University of Phoenix, Another Canary in the Education Coal Mine
The Low End of the University Market is Crumbling
Last week for-profit education company Apollo Education Group announced it is being sold and taken private. Its most well known educational institution, University of Phoenix, has been plagued by declining enrollments and federal investigations. As former Deputy Secretary of Education Tony Miller put it, for-profit universities suffer from “inadequate student outcomes, overly aggressive marketing practices and poor compliance.”
The University of Phoenix’s shuttering constitutes a tectonic shift in the industry, and amounts to the largest for-profit university “essentially going dark,” as characterized by Senator Richard Durbin. Nor is this the first university to shutter its doors. Last year after Sweet Briar, a private college, was nearly shuttered, Moody’s forecasted we’d see an average of 15 colleges shuttering each year by 2017, which Alia Wong at the Atlantic dubbed the “Sweet Briar Effect.”
With over 10 years in the ed-tech space and as the former Director of Marketing at SoFi, I’ve had a front-row seat as the millennial generation has been crushed by ever-mounting student loan debt, averaging a whopping $35,000 in 2015. Young college grads suffer an unemployment rate twice as high as older college grads during what the Economic Policy Institute calls the “longest, most severe period of economic weakness in more than seven decades.” This is why only students attending 25 of the world’s most prestigious MBA programs are eligible for a new loan from SoFi. The salary, employment rate, and overall outcomes at average universities are not promising.
As a result, millennials are taking a much more rational approach to higher education. Whereas previous generations romanticized the idea of college, millennials are able to leverage better data on graduation rates and starting salaries to measure the ROI of a college degree.
Outcomes is the watchword of this generation. An ROI driven outlook on higher education means universities that do not deliver on outcomes will perish, just as we are seeing with many for-profit education purveyors today.
Meanwhile Bootcamps are Exploding
Bootcamps emerged from challenging an assumption of higher education and asking the question: what skills do employers really want? And do those skills require 4 years, $80,000 and an “accredited” degree to learn?
The adoption of technology in industries like media, advertising, finance, and entertainment has made generalist university education less valuable, and specialized skill-focused tech education more valuable. Computer Science degrees are still valuable, but not the most efficient path to the highest paying careers. For aspiring developers, coding bootcamps are cheaper, faster and more effective. They start from the modern skills employers want and work backward from there. According to Liz Eggleston of Course Report, a bootcamp industry-watcher, today there are over 100 bootcamps with a combined estimated market of $180M, up from $0 in 2011. And the bootcamp market is not confined to displacing computer science. Bootcamps have emerged in data science, design, product management, sales, and marketing.
When we surveyed engineers at top companies like Twitter, Facebook, Google, and Amazon, they told us they used less than 25% of their university education in their career. According to Rob Gonzales, co-founder of Salsify, “many ‘core’ CS courses really aren’t that critical for becoming very productive engineers. I’ve never had to write a compiler or operating system in my career, and the last time I thought about finite automata was 2001 when I was studying them myself.”
Meanwhile, few universities teach essential skills a software engineer will use every day. According to Mo Kudeki, a Software Engineer at Twitter, “Although I went to a top Computer Science program, there are software engineering topics that we never covered that are crucial to being a great engineer, like how to methodically debug something, and how to give and receive a good code review.”
Bootcamps have focused on outcomes since Day 0, with programs like App Academy charging no tuition until you get hired. In the past three months, many bootcamps, including my company Bloc, have upped the ante and guarantee you a job — something traditional universities can never do.
Hybrids are Coming That Will Completely Replace University Degrees
GalvanizeU, a data science bootcamp, was among the first hybrids to emerge, launching a one-year accredited masters degree with the University of New Haven in early 2015. Since then, the Department of Education has acknowledged the efficacy of bootcamps and announced the EQUIP program to extend the umbrella of university accreditation and government-backed student financing over coding bootcamps.
Then in the winter of 2015, Bloc announced a 1-year program that includes the type of computer science theory that you’d expect to learn from a university; essentially creating a modern replacement for a 4-year CS degree.
We can expect further hollowing-out of higher education in the future. There will always be a place for top-tier university programs like my alma mater, University of California, Berkeley, and community colleges that deliver a great value. But high-priced universities, online or otherwise, that cannot prove their efficacy will begin to disappear. In their place, more effective alternatives will duke it out to meet rising demand.
