The coming upheaval/paradigm shift in Education

Several converging trends in U. S. will result in great change in the U. S. higher education system. These trends are: U. S. tuition  increasing to unsustainable levels, the student loan bubble, and Massive Online Open Courses (MOOCs).

The current high US tuition costs fueled in part by the easy availability of student loans. A developing “student loan bubble”, the situation is more complex than the term “student loan bubble” implies but the present state of affairs can not continue long without substantial reform. Increasing delinquency rates and negative effects on the economy are driving the need for reform   Most student loans were guaranteed by the US Federal government, removing the credit worthiness concern of the lender. More recently the US Department of Education  now makes direct Stafford loans to every college student who demonstrates financial need, without examining evidence of academic ability or ability to repay.

Massive Online Open Courses (MOOCs) also known as Massive Online Courses (MOCs), are a potentially cheaper and better alternative to many of the courses being taught  today by high education institutions in the US. The high tuition is leading many students and their families to seek lower cost alternatives, Massive Online Courses are such an alternative. MOOCs are in their early stages. At least for some courses they seem to be both a better and cheaper alternative. For large lecture courses such as “Introduction to Psychology”, etc. MOOCs seems to be well suited as a replacement  Some in the academic world are well aware of their disruptive potential. Some institutions are giving credit for them, some are waffling,  some are in denial, some are saying “not as good as the best in classroom interaction, …  Hmmp might be OK for supplemental study”. Several consortia of Universities, and businesses have been formed to offer and promote MOOCs. For example Coursera, which currently offers 400 free college-level courses to over four million students around the globe.

I expect that some institutions will take the Luddite approach and fight MOOCs by refusing credit for MOOCs or limiting students to a few credits or courses towards a degree. Others will embrace MOOCs wholeheartedly either because they are the producers of several MOOCs or because of their historical approach to transfer, advanced placement and nontraditional credit. At a few institutions in the U.S. it currently possible to get a degree without having set foot on the campus. Many in the U.S. military have used this approach to take courses online and via “distant learning” and obtain a degree. One such institution is Thomas Edison State College in New Jersey. There are others. When MOOCs take off, if the mainstream traditional schools don’t embrace MOOCs then institutions such as Thomas Edison State will. Just a few such accredited schools between them will probably cover 90+% of the existing majors. The Harvards, Stanfords, and MITs  can probably ignore these trends with impunity (but they are some of the leaders in developing and offering MOOCs). But the middle of road institutions and especially the bottom half of ranked institutions, if they ignore MOOCs, many of them will find themselves heading for bankruptcy in not that many years.

The consequences will probably be a significantly reduced attendance at residential colleges and universities. Universities and colleges will find themselves with a surplus of residences and classrooms/lecture halls. Some departments won’t have need for additional faculty, adjunct professors and graduate teaching assistants. We will see a lot of newly minted Ph.D.s with no hope of obtaining a position and current faculty without tenure may not receive it. The lack of job positions in certain curriculums will result in discontinuance and cut back in Masters and Ph. D. programs (and even departments) in areas like Sociology, English, History, Art History etc. Leading to a vicious circle as departments are cut (or programs cut back), the number of positions will plummet and the ability of the graduate loan holders to payback loans decrease.

Rising delinquencies on student loans will eventually lead to insolvencies of the lenders (or now an increasing government deficit, due to  the Department of Education loan program) and possibly a partial bailout, and finally an end to or great reduction in federal loans  (maybe just loans for majors for which a critical shortage has been projected). The net result will be number of available loans will be much fewer and the terms less favorable. Students will be increasingly wary of incurring student debt.therefore Institutions with high tuition will see enrollments fall as loans become less available and/or affordable.

MOOCs won’t mean that there will be no need for a college/university campus but the usage will change. The instructional side will decrease significantly. At research oriented institutions, research will be come a large portion of what is done. With surplus class rooms, dormitories, and dining facilities, attempts will be made to bring people to campus for other reasons. There will be short courses on things that are not conducive to MOOCs, there will be meet and greets for online forums (perhaps those associated with MOOCs). Local history weekends, retreats for X, genre film festivals, conventions, get togethers, special interest groups, summer “hotels”, family genealogy reunions, many of the same things that are being done on a smaller scale now. There maybe more emphasis on proctored exams, weekend lab practicums, symposiums on this and that. This will be especially urgent in educational institutions that have funded dining facilities and dormitories with “revenue bonds”, that is they have borrowed money with the future revenue from dorm fees or dining fees as a dedicated source of funds to pay off the bonds.  The larger institutions with a substantial research arm will be less affected, similarly those with a large percentage of their enrollment in courses with a large “hands on” aspect and those whose student are perceived to be in credit worthy based on future earning power.  Small liberal arts/humanities oriented institutions are likely to be most vulnerable. Some institutions maybe able to transition to mostly commuter.student body, with a lower total cost due to no residential fee.

I see two major scenarios. In one MOOCs become a larger and larger percentage of the courses taught and begin to snowball with more and more people and institutions jumping on the MOOC bandwagon. The other scenario is that the “student loan bubble” bursts followed by  reduced amount and availability of loans which causes a push for less expensive alternatives which leads to widespread adoption of MOOCs and consequentially reduced class room instruction, reduced faculty, reduced need for residential facilities, falling (or at least not increasing tuition). The first scenario doesn’t necessarily lead to a reduction of the number of higher education students and graduates (just to the number of in classroom hours). The latter probably does lead to at least a temporary decrease in the total number of students and/or graduates. However both scenarios lead to reduced utilization of classrooms, dining facilities and residential facilities  as classroom “hours” are replaced by MOOCs.

The effects on higher educations institutions will spill over on to the adjacent areas. Many U.S. higher education institutions, are in “college towns” . For example Penn State in State College, Pa., Texas A & M in College Station, TX, Virginia Tech in Blacksburg, Va., etc. Most states have at least one, and many states have multiple “college towns”. The economies of the “college towns” will be heavily affected by a decrease of on campus students and reduction of faculty positions.  Many higher educational institutions with a heavy investment in dormitories and on campus dining facilities, may require the fewer residential students to live in dormitories for longer than currently, for example some universities require freshmen (or freshmen and sophomores) to live on campus but permit or even require (due to limited dormitory space) upper class-men to live off campus. As on campus enrollments plunge due MOOCs and decreased student enrollments, these institutions will probably change the rules to keep their dormitories full. This will have the result of shifting the economic burden to the “college town”. The off campus landlords will not be able to fill their apartments, property values will fall, off campus restaurants will fail. Tax revenues to the college towns will fall, and the towns will be forced to reduce staff and cut services. Reduced services will make the college towns less attractive reinforcing the declining residential enrollment. College towns would be well advised to try to diversify their economy now.

As for timing: I really can’t make a confident prediction, I think that MOOCs are at least a few years away from becoming pervasive, and the timing of the “Student Loan Bubble” collapse is even more uncertain. As of July 1, 2013,  new Stafford student loan interest rates will double to 6.8%. Currently about 11% of the US one trillion dollars of student loans are more than 90 days delinquent. If the interest rates are allowed to increase, probably the delinquency rate will increase substantially.  For political reasons I don’t see dramatic changes in the availability of US Department of Education student loans for many months and perhaps years. “Student loan bubble” debt poses the greatest danger to the federal governments deficit and not so much to Wall Street as the “housing bubble” did.