The Gentrification of Higher Education

The advent of the internet promised increased connectivity between people across the world and the democratization of information.  This digital revolution has created winners and losers.

Losers:

Low and mid-tier colleges and universities
Harvard Business School Professor Clayton Christenson has famously declared that roughly half of all US Colleges & Universities will go bankrupt within the next decade.  [2]  Among the expected causes of this trend are increased availability of online courses, alternative certifications, and the relatively low percentage of students for whom college provides clearly marketable skills (such as STEM fields).  Colleges face rising costs and pressure to increase amenities, but have not traditionally benefited from economies of scale.  They now find themselves in a position where their “core customer”, that is, students who attended good high schools and whose parents can afford to help pay for their education, are considering the opportunities available to them and increasingly not choosing to enroll in a traditional, 4-yr university.  Interestingly, this trend most acutely affects lower-tier schools and affects elite schools less. [3]

Winners:

Pathways to a Just Digital Future

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Elite colleges and universities

While all colleges and universities have on average faced increasing competition for applicants and admitted students, elite colleges and universities in particular have not.  In fact, elite colleges and universities have seen demand drive higher application volumes and have, as a result, become more selective in the students they admit.  Harvard, for example, has seen the admission rate plummet from 12.3% in 1997 to 5.2% in 2011.  Similarly, Stanford has seen admissions fall from 15.5% in 1997 to 4.7% in 2011. [4]

Meanwhile, Massively Open Online Courses (MOOCs) have exploded in popularity and have democratized knowledge.  No longer are physical classrooms the only place that students can go to learn a new skill or earn a certification.  MOOCs are offered across a whole range of disciplines and can be consumed from various providers at different price points.  In fact, one can take Computer Science courses from Stanford or MIT online for a very low cost.

So why, then, are students increasingly targeting elite schools and shunning lower-tier colleges and universities?  The access to build social capital, or in a word – networking.  [5]

As knowledge becomes commoditized, simply having a “particular set of skills” becomes table stakes for any employer who requires that skillset.  A differentiator for students to gain access to jobs at the best employers naturally becomes their networks, not their skillsets.

The brand provided by elite schools is sufficient to drive demand for students who can learn the information anywhere: As more students choose not to enroll in lower tier colleges & universities, elite college and universities field more applications from this pool.  They can then become more selective in order to craft the class they want, which creates a virtuous cycle.

Online learning providers

The proliferation of online learning has created new education providers in the online space.  Now that students can obtain instruction on demand, there is no need for those who only want to learn specific skills to enroll at a traditional college or university.  Instead, they can use providers such as Kahn Academy, who, in addition to providing alternative education paths to potential college students, also offer high-quality education and training to traditional students in rural areas that would otherwise have limited access to top-tier teaching talent. [5]

This in combination with the emergence of the gig economy provides online education providers an opportunity to become a true two-sided platform: Connecting teachers and subject-matter experts to students.  Moreover, these teachers may be individuals who, for many reasons, may not have access to contribute via the traditional education model (career limitations, travel restrictions, family obligations, etc.).  Additionally, the students who can benefit from this model may be individuals who would otherwise not have access to the traditional learning model for many of the same reasons.

Online learning providers, such as Kahn Academy, have tremendous value to both create and extract as more and more students feel increasing economic pressure that prices them out of traditional educational institutions [6] and forces them to seek alternative methods of gaining an education.

Sources