Classes, adventures, friendships… and debt. College experiences are universal but prices have increased significantly over the past forty years. As seen below, by 2013 a private college cost $40,917 per year, 2.5 times as much as it did in 1974. Can online education become a promising alternative?
From 1973 to 2013, annual median household income remained relatively stagnant while tuition rose. In 1973 tuition comprised 35% of household income, but in 2013 was over 80%. If this trend were to continue, the annual cost of attending college would surpass median household income in nine years. A child born today will enter college in 2033, at which point average annual tuition is on pace to cost over $64,000 in today’s dollars. If average household income were to remain constant, tuition would represent 126% of average household income, per student. The average household has roughly two children, suggesting combined tuition would represent over 250% of average household income!
Further, the value of a college education is in question, so families and students are looking at less costly alternatives to the traditional four-year degree. Could this be the reason that college enrollment has started to decline, as shown below?
In response, Massive Open Online Courses MOOCs are beginning to revolutionize digital higher education. These free online courses offered by companies such as Coursera, Udacity, and edX, create an open community for students and teachers to interact and share learning resources, available to anyone. They could be a disrupting force in an increasingly expensive higher education market.
A Coursera Certificate in Data Science costs just $490, compared to a similar University of Washington certificate costing $3,300, or a Columbia University equivalent costing roughly $20,000. Coursera also eliminates other expenses, including room and board, travel, supplies, and books.
While some colleges and universities offer online classes, most traditional colleges do not offer digital degrees. Georgia Tech’s Computer Science Program is an exception. For other schools MOOCs and Industry Sponsorship Educations are supplemental options.
Businesses are leveraging MOOCs to train employees. Some companies direct employees to a MOOC for specific skills, one course at a time, earning so-called nano-degrees. Thanks to online education, training costs drop and productivity increases.
For example, the staffing firm Aquent uses MOOCs to train employees for their future clients. Better known staffing firms and technical institutes such as Manpower MAN, Robert Half RHI, and DeVry DV are beginning to do the same. Online education is sure to disrupt current college market trends.
The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance is no guarantee of future results. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.