goal: help students land their first entry-level job. This includes providing students with all the relevant skills ranging from writing, critical thinking, to the technical know-how. The programs work backwards by starting with employers to evaluate the necessary skills students need to develop in order to thrive in the corporate world, and from there begin to form a curated curriculum. Bootcamps sometimes act as a supplemental solution to 4 year degrees, but in other cases they are able to act as a substitute to a standard college education. They represent the biggest threat to universities given their sole focus is job placement, and some bootcamps often come with their own connections to the corporate world.

Microdegrees — Unbundling the Degree:

One of the first things unorthodox learning solutions have done is unbundling the degree, which has been key to drastically improving the ROI of an education. College institutions’ “all or nothing” ultimatum has become challenged by many MOOCs and startups. We have already seen millennial consumers reject the value of bundled product offerings from the cable TV industry, and that mentality is transferring over to the education industry. It is much more economical to only pay for what you need, especially when the cost of the product can be financially crippling. As we have noted before, college degrees’ bloated curricula are one of the key factors in inflating student debt, and it is both understandable and predictable to see solutions focused on trimming the fat to adopt a more efficient model.

Portfolios — Experience-based Education:

An increasing number of fields today such as computer science and data analytics are placing significant weight on the value of portfolios. Portfolios represent personal projects that showcase the student’s skills which are relevant to their field. The introduction of portfolios reduce the reliance on the prestige and reputation of their respective schools, and allows employers to focus primarily on the applicant and witness their work product first hand. The concept of portfolios is not new, as it has been common practice in fields such as architecture and interior design, however their use is expanding to other fields. Portfolios pave the way for experience-based education, where students have the opportunity to replicate the projects their full time counterparts would be working on. They also act as proof of experience, assuring employers that the candidate is well qualified for the position.

Change is Gaining Traction:

Although top ranked institutions may not be under the threat from disruption, mid-to-low ranked private institutions will have to adapt to remain relevant. It is the mid-tier private institutions that provide the lowest ROI given they have the highest cost per credit (ranging from $650–$1,000+) and provide the same if not inferior results to public institutions. To remain relevant many universities will combat the change in one of three ways: 1) lean into the disruption, and begin instituting those changes themselves; 2) increase tuition in order to fund resources and land a “top tier” position among the protected universities; 3) provide a separate tier of education delivered primarily online to act as a cash cow to fund resources and push for the “top tier” position.

The protection top-tier institutions experience may fuel the race for rankings among the Universities, leading to an even more accelerating cost of education on the students. The increasing cost of education will result in more students resorting to unconventional learning solutions, adding more pressure on universities to deliver on their promise of a thriving career.

But change is coming, the prerequisite of a college degree is becoming challenged by some of the most prestigious employers in their quest for talent. According to CNBC “IBM now looks at candidates who have hands-on experience via a coding bootcamp or an industry-related vocational class”. Large Tech companies such as Google, Apple and IBM are hiring individuals for positions that have strong growth potential such as product manager, recruiter, software engineer, engineering project manager, contract and negotiations engineers. One will notice that most job positions are concentrated the in technology & engineering fields. However the trend is starting to gain traction with companies in the consumer goods sector, with some offering positions such as marketing designer, publicity assistant, manager of finance, production assistant and others for individuals without a 4 year degree. We are witnessing the beginning of a domino effect that will eventually become the norm. With many promising alternatives on the horizon to challenge incumbents, the higher ed industry is ripe for disruption.

Sources & Relevant Links:

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