College wasn’t right for Daniel Gamez when he first tried it as a recent high school graduate nearly two decades ago. The Texas economy was booming; he was in a hurry to start working. He couldn’t see how the things he was learning in college would help him get a job, and he dropped out before the end of his first semester.

It’s an all too common story. The overwhelming majority of American high school students say they expect to go to college, and about 70 percent of graduates end up in a college classroom within two years. But for many, higher education is the equivalent of the Bermuda Triangle—they never come out, at least not with diplomas. Many students give up in the first year: about a quarter of those attending four-year schools and half of those who start community college. And the attrition continues until graduation day. The end result: Just 32 percent of Americans 25 and older have four-year diplomas, and just 10 percent have associate’s degrees. Meanwhile, nearly a fourth of the country’s workforce—more than 36 million adults—fall into the category "some college, no degree."

Now in his early 40s, Gamez did all right for himself without a college degree. He worked in construction, spent some time in the military, and came out with rudimentary computer skills that he used to get a better, more technical construction job. But then, just as he was hitting what should have been his prime-earning years, it all fell apart. New technology eliminated his semi-skilled position, and an auto accident ruled out the possibility of going back to physical work.

Once again, Gamez considered college. But once again, it was hard to see the point. It wasn’t just the money, although that was part of it; even more daunting was the time commitment. He’d have to continue working, so college couldn’t be full-time, extending the number of years it would take for him to get even an associate’s degree. And then what? Would the degree be worth anything? Would college help him develop skills that he could use to get a job? Gamez wasn’t sure.

That’s when he discovered the course in IT networking being offered at a local vocational training center. It required just 300 hours over six months—a little over 12 hours a week. Gamez could live at home and work part-time. The cost was $3,200—a fraction of what he’d pay at college. But most importantly, he was certain the training would lead to a job. He could even forecast his future earnings. The average annual salary for technicians with the credential he’d be working toward was $71,000. How could he be sure? Because the course was teaching to a test designed and certified by a national industry group representing just the kinds of companies at which he was hoping to work.

Welcome to the world of competency-based alternative credentials, sometimes known as occupational certifications. They’re increasingly common in many fields, including IT, advanced manufacturing, health care, the energy sector, even hospitality and retail.

A certification is comparable to a degree but different in many ways. A better analogy is a driver’s license. When you rent a car and the rental agent checks your license, he or she could care less where you learned to drive or how long it took—weeks at an expensive driving school or one day with your dad in a parking lot. All the agency needs to know is that you know how to drive, as certified by a standardized competency-based test.

So too with Daniel’s computer-networking credential. He and many students like him prepare at vocational training centers; others pursue certification in high school or community college, at for-profit learning centers, on the job, or even by themselves on the Internet. What’s important is not the course but the test, which is administered by a third-party and certified by the industry. What the test demonstrates to an employer is not where you learned or how long it took—or how much you paid a prestigious institution of higher learning—but, more importantly, that you have the skills needed to be successful on the job.

According to the Census Bureau, some 5 percent of American adults hold occupational certifications. And alternative credentialing is poised to transform American education—driving students and employers in many fields to focus on outcomes and competency, rather than seat time and institutional prestige.

Employers are drawn to alternative credentialing for the same reason students are: The old system isn’t working for them. College degrees are proving less and less effective as a predictor of job performance. Survey after survey finds employers dissatisfied with the qualifications of job applicants. According to one recent study, two in five college grads lack the basic reasoning skills required for white-collar jobs. A broad range of industries—from advanced manufacturing and construction to finance and retail—complain about "skills mismatches." And it’s no accident that even with 8.7 million Americans unemployed, roughly 5 million jobs stand empty in the U.S. today.

IT was among the industries that pioneered the new approach to credentialing. Some 20 years ago, employers in the tech sector came together and devised a process to identify the skill sets needed for the most common jobs in the field. It’s a complex, laborious process, and it has to be repeated every few years as new technology ripples through the industry. But the end result is invaluable: a set of industry standards for what a well-trained worker needs to know.

The next step for the industry was to turn these standards into a series of tests—and before long, educators around the world were teaching to the tests. Today, tens of millions of technicians hold IT certifications—it’s what many IT employers look for in job applicants, rather than degrees. The National Association of Manufacturers is now an ardent champion of the idea, as are the U.S. Chamber of Commerce, the Business Roundtable, and the National Network of Business and Industry Associations, a new consortium whose members are expected to create 75 percent of the jobs coming online in the next five years.

Some certifications are more valuable than others in that they are more widely accepted in their fields and more reliable predictors of needed job skills. And the system is only as good as the trade groups responsible for maintaining the credentials; it’s up to them to vet the standards with employers, making sure the skills measured are up-to-date and that credential holders come to work prepared. But employers have every interest in ensuring that standards are dependable. And when they are, they’re the perfect answer for someone like Daniel Gamez: tailored, targeted, up-to-date preparation for an in-demand, high-paying job.

Economic trends are expected to drive the spread of alternative credentialing. According to labor economists, as many as one-third of the jobs that will be created in the next decade are likely to require less than a bachelor’s degree but more than a high school diploma—some kind of skills training.

But competency-based, job-driven learning isn’t just for struggling students or those looking to work in technical fields. College administrators, too, are troubled by the growing gap between school and work. Even students who finish college often find themselves facing a brick wall. According to one study, roughly half of recent college graduates are unemployed or underemployed—that is, working at a job that doesn’t require a college degree. And this is driving innovative educators to argue for a new approach focused more directly on preparing students for jobs.

Their experimentation takes many forms. According to a recent study by the American Enterprise Institute, more than 50 colleges have or are planning programs that give credit for what students know rather than time spent in class. Other colleges are collaborating with employers to design courses. Still others are preparing students for industry-certification tests. The Utah-based Western Governors University, for example, is pioneering all three approaches. Meanwhile, there is increasing pressure at the state and federal levels for colleges to provide information about student outcomes—data to show if graduates are getting jobs in their fields and bringing home paychecks that justify investing in college.

Of course, there are challenges—and resistance. Many educators, especially those at the high end of the institutional food chain in four-year liberal arts colleges and research universities, believe there should be a bright line between education and training. They see their job as educating citizens and developing minds—teaching students how to learn and think—not imparting practical skills, which many view as not only narrow and transient, but also less important.

These skeptical educators are right about one thing: Students need to learn how to learn and think. But educators advocating a competency-based approach are convinced that practical training, too, can teach essential skills like critical thinking and problem solving. If anything, the stakes may be higher in a practical field, requiring trainees to get more quickly to the heart of an issue. Surely, a student nurse working to diagnose a patient has to think just as hard and clearly as a liberal-arts major analyzing a short story. And a growing body of research confirms that high school students who learn math for a practical task—calculating the volume of an engine cylinder or charting the growth of an interest-bearing bond, for example—tend to do better on standardized tests than students who learn the same skills the old-fashioned way, abstractly and out of context.

True, a student like Gamez may miss out on exposure to Chaucer or the history of the French Revolution. But that was probably never in the cards for him. His choice wasn’t between IT skills or Western Civilization 101—his choice was IT or nothing. And his education need not end with the certification he earned at the vocational training center. On the contrary, his credential is the first in a series of coursework: a ladder of qualifications designed for workers to climb over the course of a lifetime. Daniel may or may not take these next steps, but there’s nothing dead-end about the path he’s on.