Higher education is now ground zero for disruption

Lauren Williams's picture
Tuesday, January 7, 2014

Why? US Higher Ed has a product that does not work, ridiculous costs, and an antiquated businessmodel. For many years we accepted this because we see extraordinary value in education. Now, most middle and upper-middle class parents find they cannot give their children the education they enjoyed. Technology has recently put a spark to this fuel: on-line education works and dramatically improves costs and access. This is a big opportunity for entrepreneurs and investors. Many new companies and programs will emerge in 2014.

The Product Does Not Work. A college degree provides multiple sources of value, but the one that motivates parents and government to dig deep for tuition is the belief that college is the ticket to upper-middle-class life. ROI calculations show a range of results (e.g.), with grads of top technical schools showing strong ROIs and those less-known liberal arts schools often doing poorly. However, results for many recent graduates are awful: one in eight recent college graduates is unemployed, and half of those employed hold jobs that do not require a college degree (more).

Employment success of graduates has not been a top priority for Higher Ed. This reflects the complex mission of colleges and universities: research/scholarship and intellectual development are key goals in addition to imparting career skills. Plus, many believe that affiliation with a great educational institution by itself creates career opportunity. This clearly works for the top 50-100 schools. Many schools below the top 100 have tried to climb the pyramid by spending more and raising fees; it’s doubtful that this will pay off for the school or its students. The Economist studied this dynamic among graduate business schools.

It found that “an MBA from a mid-ranking school is no longer the investment it once was [a chart shows that costs for these programs have risen sharply but salaries for graduates have remained flat] … In comparison, the schools at the ends of the spectrum look more appealing. Lower-level programmes … are much cheaper to attend [and] elite business schools still look like a fair deal.” (more).

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