Why the Internet Isn't Going to End College As We Know It

Don't believe the hype: Nobody has figured out how to replace traditional higher education yet, and they're not about to.
615 ivy college Thomas Barrat .jpg
Thomas Barrat / Flickr

The idea that the Internet is about to do to college what it's done to journalism and entertainment seems to be coming dangerously close to conventional wisdom in certain elite circles. Here's blogger/economist Tyler Cowen yesterday at the Aspen Ideas Festival:

Look at the music industry. It's been completely overturned by the Internet. My vision of the world is that everywhere will be like the music industry, but we've only seen it in a few places so far. Journalism is in the midst of the battle. And higher education is probably next.
It's not just the bloggers. The University of Virginia's president was temporarily sacked partly because the school's Board of Visitors didn't think she was rushing fast enough into online education, only to be reinstated after a groundswell of protest by the students and faculty. Tech billionaire Peter Thiel has become the pied piper of the "uncollege" movement, arguing that higher-ed is a bubble ready to pop as he encourages students to drop out.

There is no question that the web will change the way people learn. And the increasing cost of a college is public policy problem we desperately need to solve. But the web is simply not about to end higher-ed as we know it. 


New innovations don't disrupt old industries by merely competing with them. They do it by cutting into their source of revenue. The music industry ignored the Internet, tried to sue it out of existence, and then let Apple effectively monopolize digital music sales, which gave Steve Jobs the power to set prices at 99 cents a song. Journalism saw its ad dollars whittled away by the profusion of online media outlets and Craigslist. 

As George Washington University's David Karpf has noted, if the Internet is to conquer higher education, it needs to hit colleges in the pocket book. And so far, there's no sign of that happening. 

The simple truth is that nobody has figured out how to build a cheap, high-quality online university. Not even close. So far, the biggest investments in Internet education have come from the for-profit sector, and their results have been, to put it lightly, lacking. For-profit graduates have worse job prospects and earn less than their peers who attend nonprofit schools. A new study released this week suggests that many for-profit diplomas are literally worthless in the marketplace. This even holds true when you control for student characteristics like parental wealth. And so perhaps not surprisingly, their alums are responsible a disproportionate fraction of student loan defaults. 

Worse yet, these schools are expensive. According to the most recent Department of Education statistics, the median net price of attending a for-profit bachelor's degree program is almost $21,000 year, compared to about $10,000 at a public institutions and around $19,000 at private not-for-profits. A year at the University of Phoenix's Tulsa campus ran students $25,987 in 2009-2010, up more than 7 percent from 2008-2009. This isn't just a matter of these schools reaping large profits. Even with the efficiencies of the internet, education is still a labor-intensive endeavor. Unless your degree program consists of nothing but multiple choice tests that can be graded via computer, you still need instructors who can grade assignments, supervise in-class discussions (even if those discussions happen in a chat room), and help lagging students with the material. 

And yes, these schools are growing rapidly -- enrollment at for-profits went from 450,000 students at the turn of the century to more than 2 million in 2010. But that growth isn't necessarily occurring at the expense of traditional, campus-centered, nonprofit institutions. During that decade, public colleges absorbed 3.3 million additional enrollees, while nonprofit private colleges added roughly another 700,000. What appears to have happened is that demand for higher education has pushed our traditional educational infrastructure past capacity, allowing for-profit schools to swoop in and aggressively market to students at the low-end of the market. Chances are they're not poaching many students who'd otherwise be considering a four-year stay at a decent, mid-tier state school. 

For-profits aren't the only institutions getting in on the online education act. Harvard, MIT, Stanford and a few other elite schools have received a great deal of fanfare for their early experiments with web-based instruction. But their early forays may well be a sign that rather than dislodging big traditional universities, the web may actually help them extend their brands, not just across the country, but globally. David Brooks has written very thoughtfully on what this might mean for the academy, but ultimately nobody knows whether this will lead to a great consolidation in higher learning. There are many reasons, in fact, to doubt it. 


As you might recall from your undergraduate years -- hazy as they may be -- colleges do more than just teach. Most obviously: They stamp their graduates a with a giant seal of approval for employers. In econ speak, this is called signaling. And signaling, while easy to disparage, is crucial. Companies don't have time to interview every single applicant for a job and interrogate their actual skills. They need a shortcut to tell whether a 22-year-old is actually worth talking to, which is why, despite anti-college evangelists like Thiel, even companies in Silicon Valley still look for a degree.* 

Then, there's the value of campus life. Online colleges have had an easier time picking off students from commuter schools because undergraduates at the top of the market have been raised to expect a college "experience," not just an education. Part of it is the fun factor, of course. But part of it is also functional. Classmates form friendships and become part of each others' professional networks. Students have the opportunity to learn in physical spaces, like professional science labs. They get a chance to mature in a relatively consequence-free environment, where a callow 18-year-old can do the sorts of things callow 18-year-olds do without landing in serious legal trouble. They learn how to deal with authority figures face-to-face. It's a long process of aculturation that transitions students into the adult world, probably with the help of a very expensive to maintain career services department. 

Autodidacts don't get those valuable formative experiences or professional help. Nor do they get the seal of approval. Those two facts combined make it unlikely that demand for spots on college campuses will suddenly dry up. And without an enormous cultural shift wherein employers suddenly decide degrees are worthless, there will still be a need for a machinery to evaluate the millions and millions of undergraduates every year. That means the institutions that perform those functions aren't about to start disappearing en mass. 

What's more likely to happen is that colleges will learn how to adapt online technology to cut costs as they come under increasing budget pressure. They'll do it slowly, but eventually. The process might lead to fewer lecturers on campus, as schools begin sharing more big survey courses. The Harvards of the world might experiment with more remote, international campuses catering to foreign students. But a wholesale, top to bottom revolution in how we educate students? Not likely, no matter how many times you hear it repeated. 
Including, notably, Thiel's own hedge fund.