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Industry Research on Higher Education

February 9, 2018

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Higher Education Challenges and Trends

Clayton Christensen predicts "Fifteen years from now more than half of the universities [in America] will be in bankruptcy."

The disconnect between college curricula and the job market has a banal explanation: Educators teach what they know---and most have little firsthand knowledge of the modern workplace. Yet this merely complicates the puzzle. If schools aim to boost students' future income by teaching job skills, why do they entrust students' education to people so detached from the real world?

5 trends in higher education:
- Recent predictions foresee as many as one-third to one-half of all universities going bankrupt over the coming decades.
- Greater transparency about student outcomes is becoming the norm.
- Demands are rising for a greater return on investment in higher education.
- New business and delivery models are gaining traction.
- The globalization of education is accelerating.

Millenials have taken on 300% more student debt than their parents.

Aligning the incentives of students and schools through Income Share Agreements could help systemically fix a challenged industry.

In order to accelerate the future, we need to better equip our youth to be creators and inventors. We need a new category of higher education - the Product University.

The Ivory Tower CNN Documentary reveals how colleges in the United States, long regarded as leaders in higher education, came to embrace a business model that often promotes expansion over quality learning. What price will society pay if higher education cannot revolutionize college as we know it and evolve a sustainable economic model?

Higher Education Affordability & Accessibility

College Tuition and Fees increased 1334% in 30 years. Student loans represent 51.8 percent of total Federal assets.

Student loan debt is skyrocketing past $1.48T across 44.2MM borrowers, over $600B more than total U.S. credit card debt. The average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year.

The share of students from low-income families who attend Ivy League universities (already minuscule to begin with) has barely increased in the past decade. The same is true at similarly elite institutions. Meanwhile, access at institutions where mobility rates (as measured by progression to adult financial success) are highest has fallen drastically.

Traditional colleges are still predominantly inaccessible.  Less than one-half of 1 percent of children from the bottom fifth of American families attend an elite college; less than half attend any college at all.

Students with astronomically high test scores typically skew relatively wealthy, putting students who don't have access to expensive test prep courses and other resources at a disadvantage. About 47% of top performing students who never get a credential are low-income.

Income Share Agreements (ISAs)

As a solution to the student debt crisis. Make School was the first higher ed institution to offer ISA financing to all students in 2014 and first to securitize ISAs in 2017.

The education industry is shifting focus to outcomes, not inputs. As concerns mount over rising student debt, ISAs (which align incentives of learners and institutions) have attracted attention as a funding alternative for higher ed.

Background reading on ISAs:
History, merits, and challenges of Income Based Repayment models
GS2 white paper on ISAs

Higher Education Underemployment

According to the Strada-Gallup 2017 College Student Survey, only a third of students believe they will graduate with the skills and knowledge to be successful in the job market and just half believe their major will lead to a good job.

The U.S. Census Bureau reported today that 74 percent of those who have a bachelor's degree in science, technology, engineering and math --- commonly referred to as STEM --- are not employed in STEM occupations.

Average median salary at the top 10 universities (measured by median salary for alumni with 0-5 years of experience) is $66,090. Average percentage of STEM degrees awarded at these same 10 universities is 41.9%.

Only 42% of employers say college graduates have the skills needed for jobs, while 72% of colleges think they do.

The tech talent shortage is one of the biggest limiting factors facing our economy. 86% of employers feel tech talent is hard to find, 83% feel it is limiting their output.

There are more than 75,000 open jobs in computing in California and only 4,324 computer science grads to fill them.

Computer science students on a number of campuses complain that their departments can't meet demand. Their professors are also stressed. But experts say there is no clear fix for nationwide shortage of computer science faculty.

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