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the future of college
Goldman Sachs: Higher Ed Ripe for Disruption

A Goldman Sachs investment research report issued last month paints a very grim picture of the state of American higher education (h/t Bryan Alexander). The bottom line: “returns on a college education are falling,” and quickly.

According to a striking graph included in the report, the average “wage premium” from going to a four-year college (that is, the difference in incomes between college graduates and high school graduates) and college tuition (including room and board) rose in tandem throughout the 1990s. Then, starting in about 2002, something changed—the wage premium growth started growing more slowly, even as tuition kept rising as fast as ever.

This disconnect, Goldman notes, is not a problem for all classes of colleges. It appears that the top institutions (as ranked by SAT scores) are still delivering good returns, while the returns for schools in the bottom half, and especially the bottom quarter, are falling off steeply. This can’t go on forever. If costs continue to exceed returns, the bubble will burst eventually—even if Washington keeps subsidizing it.

Finally, Goldman summarizes possible avenues for a shakeup of the higher education system:

Two things in particular stand out as potentially disruptive to universities. First if employers changed their attitude toward nontraditional sources of degree awards. Massive open online courses (MOOCs) are the most obvious threat (30% of undergraduates already take some classes on line), but it could also be companies creating their own de facto degrees. Udacity for example offers nanodegree programs where curricula are designed in partnership with companies like Google, AT&T, Facebook, Salesforce and Cloudera. Second, for a broader new system of signaling and talent identification, look again to the tech sector; an increasing numbers of companies are using GitHub (a software development tool used for writing, storing and collaborating on code) to view coders’ portfolios of work as a better talent indicator than their academic resume. Consulting firms EY and PWC have both said they will use their own testing systems for recruitment rather than relying on academic grades.

Both of these avenues should be pursued aggressively. We’ve written before that despite the protestations of academic insiders, MOOCs have real promise—not just as supplements to brick-and-mortar degree programs, but as viable alternatives for large numbers of students. And a “new system of signaling and talent identification” is sorely needed. A national exam system, in particular, would help level the playing field for students who didn’t want to attend an elite college, or couldn’t afford to.

The current American higher education regime is not working for a huge number of students, and, as this report suggests, those who continue to cling to the status quo are in denial. The system has to change, and it will.

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  • iconoclast

    Griggs vs Duke Power may have finally reached peak exploitation. Thousands of parasitic administrators along with thousands of so-called professors of identity studies have exploited the supposed signaling of a BA/BS degree required because aptitude tests are supposedly discriminatory.

    • GS

      You are absolutely correct, iconoclast. The Griggs decision is an abomination.

    • f1b0nacc1

      Thank you for saying it before I got here…..I know I sound like a broken record on this subject, but Duke v. Griggs delanda est.

      • iconoclast

        Disparate impact delenda est indeed.

        I hope sanity returns before I die in the next couple of decades but I tend to doubt it. Racism attracts identity demagogues like horse manure attracts flies.

  • FriendlyGoat

    I have suspected for years that some entrepreneur(s) will do and end run around traditional college degrees by developing a MARKETABLE alternative measurement of knowledge which will then upend “accreditation”. It sounds to me like Goldman Sachs is predicting the same and would naturally want to invest in it as soon as halfway-promising startups appear.

    • Anthony

      FG, (Happy New Year) here’s an insightful values interpretation that may inform: http://www.nytimes.com/2016/01/06/opinion/campaign-stops/purity-digust-and-donald-trump.html?ref=opinion&_0

      • FriendlyGoat

        Happy New Year to you to, but I could not get your link to open. It said page not found.

        • Anthony

          I misspelled a word in link; you should get there now (if not it’s a New York Times article by Tom Edsall on Trump’s attraction).

          • FriendlyGoat

            Got it now, thanks. There is an increasing amount of talk these days that political liberals and political conservatives are hard-wired with different value drivers. Your link is thoughtful about that.

          • Anthony

            Glad the connection has been made. I thought you would appreciate the objectivity of article and its valued insights.

            Also, FG, after reading the piece I reflected on something shared with me a long time ago concerning human (social) relations: “Inequality, as we are so often reminded, is characteristic of every known society. But that truth settles nothing. The decisive question is always whether a particular society has chosen equality or inequality as the ‘standard’ for judging social relations. That choice determines the scope and meaning of the inequalities that will be countenanced. It determines the realms of experience to which inequality will apply; whether inequality will have ‘sovereign significance’; whether the inequalities will need to be constantly justified to those affected by them; whether the inequalities will maximize the creative energies of all or only of a few; whether they will inflame ambition and excite avarice, or produce mutual trust and compassionate concern; and whether they will provide grounds for the dignity of each, or will merely gratify the pride of some at the expense of others.”

            Thanks, for indulging but Edsall’s article connected old memories.

    • f1b0nacc1

      Shockingly enough, we agree….smile…
      However (there is always a ‘however’, isn’t there?) I wonder about how universal this is going to be. For most technical fields, this should be easy enough, but what about something where the necessary skills/knowledge/whathaveyou isn’t easy identified? How do you determine (just as an example) the desirable skills for management of an HR department? In the end, I suspect that there is a lot of human assessment involved that simply cannot be wished away with technology, and that is where the problem will remain.
      Don’t mistake what I am saying…I am NOT defending discrimination, nor am I trying to justify its unfortunate use. I am simply not terribly sanguine that we can move away from methods of evaluation that wont’ be vulnerable to this sort of abuse.

      • FriendlyGoat

        Well, you’re right (smile). It ain’t easy to conceive or someone would have already done it. But not so long ago we would have thought Uber, AirBnB, Twitter, GoFundMe, PayPal and even bottles of high-priced drinking water were fanciful ideas. HOWEVER (yes, always) the comfort for hiring managers of hiding behind “credentialism” is a high hurdle to be overcome.
        Organizations which hire are the entities to be convinced that they could or should trust an “alternative measurement” and not be stung or sued for doing so. But—–methinks—-someone is going to pioneer something and get very rich from being the credential middleman.

        • f1b0nacc1

          We agree. I suspect when Duke v. Griggs is overturned the market for this sort of measurement will drive innovation. Before that, however, the threat of litigation would probably stifle it.

        • Jim__L

          The examples you cite were enabled by new technology. Aside from the drinking water example, they really were fanciful (as opposed to practical and feasible) before that new tech came online.

          We actually had Alternative Measurements before Duke vs. Griggs — they were the skill tests employers could impose on applicants. If you’re worried about disparate impact, the way to solve that problem would be to encourage minority participation in specific vocational training.

          This problem stems from the fact that WEB DuBois’ legalistic approach buried Booker T Washington’s practical approach to the advancement of minorities. It was a false choice from the beginning, and we’re paying the price for it now.

          • FriendlyGoat

            The entrepreneur(s) I envision will create credentials to rival traditional degrees. It’s just a matter of time IMHO, and I suspect that communication technology will help it happen. Knowledge is everywhere, in books, in audio, in video, in tutorial. The idea that accredited institutions have a “lock” on credentialing just no longer seems reasonable.

          • Anthony

            Something for you and this is your most recent comment to attach: https://www.janus.com/bill-gross-investment-outlook

          • FriendlyGoat

            Funny thing——that population growth in places like India, China and the Middle East——AND—–population slow down in places like Europe, Japan and USA, each seem to have their downsides at the same time. It’s possible to make cases for criticizing both at once, no?

          • Anthony

            Yes, more or less if I understand you to mean demographic change brings both upside and downside considerations. Still, the Janus article for me brings into focus the incredible indebtedness as it relates to worldwide and U.S. growth (not to mention the ascribed demographic effect). All an all, both avoiding issues referenced and pushing proverbial can down the road will neither serve country nor Americans well.

          • FriendlyGoat

            Well, we can follow the high-end tax cut recommendations of Donald Trump or Ted Cruz or Ben Carson and increase the concentration of wealth at the high end while cutting the spending which funds millions of jobs—–or——

            I’m not trying to be sarcastic with you, but seriously, the people who claim to know the most about economics—-the folks on the “fiscal responsibility right” —–seem to never have any other theme in mind. I seriously don’t “get it” as to how that actually is projected to work.

            If we decided to stop “kicking the can”, WHAT does that mean?

          • Anthony

            FG, I’m in no way endorsing a right of center fiscal proposal Instead, I am highlighting issues that are (in my opinion) germane to our long-term prosperity (personally, I will be affected minimally if at all) and ought to not be hostage to our polarized politics. That ,FG, is the kicking of proverbial can ….

          • FriendlyGoat

            I know what kicking the can down the road means. What I don’t know is what is meant by any idea of “stopping” kicking the can down the road. There is really not much possibility of anything other than either living with “right of center” ideas or stopping those via politics and doing little to nothing else. Compared to letting the GOP write the rules, kicking the can is preferable.

          • Anthony

            Well, we disagree. I don’t prefer your option; though I’ve never limited my possibility to an either/or, I avoid postponing critical decisions (kicking can…) while recognizing life is not always how I want it. That said, no one here is advocating concession (never been my approach understanding as I do that action starts where you are).

          • FriendlyGoat

            There is nothing wrong with addressing critical decisions unless we we appoint those who we know are going to decide the wrong direction and THEN insist on “getting on with it” WHILE we suffer that handicap. The present House of Representatives is a hopeless body for doing anything sensible in fiscal policy. Unless we can replace the control in the House, there is little to do but check and delay as far as I’m concerned.

            You and I are old enough to remember some semblance of statesmanship and sensible compromise in government. Right now we do not have it running our show.

          • Anthony

            I understand sentiment but keep stressing importance of Purse Strings in our Constitutional arrangement – given your laser like focus, work starts there (no one claims smooth sailing).

          • FriendlyGoat

            I think we have to consider that we are now dealing with a GOP philosophy which believes spending-side deficits are to be trimmed and tax-cut-side deficits are of no concern. There is no possibility of compromise in that scenario. Even Paul Ryan has been absolutely vilified by many in the GOP for making a December deal to keep shutdowns out of the election year for benefit of the GOP. This says something about what we can expect. The game is to make well-off people much more well off and to hell with anything else. I would not speak in these acerbic tones all the time if we ever actually saw anything else from “the party”.

          • Anthony

            That has been both a practice and general philosophy now for three decades or better – you know that. And your tone is not inappropriate. The hard work is not on your end but from the unwilling to call a thing what it is at the long term expense of us all.

          • FriendlyGoat

            Part of the problem we have is that Republicans who seek a middle (few as they remain) are labeled RINO in derision. Democrats who would agree to cut the spending on anything become instant DINOs. Election years don’t make this any easier. We liberals and sem-liberals have to realize that the ideology of the present GOP front runners Trump and Cruz (Cruz especially) is much more seriously radical to the right than even our memories of Sarah Palin. All elections are serious. 2016 is monumental because of the “new normal” in right-wing fever.

          • Anthony

            I’m in general agreement and it is morally justifiable to feel politically irked – no matter your U.S. politics (let’s dismiss labeling for a moment). Now, what’s important is how one behaves (rationally or otherwise) and that may be determined by one’s intellectual analysis and program for eliminating or avoiding felt difficulties – i.e., Trump/Cruz.

            Perhaps, what are generally seen or identified as leftist and rightist deviations from centrism (which may actually uphold the status quo) may at bottom instances of class struggle or at least class protest with various admixtures thrown in for good measure – “when men feel cornered they often elect to fight” (whether we really know for what end may be another matter).

            Finally, the 2016 quadrennial as others will play out. The two-party electoral system performs the essential function of helping to legitimate the existing social order. It channels and limits political expression as well as blunts economic grievances. At bottom, it often leaves little time for real issues because it gives so much attention to the contest per se – who will run, who is ahead, who will win the primaries, who will win the nomination, who will win the election. 2016 into 2017 will continue the tradition of republican government with little of the substance. But, people (hopefully engaged voters) are tiring of the show and that’s where you come in – you know and sense something is being trivialized (there cannot be a new normal for a country of 300 million plus without…).

          • FriendlyGoat

            I notice The Hill has a prediction from economist Arthur Laffer that any Republican presidential nominee will win the 2016 general election by a landslide—maybe 45 or more states. Do you suppose our voters are really that far out of touch with their own realities?

            http://thehill.com/blogs/ballot-box/presidential-races/265355-economist-gop-may-win-47-states-in-general-election

          • Anthony

            FG, noise just noise. But, every once in a while check 538 to get realistic assessment (no prediction just assessment).

    • iconoclast

      That has been done many times in the past. However our legal system has decided that disparate impact is more important than actually hiring the best people to do a job so the only ‘signal’ available to companies is whether or not someone received a Bachelors and in what area of study.

      • FriendlyGoat

        “Disparate impact” does matter. It actually is important to not have only (or even mostly) the sons and daughters of old money or old privileged classes ascending to jobs which can adequately support families. You may be willing to dismiss this idea as something silly, but I’m not and I don’t think any thoughtful person should.

        • iconoclast

          You describe nepotism and/or racism and infer (wrongly) that the State can ensure equality in outcome for everyone. But anyone who considers this proposition honestly realizes that the State can ensure no such thing. People have different abilities, goals, desires, and cultures. Imagining that outcome inequality can be resolved inevitably ends up with both favored and unfavored classes all of whom clamor for help from an increasingly polarized State bureaucracy.

          Disparate impact may be a sign of an illegally discriminatory admission/hiring/promotion policy. But, as everyone knows, correlation is not causation. Lower admissions of favored classes at Harvard are not indicative of illegal discrimination. In fact, accepting unqualified applicants to places like Harvard only hurts those applicants who would do much better at a more appropriate school. The same is true for the workplace. A middling engineer at Google would struggle mightily while the same engineer might flourish at a less competitive workplace.

          So banning policies that have a disparate impact without determining whether or not the policies discriminate illegally is a travesty of justice. Education and organizations easily navigate around the crude roadblocks put in place by marginally intelligent bureaucrats and their leftist cheerleaders. The real price is paid by the young people who actually believe in the propaganda that a university degree in white privilege studies (or sociology, same thing) is worth anything.

          • FriendlyGoat

            1) The subject here is whether something will come along to disrupt and change the present-day college model. You are off in right field to be banging on me here about your perception of concerns about disparate impact.

            2) Everyone knows that all outcomes cannot be made equal due to the differences in abilities and motivations of individual people. I am aware that you believe society should be therefore totally unconcerned with gaps between outcomes for whole classes of people. I do not agree with that, but I have no need to try to convince you. Bye.

  • bottomfish

    My version: too much student loan money just there for the taking.

  • InklingBooks

    Online learning not only has a marvelous potential, it’s already delivering. Years ago, an unusual set of circumstances led to my becoming part of the nursing night staff on the Hem-Onc unit at one of the country’s top children’s hospitals. Whatever the hospital thought, my training as an EMT was grossly inadequate for that. I hardly knew what childhood leukemia was.

    Only my commitment to my young patients and my ability to learn quickly prevented a disaster born from my ignorance. I scrabbled, with all the resources of the mid-1980s to learn more, including buying old textbooks from a med student roommate. Today, that learning on the job would have been far easier. Just last week I watched what the Khan Academy has on childhood leukemia and it was impressed. You can find that and of host of other material in its “Health and Medicine” here:

    https://www.khanacademy.org/science/health-and-medicine

    There’s a lot that can only be taught by flesh-and-blood teachers in hands-on situations, particularly in medicine and nursing. But universities are deceiving themselves if they think they can maintain their position as gate-keepers to careers when the cost of college is going up three times faster than inflation. More and more students are going to be seeking out alternatives.

    My own hunch is that the benefits of the more prestigious universities is a mirage. The incomes of their graduates remains high because their freshman class is already smarter, as indicated by their SAT scores. Those same students would have entered high-paying jobs whatever school they attended. All the Ivy-league colleges provide is a very expensive credentialing process.

    –Michael W. Perry, author of My Nights with Leukemia (about that learning on the job)

    • teapartydoc

      Accreditation, licensing, and certification are worthless after decades of government control. Just like any signal, economic or otherwise, once it becomes established it becomes subject to manipulation and cartelization. All of these things should be privatized and the bodies that form them should only have internal controls and be unable to drive any competing body out of business other than in a free marketplace.

  • teapartydoc

    National exam? And you are the one who says the Blue Model is all washed up? I think you need to go through your medication list with your doctor again (who, by the way would be just as good without a medical license from the government, but a lot cheaper) and get rid of whatever is clouding your thinking.

  • Nate Whilk

    “If costs continue to exceed returns, the bubble will burst eventually—even if Washington keeps subsidizing it.”

    Let me fix that for ya: If costs continue to exceed returns, the bubble will burst eventually—even if we taxpayers keep subsidizing it.

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