Let’s Leave High Tuition Behind in 2021
The education industry was rocked by the results of COVID. Hundreds of thousands of students would no longer be attending lectures or labs on campus. Thankfully the schools adapted…by putting a camera in the lecture halls and charging higher tuition fees.
Yes. That’s right. The cost to attend an American college or university increased during 2020. The best the educational institutions can say is that the increase was lower than in previous years. Students responded with frustration in many cases but generally the old institutions fared well enough to continue offering classes.
At Harvard, over 20% of students chose to defer their degree.
Open Room for New Players
We’re living in an increasingly globalized world, which means the top global universities will likely continue to attract students as a result of video and distance education courses. The bottom 50% percentile of global universities seem like they need to innovate and offer something new or exit the education industry altogether.
Google, Apple, IBM, Nordstrom, Costco and Bank of America no longer require a bachelor’s degree for new hires and Elon Musk has also been outspoken in his frustration about what he calls the MBA-ization of American businesses.
If the value of getting an education is to become trained in skills that make you job-ready, then our current system may be due for a refresh.
Not even a global pandemic can halt the climb of tuition fees. Since 2011, enrollment numbers have declined in America. It seems to me that the increased tuition fees may be contributing to the decision not to pursue a four year degree program for many young people.
Winners and Losers
Now, what would it look like if the 20%+ of students who deferred starting their degree bragged to their peers about their great new jobs? Or even if they showed off the results of their learning from non-traditional education providers? Would the peers at old institutions choose to continue their education in the same way or be swayed to try something new? Some would, but not all. We know the actual college enrollment in 2018 was 19.7 million students. 20% of that is just under 4 million students.
How might they beat the traditional education model? The traditional model requires 120 credits (or more) taken across a range of subjects, with a large portion focused on some specific area. Most students complete these credits in 5 years. After that, they begin their career.
How much of what you use today was learned at a university? How much was learned on the job?
If students are going to pay standard tuition fees to attend digital lectures from providers like Harvard, some of them will surely find the more optimized platforms to provide a superior experience.
Breaking Into Wall Street and Corporate Finance Institute both provide great financial modeling courses. Thinkific, Udemy, Coursera and Udacity all provide a broad range of specific programs. The cost of these alternatives doesn’t even come close to the ~$100,000 cost of earning a degree in America.
All of the above offer low-cost alternatives to traditional education providers. It only takes one person within a peer group to take the chance and win to change the tide for that peer group.
Surveys completed by Accenture show 36% of conversations with students considering starting a program in fall 2020 were about perceived value for the price. Students are ready to make a change.
Accenture also notes the increase in demand for online learning. The elearning providers have been working on this for years prior to COVID and are uniquely positioned to benefit from the students who want to defer their program but don’t want to waste the year.
What Does That Mean For Investors?
Online learning shows potential for growth post COVID if the platforms can prove their value to students. What could be a real threat to the existing educational institutions would be an endorsement of an online learning program by an employer.
If a student knows learning the Salesforce platform at trailhead.com will help them to earn a role on a team at a Salesforce consulting firm, then why should they have to sit through 120 credits worth of material and burn 5 years and ~$100,000?
How Do the Platforms Win?
There are two obvious ways for online learning platforms to play this trend.
First, they can choose to challenge the traditional schools. This is much easier if the platform has a singular focus or offering. Financial modeling comes to mind as universities never covered this effectively in my experience.
The other is integration. They can start providing their offering to augment the struggling university’s offering. Over time, this can grow into a full acquisition of the curriculum assets (video, comments, assignments built in) for an automatable subject, or even a company level acquisition may make sense in some cases.
In both cases the university receives fewer of the education dollars available in the system. In the first case because they cannot provide a curriculum that offers the specificity that a scalable video platform allows. In the second case, the university transfers the money directly to the eLearning provider, possibly as a licensing fee, possibly to acquire the eLearning company and offer their education services under a hybrid model.
Of course, if you do choose to explore this growing space, invest the money you can afford to risk.
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The Financial Star Team.