College is Broken: Reflections and Predictions

College (as we know it) is broken.

The system of higher education in the United States is being rebuilt from the foundation and we’ve only just started to see the impact of this dramatic transformation.

• The way students and parents pay for college is changing
• The methods and the places students learn are changing (and have been for a while)
• Our culture is changing to finally accept that “traditional” 4-year college isn’t the answer for everyone

But before we talk about all of the changes that are happening in higher education right now, let’s talk about why college is, to put it simply, broken in the United States.

College is Broken.

It’s impossible to miss the many ways college is broken today. And I’m not just talking about the high profile bribery scandal that broke several weeks ago.

While parents paying hundreds of thousands to millions of dollars to guarantee college admission through a “side door” is concerning, it pales in comparison to these other indicators of college broken-ness.

1. Student Loans Are Crippling Tens of Millions

44.2 Million Americans currently are carrying close to $1.5 Trillion in student loan debt (this is ~20% of the US adult population).

Even more astonishing, over 11% of these loans are delinquent (90+ days without payment or in default).

This delinquency rate is >5x the credit card delinquency rate!

Student loans have become such a burden that companies have been started to offer student loan repayment as a fringe benefit: Goodly.

Shout out to Goodly for helping the many already in debt, but we need to stop the problem at the source too!

Sources: Federal Reserve, Bloomberg

2. Tuition Increases Are Relentless

From 1988 to 2008, tuition increased on average by 3.5% per year. From 2008 to 2018, tuition continued to increase at a still-suffocating 3% per year.

In 1998, tuition at a private 4-year college was 77% of the average male income in the United States.

By 2016, this had increased to 116%.

On the public college side, the increase is even more dramatic. In 1998, the costs averaged 29% of the average male income in the United States, increasing to 52% in 2016.

Incomes simply have not kept pace with tuition increases.

Source: ProCon.org

Average Rates of Growth of Published Charges by Decade - Trends in Higher Education - The College Board

3. Incentives Are Distorted Between Colleges and Students

Students continue to attend college and continue to take on these significant loans because they believe they are making a good investment. College graduates earn substantially more than High School graduates over the course of their career, right? Correct, but…

The fundamental problem is that if the college they attend turns out to be a bad investment, as a growing number of private 4-year colleges do, only the student pays this penalty (and they pay a BIG, often lifelong, one).

The college already got paid by either the government or the student loan company and there is simply no penalty for their lack of performance in student education and career placement (save for some very limited publicly funded university penalties).

There are also no meaningful incentives from the government to provide education in areas where jobs are in the highest demand.

The only true incentive these colleges have is one that is too distant for many: The ability to continue to recruit new students who will pay their ever-increasing tuition rates.

How College is Changing Right Now

Where And How You Learn

• MOOCs: Massive Open Online Courses aren’t new, but the depth of courses they offer continues to increase dramatically. Between EdX, Coursera, Khan Academy, and Udacity you can learn almost anything from anywhere for free.
• Code Schools (v2!): Code Schools have already gone through one wave of evolution with ineffective programs and schools failing, new models for sustainable funding and profitability emerging and consolidation accelerating.
• Technical Trade Schools: Technical school used to mean learning a trade like Carpentry or studying as an Electrician's apprentice. This concept has been reinvigorated with companies like NextGenT that offer many technical certificate programs in high demand fields like cybersecurity.

How You Pay

• ISAs: Income Share Agreements. Instead of paying tuition up front, a student agrees to pay a percentage of their future income to the school or lender. There is usually an income “floor” that the student must be above in order for the income share to take effect after graduation. There is also usually a repayment “ceiling” (so the former student doesn’t end up paying an obscene amount if they get a high-salary position immediately out of school). Companies like Vemo Education have started to bring this payment model to significant numbers of both code schools and traditional 4-year colleges.
• Get Paid to Learn: Several companies are taking the idea of the ISA a step further. In addition to paying nothing upfront, these companies are actually paying you a salary to learn. They are betting on high demand career fields like software development and data science and trying to make it as easy as possible for top candidates to join their schools. Several “get paid to learn” companies include Lambda School, Modern Labor, and CareerKarma.

Cultural Changes and Pressures

• Reducing the 4 Year College “Pressure”: It’s taken a long time, and particularly affluent parts of our country are still pretty resistant, but code schools and alternative higher education options have begun to gain acceptance as a better option for meaningful percentages of high school graduates.

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Prediction: College in 10 Years…

• Mid-tier private colleges cease to exist
• Code schools will (continue to) consolidate dramatically
• All colleges remaining offer ISAs and many offer “get paid to learn” options
• Community College still exists as the low cost higher education option and may even grow in influence and size
• A small set of top code schools achieve “Ivy League” status and diversify to offer robust curriculum for developers, data scientists, designers, product managers and more (essentially the tech company talent stack)
• Student loan debt collapses in value as defaults skyrocket

Prediction: College in 20 Years…

• Ivy League and top research universities are only “old guard” that remain
• Community college is free everywhere in the USA as a guaranteed, robust, public secondary education (in many states this is the case already)
• All colleges that remain offer both ISAs and “you get paid to learn” options
• Code schools look like colleges and colleges look like code schools to the point where they are hard to differentiate

College is Changing and It’s a Good Thing

College is broken today.

But fortunately, many startups, companies, and public figures are starting to pay attention and build the next generation of higher education.

It’s going to be disruptive, it’s going to be scary (at times), but with the right minds focused on this huge problem, our country will build a secondary education system that has:

• Free options that are robust (Community College)
• Stronger alignment with high-demand careers
• True incentive alignment between students and education providers
• Little to no debt for students (!)

How do you think college will change in the next 10–20 years? Let me know on Twitter or in the comments: @amitch5903

More from Alex Mitchell on Medium

• My Millennial MBA: A Retrospective
• 2 Years Later… "10 Bold Technology Predictions for the Next 10 Years"
• Top 10 Podcasts for Product Managers in 2019
• Don’t Set Resolutions. Set Personal OKRs.
• An Open (Financial) Letter to Millennials

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