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STATE OF PLAY

How to educate the world without so much student debt

Zack Rosebrugh for Quartz
Published Last updated This article is more than 2 years old.

The nature of work has changed. Education, for the most part, has not. The educational system was built for an economic disruption that began in the 1800s. At the time, most people in the US and Europe still lived on farms. Once industrialization, steam power, and railroads knit together vast markets, opportunities and people began flooding into cities and factories. Between 1870 and 1920, 11 million Americans moved from rural areas to urban ones, and most of the 25 million new immigrants settled in cities, too. By the early 20th century, the West was urbanized with an educational system designed for the industrial age. Students, when they finished high school—or college for the lucky few—rarely looked back after entering the workforce.

Today, the industrial economy is being eclipsed by a digital one. Manufacturing, once nearly a third of all US jobs, has followed farming as a shrinking share of the economy accounting for just 8.5% of all jobs. By 2028, the BLS projects more than 85% of all Americans will be employed in the service economy, from retail to home care. A similar transition is bearing down on every advanced economy, and eventually developing ones too, as automation and artificial intelligence spread to every industry.

Countries and individuals are now trying to determine how to prepare for this new economy. Traditionally, the answer was simple: ‘Go to college.’ Often, that made sense: the higher salaries from a degree—not to mention a strong correlation with health, happiness, and relationship satisfaction — outweighed the debt the average graduate incurred. For many, it still does. A US graduate student in 2020 can expect to nearly double their effective salary compared to what they would have earned in 1964, while workers without a college diploma have seen their real wages plateau and then decline.

But that’s a serious oversimplification, says David Autor, a professor of economics at the Massachusetts Institute of Technology. College is not the answer for everyone, and it’s not always the best one. “Our system only has one track: go to college or bust,” said Autor in an interview. “For a lot of people, it’s bust.”

But hundreds of millions of people will need to be retrained. A 2018 World Economic Forum survey estimated that only 60% of skills core to today’s jobs will remain so by 2022. The jobs of the future will demand more creativity, systems and data analysis, programming, and design. Sending everyone back to campus is not the answer.

The US faces a particularly large challenge in this regard. Given its reliance on student loans, and atrophied vocational schooling options, millions of people are trapped in debt with sub-standard training and limited prospects. But it’s only extreme in this regard. There isn’t an educational system in the world that won’t have to change.

Meanwhile, the internet is coming for higher education after remaking industry after industry over the last two decades. Startups, bootcamps, and job training programs that didn’t exist a few years ago are now attracting a lion’s share of new tuition dollars and educational investment. Despite accusations of shoddy teaching and questionable claims, new schools are reducing the time, tuition, and barriers to education when most traditional schools in the US have done the opposite, roughly doubling tuition since 1990 despite a modest increase in aid. This shakeup promises to train more skilled professionals in desperately needed areas like nursing, software development, and more.

But these new models carry tremendous risks as well. One cautionary tale is the rise and fall of the University of Phoenix. Founded in 1976 and offering vocational training for technical workers at companies like Honeywell, it went public in 1994. Within a decade or so, the school had abandoned its original focus and, like many other for-profit schools, opened its doors to almost anyone who could pay—or take out federal loans. With lax standards and lack of oversight, the school’s ranks swelled to 470,000 students. For a time, it was the largest in the US, and the top recipient of federal aid dollars. But standards fell even as debt-financed dollars flowed in. Graduation rates for online students plunged to 5%, according to the US Department of Education. Congressional investigations, lawsuits, and fines worth hundreds of millions of dollars ensued. Today, the school’s enrollment has fallen by about 70%, mirroring declines at for-profit schools across the country.

This state of play examines the principles and experiments guiding the future of training workers who can thrive in the new global economy—not just in the US but around the world. Its focus is on the promise of new approaches, the risks they present, and what to expect from a world where we’re all going back to school.

Table of contents

College isn’t what it used to be | The problem of student debt | What can be done? | Education as a benefit | Coding bootcamps and accelerated learning programs | Last-mile education | Competency education | The future of education | We don’t yet know what will work

College isn’t what it used to be

Higher education, once one of several roads to a stable life, now resembles a cliff face. High school used to be the hurdle to enter the middle class. The average worker in the developed world once had a reasonable expectation of leaving high school, landing a job, and earning an income that supported a family. No longer.

The economic ladder out—affordable college tuition—is now out of reach for many. Those unable to climb it, due to resources or circumstances, risk becoming stuck in dead-end jobs with stagnant wages. Europe’s safety net has buffered the blow for workers, but the impact in the US has been worse. In 1985, the median American male worker could cover major yearly expenditures—housing, health care, transportation, education—for a family of four on 30 weeks of earnings. By 2018, this rose to 53 weeks (a problem given there are only 52 weeks in a year, writes Oren Cass, a former policy fellow at the Manhattan Institute).

This “low-wage” job trap has captured a huge portion of workers across the industrialized world. The labor market in industrialized countries now looks like a barbell: high-paying, high-skilled jobs on one end, and unstable, low-paying ones on the other. “The labor market for people with a high school degree or less is brutal,” says Ryan Nunn of The Hamilton Project, an economic policy group. “It’s gotten significantly more difficult.” The data reveals an economy relentlessly squeezing out less-educated labor. Since 1963, the number of hours worked in the US economy by those with a high school degree has plummeted from about 75% to less than 40% in 2017. Among dropouts, the decline was even steeper.

Wages have flatlined for decades in Europe, Japan and other wealthy countries (despite a recent bump) while the share of workers toiling for low wages has risen steadily. In America, nearly 44% of workers—53 million people—are now stuck in dead-end jobs, from retail to call centers, earning $18,000 per year. Without more education, their prospects are dim: one study found only 5% of low-wage workers moved into better jobs over a 12-month period.

The problem, in part, is that college is still designed for “traditional” students: young people who attend school full time without serious family or work responsibilities, a relic of the time when college was the domain of the wealthy and elite.

Yet most students today are not traditional at all. Just 27% of US undergraduates fit under the “traditional” model, according to the US National Center for Education Statistics. Most worked full-time jobs, lacked a high school diploma, attended part-time, or cared for children and family members. At private for-profit institutions, the figure was just 9% of the student body.

The education system is now delivering the worst of both possible worlds for many students: the promise of a better life without delivering for many who start it. Only 60% of full-time US undergraduate students finish their Bachelor’s degree within six years, and the figure is 21% at private for-profit institutions.

The problem of student debt

The US is unmatched in student debt, but it is not alone. While about 40 countries offer free public college education, the rest are hiking tuitions and transferring the burden to students. In the last five years, British graduates’ average loan debt rose from $20,000 to more than $55,000.

Loans for education are turning America into the world’s largest debtors’ prison. Student debt is now the second largest category of debt for US households behind mortgages, but one that can never be discharged in bankruptcy.  More than one in ten borrowers are already delinquent on student loans, and the number is expected to grow to 40% by 2023, reports the Brookings Institution.

Advanced economies can’t expect to have a middle class without offering advanced education. Just as high school was crucial to a stable, productive life in the 20th century, training after high school is now crucial to one in the 21st—even if it does not end in a college diploma.

Using private debt to finance what is effectively the minimum education to compete in a modern economy—a policy shift under former US president Ronald Reagan’s budget director David Stockman—no longer seems sustainable.

One answer is for the government to spend more on subsidizing college attendance, as in countries like Sweden and Norway. For places like the US and the UK where student debt is a major problem, that would be a considerable improvement. But even in many of the countries where tuition is free, most young people don’t complete postsecondary education. Along with more government funding, better models are needed.

What can be done?

Michelle Dervan, a partner at the social impact investment firm Rethink Education, identified four promising trends, if done right, they might offer an affordable way to teach critical skills without requiring students to go deep into debt. Most are nascent. But they point to a future where more and more students opt out of traditional college. Harvard it will not be.

But these new approaches may serve the nearly half of Americans stuck in low-wage jobs due to a lack of education, as well as employers holding 7 million positions open because applicants lack the right skills. It won’t stop there. Over the next decade, we’ll need to retrain 375 million people around the world, 14% percent of the global workforce (pdf), as technology transforms the global economy.

Here’s a preview of what’s to come.

Education as a benefit

For decades, big companies reimbursed white-collar workers to go back to school. It wasn’t altruism, just good business. As long ago as 2002, researchers at the National Bureau of Economic Research (pdf) suggested tuition assistance allowed firms to hire better quality, more educated, more productive workers. Companies paid the tuition bills and were rewarded with workers’ higher productivity.

Education as a benefit is now expanding to the working class. This time companies are paying for education, but college is not necessarily the goal. Microdegrees and competency credentials have proliferated, alongside company-designed curriculums and virtual satellite campuses at the office. Whereas earlier programs reimbursed professionals and executives for part of their tuition, a growing number of employers now pay most or all of the education expenses of their front-line workers.

To recruit and keep talent, companies are experimenting with ways to move their workers up—and out. This “outskilling,” as opposed to reskilling for internal jobs, marks a fundamental shift in the implicit bargain between low-wage workers and corporations. Companies no longer expect workers to arrive with all their skills. They are taking an active role shepherding workers from basic education to middle or advanced skills where demand is high—even if that means preparing them for roles outside the company itself. With the skills workers need changing faster than many traditional schools can handle, companies are finding new partners online and offline to deliver an education to their employees.

There’s big money behind it. Last July, Amazon announced that it would spend $700 million on job training for 100,000 of its workers through 2025. Billions more have been pledged by Walmart, AT&T PwC, Home Depot, and others. While that doesn’t make them ideal places to work—Amazon, in particular, has been criticized for its onerous working conditions—it does turn what was once a career cul-de-sac (or worse) into a possible route to a different life.

Amazon’s CareerChoice program, one of the expanding initiatives, pays almost all tuition costs (up to $12,000) for workers earning credentials in high-demand occupations. “Not everyone who comes to Amazon is going to stay at Amazon,” says Tammy Thieman who helps run CareerChoice out of Seattle. “From a business perspective, it’s a great recruiting tool. They have the opportunity to make their life better. People engaged in this program are better able to serve customers. If they choose to leave Amazon, and find opportunities in local communities, they become a customer for life…We know it’s effective.” So far, more than 25,000 people have been trained through the program from aircraft mechanics to machinists to and nurses.

Amazon has partnered with more than 900 schools to facilitate the program. But it’s also setting up its own classrooms and technical training academies inside Amazon. By the end of 2020, notes Thieman, the e-commerce company will have at least 60 classrooms in warehouses around the world where workers can attend classes around their workday. The idea that its workers could commute to work, pick up kids and run errands, go to school, and then return home was a non-starter for many. As part of every new warehouse built in the future, a classroom is designed into the floorplan.

Amazon is exceptional, thanks to its sheer size. It hires hundreds of thousands of people each year in a tight labor market. But LinkedIn spans all of it. The social network for professionals has about 660 million users in 200 countries. Its acquisition of Lynda.com (now LinkedIn Learning) for $1.5 billion in 2015 thrust it into an online learning market. It now serves 12,000 big enterprise companies looking to reskill their workforce, and is growing fast.

Since 2017, LinkedIn says its learning platform with 23 million paid users has seen the number of paid learners (both company learners and individuals) rise 104%. Many of the skills companies are seeking out are only now hitting curriculums at colleges (if at all). Expertise in blockchain was the skill in the shortest supply in 2020, according to LinkedIn data, followed by cloud computing, artificial intelligence, and user experience design. Partners like Verizon say it has allowed them to train workers in novel ways and retain the best workers. “A lot of the technology has finally caught up with the ideas,” says Lou Tedrick who leads learning & development at Verizon. “In the past, you were hired to do the job you were hired to do, and we provide learning to do that job. Now we prepare for what’s coming next.”

Coding bootcamps and accelerated learning programs

Bootcamps are the technology industry’s answer to a vocational school. Exploding onto the scene with General Assembly in 2011, more than 100 bootcamps have now graduated 133,000 students, according to CareerKarma, a firm connecting students to coding programs.

With names like AppAcademy, General Assembly, Hack Reactor, Metis, and Lambda School, these short, intensive training schools are designed to turn capable students—many of whom already have a college degree—into entry-level programmers, product managers, data scientists, and more. Most are independent, although a few universities have embraced them to modernize their traditional degrees through companies such as Trilogy Education Services (acquired for $750 million last year). Last year, bootcamps posted a record 34,000 graduates, pulling in nearly half a billion dollars in revenue.

Unlike massive open online courses, or MOOCs, bootcamps tend to bring together small classes for intense weeks of full-time study. Teams solve technical problems together, offline or online.  They are often assigned practical projects, or even internships, with companies that might hire them after graduation. While coding was the original focus, the model has steadily expanded to include subjects such as cybersecurity, user experience and even sales.

A key element for bootcamps is how students pay. Many charge tuition between $10,000 and $25,000, a risky proposition for unaccredited schools. But the most well-known bootcamps are shifting to income share agreements. Students agree to pay a percentage of their income (usually about 15%) after finding a well-paying job. (The exact threshold varies by school.) If no job materializes, they owe nothing. In 2019, there were 27 bootcamps in the US offering ISAs with varying terms. The standard average offer was a 38-month repayment term for students earning more than $42,476 per year, with a 13.8% income-share percentage and $32,754 payment cap, according to CareerKarma.

Yet coding bootcamps remain largely unaccredited and only some are regulated. That has allowed them to scale up quickly around the country, but a steady stream of student complaints is growing into a torrent as some students’ expectations are not met. Since 2014, California regulators have sent cease-and-desist letters and fined about dozen coding bootcamps operating without a license, some have registered while continuing to operate (incurring more fines and leaving students without much recourse should things go wrong).

The most recent example is Silicon Valley’s Lambda School which has raised $48 million, according to the private equity research firm PitchBook. Last month, The Verge reported on design students castigating Lambda School for “unprofessionalism, incompetence, and disorganization” who asked to be released from their ISAs. It was later reported that the school had misled students about the quality of its program and job placement rates. Lambda’s co-founder Austen Allred later admitted to mistakes, and vowed to revamp aspects of the school’s program. Despite an effort to standardize reporting of student outcomes, the controversy has cast doubt on bootcamps’ job placement rates and their ability to grow while maintaining standards.

Last-mile education

Companies are no longer waiting for candidates to apply with the right skills. They’re designing mini-degrees for candidates to complete before they even apply. Last-mile education delivers a light-weight, focused credentials that brings promising candidates through a hiring process where they might otherwise have gotten lost. Rather than build out their own program, companies are integrating with existing universities so students can add credentials to conventional degree tracks.

SV Academy is one of them. It acts like digital finishing school for aspiring tech workers, a fusion of a vocational bootcamp and a recruiting firm. It offers a three month (part-time) training program in tech sales and support roles at Arizona State and Florida International Universities (so far). The company—which claims that 60% of its graduates are women and 40% are African American or Latinx—says its trying to improve talent search and training for fast-growing startups, where minorities remain underrepresented. Every quarter, about 100 people go through courses designed to prepare them for roles at startups in Silicon Valley and New York. The program is free for students (who must work exclusively with SV Academy’s hiring network), and employers pay SV Academy for hiring students after they graduate.

A second is Pathstream which partners with existing universities to train students through online courses designed by the tech firms themselves. Students can earn certifications in a simulated work environment from Facebook (digital marketing), Salesforce (customer relation) and Silicon Valley Bank (business and data analytics), an more focused alternative to bootcamps that give students a way to signal practical competency and develop a portfolio, while companies get access to a new recruiting pipeline.

A few companies, such as Facebook, are big enough to simply partner with colleges directly. The social media giant launched a digital marketing certification for community colleges to add to their associate degree tracks. It’s not designed to recruit new hires to Facebook, the company claims, but teach marketable digital skills to students (as well as promote Facebook’s advertising model to more small businesses). Colleges say it’s helping them meet employers’ demands. “We don’t want to say this is a Facebook school or program,” said Jermaine Whirl, a vice president at South Carolina’s Greenville Technical College which offers the certification. “But it’s definitely giving us a competitive advantage to have something substantial, branded, and nationally recognized. Almost every company out there has a Facebook page, and nearly all small businesses have a Facebook page.”

Competency education

You probably haven’t heard of one of America’s biggest universities. It has no Ivy League legacy. No Nobel laureates. Its sports teams get little airtime. Since 2003, however, Southern New Hampshire University (SNHU) has rocketed from 3,000 students to more than 132,000, almost all of them online. The private, non-profit university’s improbable success came from reimagining how to deliver a vocational education online using technology and a learning process that pushes down costs without sacrificing credibility.

SNHU’s president, Paul LeBlanc saw the writing on the wall in 2009. Small colleges were closing. Tuition was rising, but public funding and private funding were not. Cuts were imminent. Rather than slash faculty, LeBlanc doubled down on the school’s online education betting growth there was the future. It was the right bet. The school, described as the “Amazon of education,” offers 200 fast, low-cost, employer-tailored programs delivered online. Its rapid growth strategy, borrowing from the aggressive marketing and cost-cutting measures more familiar in the for-profit world, while aiming to maintain the academics of an accredited, non-profit university.

But SNHU doesn’t operate like most universities. Its $139 million annual marketing budget works out to about $1,134 per student (about half of what it spends on instruction). Its online curriculums are standardized and then handed out to thousands of adjunct professors who earn as little as $30 an hour and rarely interact with students until they need help. “Admissions counselors” work huge phone banks so when a student expresses interest online, they get a phone call back in less than a minute.

If that all seems anathema to the popular conception of a college education, LeBlanc sees it as lower the cost of a degree so millions of students can afford a shot at the middle class. “We are super-focused on customer service, which is a phrase that most universities can’t even use,” LeBlanc has said.

The school’s next step has been to do away with the need for traditional tests, letter-grades, and credit hours to earn a degree. SNHU’s College For America program lets students earn a diploma by working on projects, overseen by instructors, and submit work to prove they’re mastering skills before advancing. The Bill & Melinda Gates Foundation-backed effort bears almost no resemblance to the classic college experience: material is delivered entirely online, teachers only work with students when projects aren’t up to par, and the entire Bachelor’s degree may be earned in two years costing as little as $10,000.

Many employers sponsor the program as a benefit. Its partnership with a startup called Guild means it now has access to workers at companies such as Walmart, Chipotle, Disney, Lowes, and others spending some $16.5 billion in education and training for their workers each year. Guild, and competitors such as Bright Horizons, InStride, and Pearson, essentially acts as a student recruitment service for colleges eager to scale online programs, while companies get access to thousands of online degree programs assembled from university partners.

SNHU is now moving into skills-based credentials. SNHU is betting the future of education for people who want marketable skills will be micro-degree that increase their incomes. To make this a “seamless pathway” from high school through college to employment job, SNHU recently acquired the Chicago company LRNG matching young people with job opportunities using game-based learning and digital badges. SNHU plans to roll that into its accredited College for America. “I think we have to move away from a one-size-fits-all model of education and give people choices,” says LeBlanc.

Is SNHU another University Phoenix waiting to happen? Despite borrowing its marketing strategies, LeBlanc bristles at the comparison. Instead, he argues, the non-profit school is more effective at educating the 93% of its students who study online and part-time without placating shareholders. In 2018, SNHU boasted a six-year graduation rate of 52%, according to federal filings, not far off the US average of 60% for four-year institutions and far better than the 21% graduation rate at private for-profit institutions. The tuition for a four-year Bachelor’s degree is just $38,400, one of the lowest, and unchanged since 2012. SNHU says it plans to keep the price frozen until 2021. But as SNHU grows, it will test just how big a university can get while serving its students.

The future of education

Some of these experiments will succeed; others won’t. But one way or another the way we train workers is changing. A few principles unite the experiments I’ve described, and point toward the future of education.

Students won’t pay up front (or at all)

Education is an investment in the future. Two new sources of cash are filling the void for those without the means. The first is investors. Income share agreements backed by investor cash are allowing students to pay for school out of their future earning potential. Their tuition cost is paid back over time as a percentage of a student’s salary. If they don’t earn a minimum amount, they owe nothing. Most are capped so students know the maximum amount they’ll be required to repay. The contract transfers the risk of financing education from students (once reliant on debt) to investors and the schools themselves.

The second is employers. For decades, companies have educated their professional workforce because they knew it increased productivity, retention, and recruiting. Now they’re extending the same benefit to lower-wage workers. As low-cost programs come online, they’re paying for their entire education.

Education will adapt to students’ lives, not the other way around

Schools assume students will come to campus, learn on the school’s schedule and leave with a degree. New programs abandon that idea. Courses are moving online. Schedules and locations follow the students. Amazon’s decision to build classrooms in its warehouses emerged from student feedback. “Everyone told us the number one barrier for them is work-life balance,” says Thieman of Amazon’s Career Choice program. Austen Allred, the head of Lambda School bootcamp, said the most important component of the school was not the curriculum, it was delivering a flexible education. It’s a more customer-centric view of learning, but also one reflecting the reality many “non-traditional” students face. “The more difficult aspect is actually working around people’s lives,” he says  “How do you provide outcomes in as little time as possible, right?”

Competency matters more than credentials

While an Ivy League degree will not lose its pedigree, companies are dropping college degrees as prerequisites in favor of proven ability. Apple, Costco, IBM, and Google no longer require a diploma for a myriad of white-collar jobs ranging from program manager to software engineer. To some degree, that’s a matter of supply and demand (not enough technical candidates), but it’s also an acknowledgment that the college degree is a crude indicator of aptitude. “We are now in the transitional stage of employers gradually reducing their prejudice in the hiring of those who studied at a distance, and moving in favor of such ‘graduates’ who, in the workplace, demonstrate greater proactiveness, initiative, discipline, collaborativeness–because they studied online,”  says Fredric Litto, a professor emeritus of communications and longtime distance-learning expert from the University of São Paulo.

Education ends with a (better) job

For “non-traditional” college students (the vast majority), school is an economic calculation to better their life for themselves and their families. Yet “it’s difficult for people to even figure out what is the opportunity,” says David Autor, a labor economist at MIT. Students must pick a new career, select courses, gain practical experience, and find a job after graduation with little visibility into what lives their education will lead. The best educational programs now guide students toward careers that fit into the constraints of their lives, and spend as much time on career placement and preparation, as the education itself. At Amazon, Thieman says the company has full-time staff dedicated to finding jobs for graduates and guiding them into the right career trajectory. “We have learned it’s less about aptitude and interests and it’s more about keeping students’ end in mind,” she says. “How do we give people a really clear vision for what happens after education.”

Education will not end after graduation

Most educational spending is dedicated to the first two decades of life, but lifelong learning is now seen as essential in the workplace. A 2016 survey by the Pew Research Center found 87% of workers say they will need new training and job skills throughout their work life. “College education (which will still favor multi-year, residential education) will need to be more focused on teaching students to be lifelong learners, followed by more online content, in situ training, and other such [elements] to increase skills in a rapidly changing information world,” predicts Jim Hendler, a professor of computer science at Rensselaer Polytechnic Institute. As automation puts increasing numbers of low- and middle-skill workers out of work, these models will also provide for certifications and training needs to function in an increasingly automated service sector.” That’s already reflected in the data. Degree-holders and non-degree holders now devote a nearly identical share of overall learning time toward learning tech skills: 42% vs 43%, according to LinkedIn.

We don’t yet know what will work

There’s no technology today that can reliably train large numbers of unskilled students to a high standard, argues MIT’s Autor. “Technology has been most successful increasing the learning opportunity for people who are really good at learning,” he says. The numbers bear this out. While a third of students take at least one online course as part of an accredited college experience, the most common use of online education is for advanced master’s degrees. “We have not found the kind of secret sauce on how to use all this technology to make a cost-effective, fast education,” says Autor.

As with almost every technological revolution, the key is unlikely to be technology itself. It’s how it empowers people. Access to information could be the least important part of education. Instead, it’s fostering the social benefits of a traditional experience online, without the expense of a physical campus. Whoever solves this will lead the way, says Rethink Education’s Dervan. “When we look at the challenge of training the workforce, in many cases it’s a human solution: mentors and teachers,” she said. “How can you extend the reach of what’s possible for those people using technology?”

It’s the feedback, encouragement, and guidance that great teachers and peers provide which makes the difference between graduation and failure. As part of MIT’s Poverty Action Lab, Autor is helping run studies of how policy interventions can reverse the trends decimating the prospects of the working class throughout the world. The results will take a decade or more to come in. But he’s optimistic. “Many people believe they are good opportunities and we just haven’t found them all yet,” says Autor. “We need a portfolio rather than a single one.”