Anyone who’s been paying attention has to realize that higher education is caught in the same death spiral as real estate and the banks. But instead of debt fueling the spiral, higher education’s spiral is fueled by rising tuition and endowments. It’s unsustainable. Colleges and universities are in the information transportation business. Yes, yes, there’s the self-exploration and professorial interaction that’s an enormous part of the college experience—and the value delivered—but in the main, institutions of higher education transport information. Technology in general, and the internet in particular are collapsing the economics of transporting information in all areas of the culture and economy.
Call it simultaneous disruption from the top and the bottom, but, as Kevin Carey writes in “College for $99 a Month,” in the Washington Monthly‘s outstanding College Guide, “... these two trends threaten to shake the foundation of the modern university, in much the same ways that other seemingly impregnable institutions have been torn apart.”
At the same time individuals need almost continual education to stay afloat in an economy and society that are one big disruption after another.
Carey presents StraighterLine as one option: All the higher education courses you can eat for US$99 per month. Sort of like O’Reilly’s Safari for college. Carey sites a woman taking courses through StraighterLine and her daughter taking the one of the same courses at the local community college:
“... she realized that her daughter was using exactly the same learning modules that she was using at StraighterLine, both developed by textbook giant McGraw-Hill. The only difference was that her daughter was paying a lot more for them, and could only take them on the college’s schedule. And while she had a professor, he wasn’t doing much teaching. ‘He just stands there,’ Solvig’s daughter said, while students worked through modules on their own.”
Burck Smith, the founder of StraighterLine realized while he was a graduate student at Harvard’s Kennedy School of Government that higher education would be radically different once barriers between institutions were shattered. And the internet wouldn’t waste any time shattering those barriers. Instead of being stuck with the offerings of a single institution, in the foreseeable future students would be able to cherry-pick the best offerings from the best institutions. With the internet delivery costs of courses approaching zero, traditional colleges and universities would have to start cutting tuition costs in order to attract students, Smith’s thesis surmised. After all, Carey reports “over four million college students—one fifth of the total nationwide—took at least one online course last year.”
Smith set out by launching Smarthinking, an online service providing on-demand college course one-on-one tutoring. At a time when colleges and universities were cutting costs by outsourcing their tutoring services, they would buy blocks of time from Smarthinking who hired credentialed tutors from India and the Philippines. Carey reports “by 2008, the company had 368 clients, ranging from big research universities to community colleges and the US Army. Major publishers like Pearson and Houghton Mifflin packaged hours of Smarthinking tutoring with college textbooks and instructional software.”
Undergraduate education is to the traditional university as classified ads were to the local newspaper; that is, a cash cow. StraighterLine is the higher education equivalent of Craigslist. “If enough students defect to companies like StraighterLine, the higher education industry faces the unbundling of the business model on which the current system is built,” writes Carey.
Carey predicts that traditional public higher education is doomed unless it adapts quickly. The elite private institutions will survive on prestige and perennial oversubscription. And the small liberal arts colleges will survive because “teachers and students learning together in a four-year idyll” is still the best higher education model. Carey writes that “regional public universities and nonelite private colleges are most at risk from the likes of StraightLine. They could go the way of the local newspaper, fatally shackled to geography, conglomeration, and an expensive labor structure, too dependent on revenues that vanish and never return.”
The University of Minnesota’s School of Nursing is at the cutting edge of online course delivery and it’s not necessarily the panacea Smith envisions. As Carey notes, most brick-and-mortar colleges and universities are charging more for their online courses: either by adding fees or raising tuition at a rate far in excess of inflation. Meanwhile for-profit online-only education outfits like Capella and the University of Phoenix are making big money from delivering courses online at the same prices the traditional universities are charging with an almost non-existant cost structure. “Electronic course content in standard introductory classes had become a low-cost commodity,” writes Carey. “Economics tells us that prices fall to marginal cost in the long run. Burck Smith simply decided to get there first.”
The only advantage traditional colleges and universities have is accreditation. And accreditors accredit only institutions; outfits with actual libraries, labs, hospitals, etc. But the bricks in that particular wall are already starting to crumble. Smith cut deals with accredited institutions to “allow students to transfer in StraighterLine courses for credit,” Carey reports. “After the credits were accepted—laundered, a cynic might say—students could theoretically transfer them anywhere else in the higher education system.” There’s been some blowback—and an investigation by the accreditor—but the proverbial cat is out of the bag. Traditional colleges and universities have very little time “before the internet bomb explodes in its basement,” as Carey puts it. Traditional universities and colleges must adapt at the speed of the internet or face the same fate as the newspapers.
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