MOOCs – Are They Worth It?

by Sydney Williams A university education is undergoing monumental change. […]

Graduate Holding Dollar Sign On Shoulderby Sydney Williams

A university education is undergoing monumental change. While campuses as we know them will continue, an increasing number of people will get their education on-line. Up to this point, and unlike most businesses, productivity improvements have been virtually non-existent at colleges, despite the fact that much of the technology that has benefitted consumers and businesses were born, nurtured and brought to fruition on their campuses.

There are numerous forces at work. William Bennett’s and David Wilezol’s new book, “Is College Worth It?” was reviewed in Monday’s Wall Street Journal. It expresses some of the concerns so many have about college today. Over the past few decades, the cost of a college education has risen at levels far in excess of inflation. The consequences, certainly unintended, have been several. Student debt has exploded, imperiling the creditworthiness of graduates facing a difficult job market. The numbers of households owning some form of student debt is 20% versus 10% twenty years ago. More startling, those at the bottom of the economic ladder are going to college less than they did forty years ago. Arthur Herman, in his review, noted: “In 1970, 12% of recent college graduates came from the bottom quarter of the income distribution; today it’s 7%. Federal student loans have increased 60% over the past five years, while grants-in-aid, like Pell grants, have tripled over the past ten years. Washington’s willingness to make college affordable helped make unnecessary the institutions implementing cost reduction programs. The more money a university could pick up from the government, the less it would have to rely on its endowment. Administrators and bureaucrats could be hired, without concern about costs. Finally, as more unqualified students matriculated, “gut “courses and “trendy” majors helped produce grade inflation, “allowing students to glide along and earn an easy degree,” but without the skills today’s job markets demand.

A hundred years ago, a college education was generally only available to the privileged few. The G.I. Bill changed that, making college available to tens of thousands of returning servicemen following World War II. By the mid 1950s, meritocracy had replaced birthright as the determining factor for acceptance into America’s most elite universities. A strong economy and rising markets allowed endowments to blossom, permitting a far greater use of scholarships. Ability to pay became secondary to accepting the best and the brightest. The principal purposes of any endowment are to fund needed capital expenditures and to pay the tuitions, in whole or in part, of deserving students whose parents are unable to pay the ever-increasing costs. Nevertheless, during a time of ever-rising tuitions, endowments have grown bigger. For example, Harvard University’s endowment amounts to roughly $1.6 million per student, including undergraduate and graduate. The contrast between ever-richer colleges and more-indebted graduates is striking.

While MOOCs (massive open on-line courses) have many shortcomings, they may have arrived at an opportune time. The game being played has limits. At some point Congress, worried about expenses and debt, may have to reduce funding for loans and grants. Families and students face unacceptable levels of debt, for which there has not been an automatic payoff in terms of a job. Left alone, America’s higher education system risked reverting to what it had been in the pre-War days, a refuge for the privileged few who could afford the ever-rising prices.

MOOCs stepped in. There are three main providers: Coursera, Udacity and EDx. Both Coursera and Udacity have roots in Stanford and Silicon Valley, while EDx was formed and funded by Harvard and M.I.T. The on-line learning platform Coursera, the largest of the three companies, was launched in early 2012 by two entrepreneurs out of Stanford. It was funded by venture capitalists and, according to a recent Wall Street Journal article, now has 3.5 million users for 370 courses. While offering fewer courses, Udacity has the advantage that all of its courses are openly available with no start and finish dates. Participating colleges in MOOCs include most of the elite colleges in America, from Princeton and Yale to the University of Texas and Cal Tech. There have been some exceptions, like Amherst, which is concerned that MOOCs may centralize education to an uncomfortable degree, clashing with their small-class style. A low faculty to student ratio remains a compelling sales tool for admission officers, especially at smaller elite colleges. As Nathan Heller recently noted in a May 20 “New Yorker” article, “…a Harvard lecture hall still holds about the same number of students it held a century ago.”

In the “New Yorker” issue, Mr. Heller’s piece was entitled “Laptop U.” In it, he largely followed the experience of Gregory Nagy, professor of classical Greek literature at Harvard. Given his age (70) and his field, he seemed an odd choice to offer his class, “Concepts of the Hero in Classical Greek Civilization” as an on-line offering; yet 31,000 signed up for this spring’s semester. (Perhaps Earl Shorris, who I wrote about on April 23rd, was right – there is a demand for the classics.) In his article, Mr. Heller described both positive and negative aspects of MOOCs. They allow leverage to be applied to good professors, and for students anywhere in the world to benefit from the top universities’ best professors. As one of his interviewees put it, “MOOCs look like a victory for open-access scholarship.” By increasing the productivity of the most acclaimed professors, they should also act as a governor on rising college costs. But education is also an interactive experience, and, while Technology allows interaction, doing so on-line is not the same as being in an animated classroom. After reading the article, I found myself asking: Will MOOCs make elite schools even more elite? Will MOOCs convert a professor of a lesser-known college into nothing more than a teaching assistant? Will MOOCs standardize learning in such a fashion to be unhealthy for a diversified student body and country? Will smaller, less-well-endowed colleges simply disappear?

The problems education faces are not insurmountable, but they cannot be easily dismissed. Most colleges are in very good financial shape, but their graduates have never been more in debt. High school students are told that 21st Century jobs require a college education, providing demand for those in the business of providing higher education. Helping that demand being fulfilled, government has been providing loans and grants. The consequence has been a situation, according to Diana Furchtgott-Roth writing in “Real Clear Markets, in which 40 million borrowers owe $1 trillion. Government’s response has been as expected. The Obama Administration wants to reduce the re-payment schedule to a small percentage of the borrowers net income, after “living expenses,” and to set a date at which all remaining debt will be forgiven. Such actions, while pleasant for the borrower, breed irresponsibility and dependency.

A sluggish jobs market, especially for the young, has meant that millions of recent graduates are trapped with enormous loans and very few jobs. While overall unemployment has declined over the past year from 8.1% to 7.5%, young adult unemployment (ages 20 to 24) is down less than one tenth of one percent to 13.1% over the same time. Since 2000, labor force participation rates have declined. Again, the steepest decline has been among young adults. The Affordable Care Act will pressure them further. Instead of using standard actuarial tables, insurance companies have to take everyone, and premiums for the elderly can be no more than three times the premiums for younger people, implying younger adults will have to subsidize seniors. As Ms. Furchtgott-Roth wrote, “A society that cannot offer young people work will see the brightest flee to countries that have more opportunities. Others, less entrepreneurial, will stay and collect welfare benefits.”

Public officials are in part responsible for the problems we face, or, a better way of putting it, there have been some unintended consequences. Government made access to money easier for matriculating high school seniors, allowing colleges to continue to raise tuitions. They are the ones who wrote the Affordable Care Act. They are the ones who have imposed increasingly tough and complex regulatory and tax laws. And they are the ones who constantly preach that higher education is the path to success, helping to convert what should be an opportunity into what has become an entitlement. And now officials are providing a path toward debt forgiveness. Higher tuitions have allowed administrators to proliferate, raising costs further. Controlling costs have not been on the front burner for most college trustees and administrators.

A college education is not an entitlement, nor is it a panacea for the ills that plague us. It is an opportunity for the aspirant, and MOOCs represent a door through which they may enter to realize their dreams. Currently, according to most reports, about ten percent of those who start on-line classes complete them. But as courses proliferate and as credits are granted, that could well change. Aspiring students, whether they be from Monowi, Nebraska, Airline   Drive in Houston, or the African nation of Togo, will have the opportunity to learn on-line, when courses are offered. The interests of the poor but aspirant will not be in toga parties or football games, but rather in a desire to better themselves and their conditions, to be able to live and compete in a world they know only through images. Richard Vedder, who heads the Center for College Affordability and Productivity, recently wrote an article in US News and World Report, “Why So Much Lying on Campus?” In it, he quoted a recent National Survey of Student Engagement administered to students that “reveals students spend more time partying than on academics…” – a confirmation of a supposition. Poor, but aspirant students who learn on-line will likely prove more serious and productive students.  It will be those individuals and millions like them who will be the principal beneficiaries of MOOCs.

MOOCs do have shortcomings. They cannot replace the college experience. They limit the ability to actively interact with professors and other students. But they are vital in providing learning and new skills, and therefore opportunities, to millions who are unable to attend traditional universities. Like community colleges, they serve a need. Change is never easy. Change always involves trial and error, and unfortunately many of those impacted become victims of necessary change.  One of the more salient aspects of MOOCs is that they represent free markets’ attempts to fix a problem that college administrators have abetted and that politicians have inflamed. On balance, and all things considered, it appears they represent a critically important change.

“The thought of the day” by Sydney Williams



The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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