Universities have a strong value proposition. In a university, you will receive a well-rounded education in a subject you find interesting, and leave with the knowledge you need to find a well-paid job in your field of interest. Historically, attending college has paid off: in 1970, first year starting salaries for college graduates would more than cover the full cost of a college education. And due to the historical returns, an increasing number of people have attended college—16.8 million people attended a degree-granting postsecondary institution in 2017.
However, in recent years, college has become less valuable for large groups of graduates. Overall, college still represents a good investment for most students—graduating from a university still confers on students more promising job prospects and higher salaries—but college is no longer the only option people should consider. As more students attend universities, the value of each individual degree depreciates, similar to how, as more money is printed, the value of each bill decreases. In our modern society, students need more than what colleges can offer. Students need to learn practical skills, and be prepared for employment in a specific career upon graduation.
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There has been no one alternative to universities that has emerged, but that does not mean this change is not due. Higher education institutions are falling behind in teaching students the skills the labor market demands, and many students are opting to skip college in favor of either entering employment immediately, or learning from on-the-job training opportunities. As we will discuss, there are a few potential alternatives to university education, but real change in this industry can only be measured on decades-long timelines, due to the dominating position of college in our culture.
Students are Looking for Jobs
The main value proposition of college is to prepare students for their future. Thus, it is reasonable for students to expect that when they graduate from university, they should be prepared for the labor market they face. However, despite record low unemployment rates, an increasing segment of the population is facing underemployment—a state where an individual is employed in a position that does not require their full qualifications. A 2018 report found that up to 43 percent of recent graduates may face underemployment.
This demonstrates a fundamental mismatch between what colleges provide and what students expect. Students who graduate from a major in STEM, finance, or similar degrees can expect to realize favorable outcomes upon graduation, but the outlook for other majors, such as those in the liberal arts, is less promising. That is not to say that universities are not teaching students what they need to know, but rather universities are not investing enough resources in preparing students for the labor market they will face upon graduation.
Employers are Looking for Skilled Workers
Colleges have a strong reputation for building well-rounded citizens who can contribute to the economy and the world more broadly. However, this does not mean that students are acquiring the practical skills they need to have in today’s labor market. Indeed, many of the positions open today are suited for people with certain specializations that they may not learn about in a traditional university. For example, while a degree in computer science may provide students with a strong view of computing, a graduate may not necessarily be prepared for a specialized role, such as cybersecurity, which requires its own set of unique skills.
Universities are also funneling students into degrees where there may not be sufficient demand in the labor market. For example, 161,000 people graduated from a major in social sciences and history in the 2015-16 academic year, and yet there are only 3,300 jobs available as a historian in the US. A liberal arts degree can still be valuable for students—it teaches critical skills like communication and analytical thinking which are expected to grow in importance in the “knowledge economy”—but it is unclear whether universities are doing enough to prepare these graduates for jobs.
According to a report by Burning Glass, 20 percent of graduates are still not working in a job that requires their degree even one decade after graduating. This only demonstrates that employers are looking for people with skills, rather than degrees. In the future, it is expected that the value of a college degree may depreciate as employers look more towards demonstrated skills when evaluating candidates for jobs. In jobs within computer science, this has been happening for years—portfolios of projects are highly valued by employers— but this trend is beginning to grow among other fields where skills are more difficult to evaluate.
College is Becoming too Expensive
In order to calculate the return on investment of an asset, one must consider two variables: the total cost of the asset, and the profit yielded from that asset. In the past, it was clear that higher education was worth it: starting salaries were always significantly higher than the cost of college.
However, the cost of college has inflated at unprecedented rates in recent years. The price of college has increased by more than 200 percent since 1997, and the only industries which have grown in cost more in that timeframe are hospital services and college textbooks. These increasing costs have led to a proportionate increase in the number of outstanding student loans—there are over $1.6 trillion worth of student loans outstanding, and student debt accounts for the second-highest source of household debt after mortgages.
College may still have a strong return on investment, especially for graduates of STEM programs. And, students are still generally better off having a college degree than not having one—over the long-term, value of most college degrees is still hard to dispute. But in order to arrive at such a conclusion, one must treat college as an investment, rather than a path toward immediate career success.
However, at a certain point, the price of college will become so large that the return on investment will become increasingly less clear for a number of college degrees. It is also worth noting that college is only worth it if students graduate. Around 40 percent of students who enroll in full-time programs at four-year schools will not graduate within six years. And students who do not graduate often struggle to pay back their student loans: a report by Third Way found that after seven years, only half of those who started college and had not finished had paid anything toward their student loans.
In this time period, though, it is unclear whether the quality of college has improved; and it has certainly not doubled in value since 1997. The bottom line is that if college costs continue to increase, higher education may be a much less valuable investment for many.
Universities Suffer From a Broad Value Proposition
If you spend any time reading about universities, you’ll learn that they typically have two purposes: to educate, and to conduct research. Some of the top universities such as MIT and Johns Hopkins University all heavily invest in research. In most of these top schools, some professors have to perform both research and teaching duties, and research is often given priority. The best professors are often given more freedom over their work in order to attract them to a university, which means that while they may publish strong research, the extent to which their talents are used to assist students is limited.
Because schools have two business models, it can be difficult for institutions to balance student success with research. In addition, research appears to be a winner-take-all market where research dollars are becoming more concentrated among top universities over time. This is because large universities can attract better talent and more grants, which in turn results in more output. This means that many small universities are competing in a research space where large universities are better prepared to make more discoveries, perhaps to the detriment of student services.
That is not to say that universities should not be researching. Indeed, higher education institutions are in a unique position to pioneer groundbreaking discoveries based on their ability to attract the best minds onto campuses. But this broad value proposition often means students do not get access to the best teachers, because their work is primarily research focused. And small universities are competing in the same research space against the Harvards and Stanfords of the world, which often account for a large portion of R&D spending.
What Solutions can we Turn to?
It is clear that the higher education industry is due for disruption, but what solutions are there out there that can help supplement—or even replace, in the long-term—traditional universities? The first thing to note is that this transition will be measured over decades and centuries, rather than years. This is because college retains a certain level of prestige in our culture—going to college is seen as a rite of passage for many people—and because, statistically, getting a college degree still pays off in most cases today. But that doesn’t mean the higher education stronghold cannot be disrupted.
There are two main potential alternatives to college which have proven their viability in recent years: on-the-job training, and bootcamps.
On-the-job training comes in many different forms. Some of these, such as upskilling and retraining, are focused on helping workers improve existing or acquire new skills. Thus far, upskilling and retraining initiatives have gained a lot of traction—companies from Microsoft to AT&T have launched their own training programs to upskill or reskill workers. But perhaps the more relevant method of on-the-job training as an alternative to college is the internship or apprenticeship.
Apprenticeships, which have been a common way to enter into practical jobs such as woodworking and welding for centuries, offer a viable alternative to college. In an apprenticeship, students learn the “tools of the trade” in an actual work environment. Then, after they have been trained, students are able to put their skills to use in their current job. These programs typically last between a few months and a year, and participants will both be trained in a variety of skills and earn a paycheck while they learn.
While apprenticeships still primarily exist in practical “trades,” the model could still be effective in modern, knowledge-focused jobs. For example, a young person who wants to acquire skills in digital marketing could enter into an apprenticeship with a traditional marketing or tech company and learn the practical skills they need to know during the apprenticeship program.
In Germany, more than half of all young people launch their careers with an apprenticeship, which offer both training and the ability to make a living. And students who complete apprenticeships successfully are often promised a job after they graduate, which allows them to easily transition into the full-time workforce.
The second viable alternative to college is the bootcamp. Bootcamps are short, intense, employment-focused programs designed to teach students the practical skills they need to thrive in a particular role. These institutions have gained a lot of traction in computer science fields such as web development and data science, and are expected to graduate over 23,000 people in 2019.
Whereas a college gives students a well-rounded education in a subject, bootcamps focus on teaching specific practical skills students will need to use when they graduate. Bootcamps also offer career services such as resume workshops and interview preparation, which helps graduates learn how to articulate the technical skills they have acquired when they are talking with prospective employers. Students also graduate from bootcamps with a portfolio of projects, allowing them to showcase their skills, rather than just tell employers what they have learned.
While bootcamps still primarily exist in technical roles, there are signs the model can be extended to other positions. SV Academy, for example, is offering a business development education through the bootcamp model, and Flockjay offers a technical sales education.
The Future of Higher Education
Higher education is in need of disruption. From the broad business model that often causes students to receive less attention than research, to the rising college costs, it is clear the current model of higher education is unsustainable. Changes in higher education will happen incrementally, and over time as the tradition is deeply entrenched.
But change will happen, and there are early signs of it today. The emergence of bootcamps indicates that the supply-demand problem in computer science has become so prominent that the private market was willing to step in, and has since come up with a sustainable business model under which to train students. The growth of on-the-job training programs also indicates people are becoming more interested in alternatives to higher education. In the future, education will be about demonstrable skills, not degrees. And if colleges do not change quickly, they’ll find themselves left behind when the disruption goes mainstream.
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