The announcement of agreements between Burck Smith’s StraighterLine and the Education Testing Service (ETS) and the Council on Aid to Education (CAE) to provide competency test materials to students online is potentially very important, along with several other recent developments. A little economics explains why this is so.
In the first week of beginning economics courses, professors usually make this fundamental point: If the price of something rises a lot, people look for substitutes. Resources (dollars) are scarce, and individuals want to make the best use of them. They “maximize their utility” by shifting away from high-priced good or service A to lower-priced good B.
With regards to colleges, consumers typically have believed that there are no good substitutes–the only way a person can certify to potential employers that she/he is pretty bright, well educated, good at communicating, disciplined, etc., is by presenting a bachelor’s degree diploma. College graduates typically have these positive attributes more than others, so degrees serve as an important signaling device to employers, lowering the costs of learning about the traits of the applicant. Because of the lack of good substitutes, colleges face little outside competition and can raise prices more, given their quasi-monopoly status.
As college costs rise, however, people are asking: Aren’t there cheaper ways of certifying competence and skills to employers? Employers like the current system, because the huge (often over $100,000) cost of demonstrating competency is borne by the student, not by them. Employers seemingly have little incentive to look for alternative certification. That is why reformers like me cannot get employer organizations like the U.S. Chamber of Commerce to take alternative certification seriously. But if companies can find good employees with high-school diplomas who have demonstrated necessary skills and competency via some cheaper (to society) means, they might be able to hire workers more cheaply than before–paying wages that are high by high-school-graduate standards, but low relative to college-graduate norms. Employers can capture the huge savings of reduced certification costs. And students avoid huge debt, get four years more time in the labor force, and do not face the risks of not getting through college. Since millions of college grads have jobs which really do not use skills developed in college anyhow, alternative certification is more attractive than ever.
Back to StraighterLine, a company that has brought relatively high-quality college-level courses to undergraduates online at very modest costs. Through StraighterLine, a student spending a thousand bucks or so a year could get a large hunk, if not all, of a year of college-level learning if he or she applied herself. The biggest problem, as Burck told me, is that accreditation agencies refuse to accredit courses (they only accredit degrees), even though, arguably, a degree is simply a collection of courses. But the college-dominated accrediting agencies, seem to not want new forms of competition for existing schools.
Enter ETS and CAE. ETS has operated the famed SAT test for the College Board and owns and operates many other iconic tests, such as the TOEFL, GRE, and Praxis. Through affiliated organizations, it is big into employee testing. Via StraighterLine, students, for a modest fee, will be able to take the iSkills test that “measures the ability of a student to navigate and critically evaluate information from digital technology.” CAE is a powerhouse organization, with a board laden with leaders from the college world (e.g, Benno Schmidt, former Yale president; Charlie Reed, chancellor of the Cal State University System; Michael Crow, president of Arizona State; Sara Martinez Tucker, former Under Secretary of Education). The CLA assesses critical learning and writing skills through use of cognitively challenging problems. It is the test used by Richard Arum and Josipa Roksa to support the research in Academically Adrift, my favorite recent higher-education book. Hundreds of universities use the test.
Students can tell employers, “I did very well on the CLA and iSkills test, strong predictors of future positive work performance,” and, implicitly “you can hire me for less than you pay college graduates who score less well on these tests.”
There are other promising approaches. The Saylor Foundation, Khan Academy, the Learning Company, and others have developed low- or no-cost high-quality course materials. MIT, Stanford, and others have open sourced much learning material and MIT is planning to offer some form of certificate–a huge step. If costs are kept low, students can avoid borrowing money, and thereby sidestep the stranglehold imposed by the Accreditation Cartel. Some highly regarded nonprofit entity (the equivalent of Underwriters Laboratories) could certify that a given student “has achieved the equivalent of a bachelor’s degree.” In short, we can create an equivalent instrument to the GED test equating to high-school diplomas.
All of this should appeal to affluent visionaries like Peter Thiel and Michael Saylor who share the concerns about the rising costs of traditional higher education. This is not for everyone, of course. Many have the resources to go to expensive residential colleges, which is as much a consumption as academic/investment experience. But necessity imposed by extraordinary high costs is the mother of innovations–and they are coming.