8/26/13 – Making College Irrelevant?

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Aug 26, 2013 10:27:57 AM

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I haven’t written much about education recently, but now that school is starting back up, it’s time to take another look. My oldest nephew, Jake, is entering college this week here in Boston, which adds a certain amount of immediacy to the discussion.

When I compare the experience Jake will have with what my five-year-old son, Jackson, might have years from now, I expect there will be significant differences. First, Jake will be starting at an established university, with a physical campus, and take most or all of his classes sitting in a lecture hall—just as his parents and I did. For Jackson, I doubt very much that will be the case.

College has, to a large extent, become a social enabler and validation rather than a training ground for core educational competencies. That’s not to say training doesn’t happen—of course it does—but, increasingly, there appears to be a mismatch between what colleges are producing and what employers need. There’s a front-page story in today’s Wall Street Journal on a new test, the Collegiate Learning Assessment, designed to let employers know whether a college grad can actually think and write. The fact that such a test is needed (and will be offered by about 200 schools) suggests there’s a systemic problem here.

Beyond the question of whether college trains students to think and write, there’s still the growing mismatch between the perceived value of a college education and the costs. Although higher education inflation has gone down, as I’ve noted before, it still remains high. The federal government’s recent moves to raise interest rates on student loans will only worsen the problem. For many potential students, a four-year degree doesn’t make sense. Specific technical or professional education—at a community college, in many cases—simply offers more benefits for the cost. It is more focused, more directed at what local employers need, and much less expensive.

Between the move to specific professional education and colleges’ apparent failure to train students in thinking and writing, there is an opening that’s being filled by the rapidly emerging online-education industry. I read the Collegiate Learning Assessment test described in the WSJ article as a significant enabler of this trend. If there is a valid, publicly available and accepted indicator that an individual has the critical thinking and writing skills needed—like the CLA, combined with evidence of competency in certain functional areas—that can be provided by online courses, then much of the educational rationale for a residential, four-year degree goes away.

I had an interesting conversation a while ago with a very successful entrepreneur I know. He has a son about to enter college, and he said he’d almost rather the boy just start a job and (assuming it was in finance) start studying for the Chartered Financial Analyst® certification, rather than go to college. This is a very smart and accomplished man, with a college degree, and for him to make such a statement suggests that, even at the top of the socioeconomic heap, the value of a four-year degree is starting to erode.

For my part, I’ve recommended a CFA® designation over an MBA to many junior analysts I’ve spoken with. I did my CFA® at the same time I was studying for a master’s in finance at a local top-20 business school. I did them together because much of the coursework overlapped. Given that, I wonder in retrospect how much added value I got from the additional degree. In this field, the designation is certainly more valuable than many degrees, and I know that’s the case in many technical fields as well.

None of this is to minimize the potential value of a four-year degree, which should remain the standard for some time. Nor is it my intent to minimize the value of the liberal arts. I was an English major, for example, and learning to think and write there has served me very well. If the CLA takes off, though, it could be the biggest crack in the wall of higher education so far, allowing students to demonstrate that competency directly rather than indirectly, through a college degree. Although Harvard will always have its place, this development will be very bad for many educational institutions. By providing more of a choice, however, it could be beneficial for both individual students and the economy as a whole.

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