According to the White House Council of Economic Advisers, a 25-year-old with a bachelor’s degree will earn $1 million more over a lifetime than someone without a degree. This is the main driver behind getting a degree in America. As a results more than 20 million Americans go to college each fall despite the fact that the cost of attending college is increasing year by year.
How is this tuition financed? ~50% of American college students take out loans either from the federal government or private providers. (platforms and banks) It takes many decades to pay the loan back. In many cases the students default on their payments.
Besides money students need to have the mental capacity to go to college. Schools has stress and requires stamina. It is not a sprint but a marathon where you need to outlast your classmates.
What does it look like today?
- 20% of students is at least 30 years old.
- 37% percent go to school part-time (PT).
- 40% of students attend 2-year community colleges.
- Only 60% of students who started a 4-year college in 2007 graduated from the same school by 2013.
- 66% of adults who come back to college after a year away don’t graduate.
- 33% of college students live with parents or other relatives.
But you can’t understand the present unless you know history. Before the Civil War, college meant private institutions emphasizing Classical languages and schools for, teachers, military officers and politicians. World War II was the era when we saw a boom in public colleges, 2-year community colleges, and for-profit colleges.
Demand has increased with the shift from an industrial to the knowledge economy. Enrollment has grown from 10% to 41% of 18–24 year olds and from 2M to 17.5M overall.
US universities have been bulking up not only academically but with amenities like ever fancier student centers and athletic facilities. It has become like an arms race.
To finance all this, public schools have increased tuition on out-of-state and international students, making these students’ admission desirable. In-state tuition has risen too. Universities can afford to do this because they offer a limited supply product whose efficacy is extremely hard to measure.
Since students pay so much, they demand more. Here is where the problem kicks in. The financial savviness of 18-year olds is questionable.
These trends have encouraged many students to seek other ways for low-priced, high-quality education. Some students who could attend a 4-year institution choose to spend their first 2 years at community colleges that do not offer any fancy facilities.. The popularity of community colleges will only increase with President Obama’s initiative to offer more free two-year degrees.
The 2015 Gallup poll shows significant increases over 2014 in the percentage of respondents who, when they hear “college,” will imagine a 2-year community college, a workplace certificate program, or online learning.
Community college is what Harvard Business School professor Clayton Christensen calls a disruptive innovation. Disruptive innovations are initially frowned upon by incumbents but they make it to the top.
Online programs is one way to break this arms race link between status and perceived educational value. This is because online programs have an advantage over bricks and mortar universities, They have no constraints on capacity.
According to Department of Education Statistics, in the fall of 2013, 25% of American undergraduates were taking at least one course online. That was more than 5 years ago.
Americans have accrued $1.2T in student debt. More debt cannot continue to be the answer to college accessibility. Innovation is not only the answer but also the anathema of all broken ecosystems. In 5 years, more than 50% credit-bearing college courses in America will be delivered over the internet. Technology enables that. The price of college will have to decrease.
