More Evidence of that Education Bubble

Many top tier schools have lately been praised for allowing more and more people access to their education system. UC Berkeley and MIT offer all of their lectures for free on Youtube. Harvard, as well as many other schools, offers an “extension school“, where people can take classes part time or remotely.

While this is undoubtedly good public relations, one may start to wonder: “If I can get a full MIT education for free online, why would I want to pay upwards of $40,000 per year for the same privilege?”. And then one will wonder, if everyone else starts thinking in the same manner, won’t MIT et al lose all of their students, and therefore all of their money?

Well, they won’t. These schools have discovered that the most valuable part of a college education is not the education itself, but the “signalling” (or signaling) that goes along with it. A person who went to MIT will receive a diploma from MIT, and therefore be allowed to add it to their resume. Someone who followed the courses online will not. Likewise, someone who attended a Harvard extension course will only receive the extension course certificate, not the diploma. When looking for a job, most interviewers (or human resource departments) will not test the applicants on what they really learned and retained, but they will notice the degree (or lack thereof).

Once again, a bubble occurs when a certain product (or service) is bought not for its inherent value, but purely as an investment. If enough people keep purchasing something as an investment without regarding its value, the discrepancy will become larger and larger, until people decide to abandon the whole ordeal. In other words, I will choose to attend MIT because I know it will raise my expected salary by x%. MIT knows this as well, so it charges quite a bit. Of course, more money attracts better professors, but if smart professors worked solely for more money they would all become consultants. So I will be paying a lot solely for that degree on my resume (although these days being a Harvard dropout seems in vogue as well).

Unfortunately, in this global economy, people will start noticing that they can learn just as much at a good school in a foreign country, or simply my following the online lectures diligently. They will be at a disadvantage when job seeking, but will perform just as well once they have the job.

You could also make the networking argument, that you go to Harvard or MIT for the classmates (who will surely be very powerful in the future). If, however, over the years people of the same (or higher) caliber come from other places, the influence will wane, slowly but surely. Company bosses (and human resource departments) will start to notice that Harvard graduates are not the best people for the job.

At this point, these schools will be charging $40,000 for something that can be obtained for free, and they will be doling out degrees that are worth less and less, and students may wonder what the benefits are. And then, one day, these schools will lose a huge percentage of their students and realize they need to lower their tuition fees. Way down.

6 thoughts on “More Evidence of that Education Bubble

  1. Senectus

    Khan Academy (slogan: “learn almost anything for free”) has used gaming technology to take k-12 education out of the classroom, allowing each learner to progress at their own pace while having some fun. iTunes U augments university-level courses with media and interactivity, using the U app for iOS. Although MIT was a leader in making high-quality university course material available on-line for free, they have not (yet) joined the Coursera consortium, which includes 33 of the world’s universities. Unlike the early courses posted by MIT or iTunes U, these Coursera courses are designed for mass audiences, with discussion forums where the student can ask questions and enter into further discussion on any aspect of the subject being taught.
    The universities will say that by paying the tuition and going on campus you get a more personalized experience. But with the current state of the technology, the lecture hall is now the most sterile learning environment on offer. The mid-level private universities with modest endowments charge tuition near to that of the Ivy League, but without the resources to offer scholarships to middle-income students nor to hire stellar faculty.

    Tomorrow’s universities will have to find a way to add real value to the near-infinite knowledge available on-line. Part of this added value will come from the extra-curricular activities, be it football, frat parties or the debate society. The challenge will be for Podunk U to deliver MIT-quality knowledge (perhaps downloaded from MIT) with an element of learning available only from Podunk.

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  2. Sandro

    Lots of good points. Things are however more subtle. Those top schools environments are not isolated islands but there are industries and bright people gravitating around in a cluster of synergy. I personally learn more when physically present at a lesson and talking with the teacher on or off lesson plus with the guy sitting next to me…A book can also be a good moment. Watching videos online is often prone to more distractions and I might have the tendency to skip forward or pause it altogether. But to be able to “be there” at a MIT lesson is still a wonderful thing and what distant communication should be all about. Let’s take what is positive and move on in this direction.

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  3. Ocean Post author

    Senectus. That’s all very true. The future of a physical university will really have to concentrate on the physical. This could bring about great benefits. Like your entrepreneurship class takes you to meet actual VCs and incorporates your idea. Or your government class allows you to work with real governments on real ideas (realizing that much of this could be done online, but meeting face to face with co-workers can be beneficial). It will be interesting to see how the better universities will react. The not-so-good ones, on the other hand, will find it very hard to justify their high prices.

    Sandro, yes I think that is the point (and the only main advantage physical universities still have). Meeting people face to face is still irreplaceable, in terms of contacts, friendship, inspiration, etc. etc. Some EMBA programs (I’m sure others as well) make it a point to organize regular meetups for classmates. On the other hand, what Coursera (mentioned by Senectus here) does is take online classes and assign homework and grades to them, so you’re forced to pay attention. I might also argue that plenty of students are not paying attention in face to face classes as well.

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  4. Rebecca

    I’m afraid I don’t have a reference for this but a friend recently told me about a school somewhere experimenting with giving students lectures to watch at home, and then having them do the homework in class. The idea being that the teacher helps with the application (and thus understanding) of the material, and facilitates each student moving at his best pace. I will try to find the proper reference, but if this is accurate it’s an application of both methods in one.

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  5. Ocean Post author

    As far as I know, there are also Udacity, Edex and Coursera, although I’m not an expert on what differentiates one from the other. Mivervaproject also seems to be doing something similar.

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