Can Free Online Courses Transform the Higher Education Industry?

When Bilal Shah got his doctorate in computer science from the University of Southern California back in 2010, the job market wasn’t exactly welcoming. “I graduated into the Great Recession. Nothing would test my mettle more,” says Shah.

Around that time, he heard about a free massive online open course (MOOC) on machine learning — a branch of artificial intelligence related to the design of certain computer algorithms — taught by Stanford’s Andrew Ng. Since Shah had plenty of spare time, he gave it a try. Every morning for three months, he sat in Peet’s Coffee & Tea in the Los Angeles neighborhood of Brentwood, drinking coffee and watching lectures on his laptop. He took pop quizzes, did programming assignments and checked his work on the course’s online discussion board. “It was an easy, convenient way to learn something new,” notes Shah, who is in his early 30s.

Soon after getting certification from the class, he landed a job interview with ID Analytics, the San Diego-based identity fraud and credit risk modeling company. “They prodded my knowledge [of machine learning] and they could tell I knew the material well,” he says. “I got the job. It was a great feeling.”

Amid a sputtering recovery that has shone a spotlight on the dearth of qualified workers in particular segments of the economy, many in the business community view MOOCs as a key part of the solution. And at a time when rising college costs and growing income inequality occupy the national debate, some say the platforms that offer MOOCs could potentially transform higher education. Giving millions of students around the world access to high quality classes could help shrink the gap between the haves and the have-nots.

A number of start-ups and prominent colleges have recently gotten in on the game. Coursera, an online learning system created by Ng and Daphne Koller, both Stanford computer scientists, has partnerships with four universities: Stanford, the University of Michigan, the University of Pennsylvania and Princeton. Coursera delivers MOOCs in math, science and the humanities. Udacity, another online education company, launched in February by Sebastian Thrun, a former Stanford professor, offers MOOCs mainly in computer programming and software design. Harvard and MIT recently announced edX, a joint online education partnership, which begins classes this fall.

“Higher education will change; the system is unstable,” says Kevin Werbach, a Wharton legal studies and business ethics professor, who is teaching a MOOC on Coursera this summer. “It’s an industry that will be in severe turmoil in the next decade. There are so many schools in distress, and the student loan burden is [huge]. In that environment, online platforms like Coursera are an interesting opportunity.”

But while Coursera and others hold out the promise of bringing higher education to the masses and leveling the playing field between rich schools and those with fewer resources, some ask whether these platforms have rigorous enough curriculum standards. They question whether the credentials issued for course completion are meaningful in the job market. There is also skepticism around the sustainability of their business models since, for now at least, the classes offered by these platforms are free.

‘It’s a Facebook World’

Over the years, many schools have attempted online education. Fathom, Columbia University’s for-profit online learning venture, shut down in 2003 just a few years after its launch. AllLearn, a similar effort backed by Yale, Princeton and Stanford, was founded in 2000 and closed in 2006.

Why might Coursera or another of the new enterprises succeed where others have failed? For one, the technology has evolved. Video and audio are crisper. Desktop sharing tools and discussion boards are easier to navigate. There is greater access to Internet libraries. Course developers also have a more nuanced understanding of how people learn online and the best ways to present information in that format. Coursera, for example, slices lectures into digestible 10- or 15-minute segments and provides online quizzes as part of each section. Professors answer questions from students in online forums. This is a vast improvement from previous online education ventures that offered a less dynamic learning model where students watched canned lectures, with no interaction.

Second, the barriers to entry for students are lower. Taking an online class today doesn’t require much technological know-how. Even if it did, the population of potential online learners has a greater comfort level with technology even compared to five years ago. Members of Generation Y are digital natives and famously tech savvy. They already use technology and online tools for collaboration, communication and research. Baby boomers are not far behind. In 2008, only 11% of those aged 50-64 used social media. Today, 52% of that age group uses social media, according to the Pew Research Center.

Advanced technology and society’s apparent ease with it make the “sage on the stage” model of collegiate learning seem old-fashioned, quaint even. “Fundamentally, the way most faculty members teach at most universities is the same way that college students have been taught for the past 100 years,” says Werbach. “This is despite all the technological advancements that have taken place. There’s a growing recognition that the workplace of today doesn’t look like it did in 1940 or 1970, yet the classroom has changed very little since then…. It seems impossible to suggest that the dramatic changes in the way people interact with each other and with technology will have no impact on the way they learn.”

Or where, when and how they learn. Students today demand ease and convenience. Online education offers a self-determined pace of learning so students can study according to their own individual schedules. “The whole notion of going to a bricks-and-mortar school makes no sense to many people when the confines of space and time have been eliminated,” notes Douglas Shackelford, a professor at the University of North Carolina’s Kenan-Flagler Business School and dean of its new online business degree program, MBA@UNC. “I have one student who works for a Fortune 100 company. He tells me he has five people on his team on four continents, and he has never met any of them. The idea that he would go back into a classroom to do his MBA seemed like something his granddad would have done. It’s a Facebook world now.”

A third driving factor is the economy. College is out of reach for many people because of the cost but, for better or for worse, a degree is considered necessary for a successful career. The cost of college has risen by a staggering amount. In 1981, the average annual tuition and fees for a four-year public university were about $2,242 (in constant dollars today), according to the College Board. Last year, that number had climbed about 267% to $8,244 a year. The cost of attending a private college has also increased: In 1981, the average yearly tuition and fees for a four-year private university rang up at $10,144; today the cost is $28,500, an increase of 180%. The Federal Reserve Bank of New York says that about 15% of Americans have outstanding student loan debt. The bank estimates the total burden at around $870 billion.

College graduates have much lower unemployment rates than high school graduates, and they tend to make a lot more money over their lifetimes, but the financial crisis has not been kind to either group. According to the Center for Labor Market Studies at Northeastern University, about 54% of people under the age of 25 who hold bachelor’s degrees were jobless or underemployed last year, the most in at least 11 years. High school graduates have fared even worse. A study published June 6 by the John J. Heldrich Center for Workforce Development at Rutgers found that a mere 16% of the high school classes of 2009, 2010 and 2011 are employed full-time. An additional 22% had part-time jobs.

These grim statistics have increased scrutiny of the higher education industry. Public universities are already buckling under draconian state budget cuts. “And in a slow-growing economy, there is greater pressure on schools — particularly graduate schools — because people are getting their degrees and still not getting jobs,” says Wharton’s Werbach.

Many people cannot afford college, and many of those who went still cannot find jobs. Both these groups need to acquire new skills and additional training. Online education platforms, like Coursera, edX and Udacity, fill an economic need, according to Chris Pitts, a Boston-based producer specializing in e-learning content for colleges and corporations.

“Trying to push the envelope in online education is hugely important,” he notes. “The economics of today are demanding alternatives to the traditional bricks and mortar education experience. We have a whole new learning audience — people who haven’t been in a classroom in ages but still need to learn new things [to get a job or keep a job] and people who can’t afford to go to college but still need to learn stuff.”

Replicating — and Flipping — the Classroom

The time may be right for online education platforms, but these enterprises still face a number of challenges. The biggest question, says Jason Wingard, vice dean of executive education at Wharton, is: “What does a sustainable business model look like? Many of these platforms are free. If you’re giving away course content, that might undermine your brand.”

There are also questions about how the platforms will maintain rigorous curriculum standards, and how they will judge performance. “Is the online learning experience equal to, or better than, the bricks-and-mortar experience?” asks Wingard. “Are you testing appropriately to make sure students learn the material?”

Another glaring disadvantage of online learning platforms compared to traditional schools is the lack of an intense campus environment. “The … college experience is a soup-to-nuts education,” Wingard notes. “There’s a lot of content. There’s a lot of group learning. There are a lot of social experiences. A big part of going to college and grad school is that it helps you grow up and learn how to work in the world.”

The global e-learning market will reach $107 billion by 2015, according to a new report by Global Industry Analysts, the San Jose, Calif.-based market research firm. And yet, it’s still not entirely clear how this new wave of online education platforms will make money.

In April, Coursera announced it had secured $16 million in funding from two Silicon Valley venture capital firms. Udacity is also venture backed. MIT and Harvard contributed a combined $60 million to launch edX, which is overseen by a nonprofit, but program directors have said they plan to make the initiative self-supporting.

Industry analysts point to several potential ways Coursera and others could generate revenue. Platforms could, for instance, charge students a fee for certificates of completion or even transcripts. They could also make money by providing premium services, such as a recruiting tool that links employers with students who have shown ability in a given area. Another potential income stream: donations from thankful alumni.

Schools involved with these platforms dismiss the notion that free MOOCs could harm their reputation. In fact, universities expect that participating in these platforms will enhance their international standing. The professors involved are motivated by the potential of the platforms to spread knowledge to students around the world. As Ng, Coursera’s founder who recently taught an online class with an enrollment of more than 100,000 students, told U.S. News and World Report: “I normally teach a 400-student class. To reach a comparable size audience, I’d have to teach my normal class for 250 years…. Today’s top universities offer an amazing education to a minuscule fraction of the population. We would like to see a future where top schools are teaching not just thousands of students, but millions.”

It is, of course, no accident that the schools behind these platforms are among the wealthiest universities in the country. They have the means to take risks. “Higher-end institutions have the freedom to experiment without having to worry that they are going to implode,” says Werbach. “It’s easier to change when you’re free from established constraints.”

One of the most promising aspects of these online enterprises is that they could level the playing field for colleges that lack Ivy-level resources. The cash-strapped schools could, for example, ask students to download lectures from Coursera to watch on their own time as homework, and reserve class time for face-to-face interaction and discussion. Salman Khan, founder of Khan Academy, the free online education platform, is the pioneer of this “flipped classroom” model.

“There is real potential to disrupt the current higher education system,” notes Jeffrey Katzman, chief learning officer at Xyleme, the Boulder, Colo.-based company that sells education tools to universities. “The most effective learning comes from a blend that enables students to use technology and online capabilities, and teachers and professors to use the class time more effectively. Professors can work with students where they are. It makes for a personalized learning experience.”

But others, including Georgette Chapman Phillips, vice dean of Wharton’s undergraduate division, disagree. “What you get at a place like Penn, and what you’re missing with Coursera, are the people around you — the other students. To say that it would level the playing field is a fundamental misunderstanding of college education.”

What differentiates Penn, she adds, “is the professors who have the ability to go that next level. It’s not only the teaching of the introductory classes. It’s the application of cutting-edge research to teaching and mentoring. That’s why students fall over themselves to get in.”

But others suggest that for students who can’t get in or can’t afford to go to college, online education platforms are already proving themselves to be a decent alternative. There will always be a place for elite undergraduate education, but the access to learning and knowledge these platforms provide holds great promise.

Bilal Shah is a true believer. “The power of this lies in its global reach,” he says. “Think about the kid in Africa who has a connection to the Internet and who can watch lectures on Coursera. Maybe he can take what he learns and build something great for his village. Maybe we cannot replace universities, but we can reach millions of kids who would never have had access to a Stanford class.”

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