In 1636, the Massachusetts Bay Colony established New College – the first institute of higher education in the Western Hemisphere. A Boston minister named John Harvard donated 320 books and £800 to the new institution, which was promptly renamed Harvard College in his honor, thus beginning the modern university system in the United States. For most of the time since then, universities were the province of the elite. Since most Americans were farmers prior to the 20th century, they had little use for even a high school diploma, much less a bachelor's degree. Following World War II, the paradigm shifted dramatically. As the need for college-educated labor dramatically increased, universities became much more commonplace. The university system has grown to immense scales that John Harvard could scarcely have imagined – there are now over 2,600 universities in the United States, and more than half of all Americans have completed at least some college education.
For the past 60 or so years, the university system has served a dual role: Professors both conduct academic research and instruct students. High tuition price tags are, in large part, used to subsidize academic research rather than pay for student education. Although this arrangement worked reasonably well for several decades, it began to show cracks in the early 2000s and is now near the breaking point. This paradigm for higher education is no longer sustainable.
The most obvious reason is the soaring cost of tuition. The average college graduate has accumulated $26,000 in student debt when he or she graduates. In 2010, student loans became the largest source of unsecured debt in the United States, surpassing credit card debt for the first time. This wouldn't necessarily be a problem if accumulating so much debt was a worthwhile long-term investment, but recently many people have started to question this longstanding assumption. They are right to be worried. Student debt is an albatross around the necks of many recent graduates which hinders social mobility. One definition of an economic bubble is the trade in a product or service at a price that far exceeds its intrinsic value; another definition is a widespread public consensus of the high value of the product or service, that is at odds with a realistic examination of the facts. By these definitions, university tuition prices are most definitely in a bubble, and it's only a matter of time until the bubble pops.
But the tuition bubble masks another looming problem that most universities barely acknowledge today, but poses an even greater threat to them: The prominence and quality of free online education is poised to improve dramatically in the next few years. Today, most online universities are for-profit institutions with horrible brand images, but that will soon change. MIT and Stanford now offer many of their courses online for free, to anyone who wants them. Additionally, a slew of free websites have popped up in the last couple years to teach specific skills such as computer programming, mathematics, history, biology, foreign languages, and business.
As the course offerings proliferate and quality improves, more and more students will begin to question why they are paying tens of thousands of dollars to attend a university, when they can learn the same material online for free (or at least very cheaply). This will, in turn, encourage employers to accept “alternative” certifications to a traditional bachelor's degree, such as educational websites vouching for the student's knowledge. This will badly damage the credibility of universities and undermine their role as the gatekeepers to white-collar careers. With the exception of certain professions for which formal credentials are absolutely required for employment (e.g. law and medicine), the necessity of acquiring a formal degree will fall by the wayside as more alternatives present themselves, causing a mass exodus from universities.
As this happens, universities will need to sharply reduce their tuitions in order to stay competitive with their free counterparts...and eventually, even the sharpest reductions will be insufficient. As the cost of a good education drops to nearly zero, universities will need to completely rethink their business model.
This will cause major funding problems for scholarly research, if nothing is done. The dual responsibilities of universities, instruction and research, will separate from one another. As universities earn less money from tuition – and have fewer alumni to provide large donations – academia could suffer unless steps are taken to find another stream of revenue. The research that professors conduct benefits society as a whole, but is usually not profitable. As tuition money dries up, I suspect that universities – both public and private – will rely more on government largesse to support their research.
Ultimately there is another role that universities might serve. Although the tuition model is doomed in the long term, many students crave the “college experience” that only being on a campus can provide. Universities might still serve as places for young people to come together and live, join clubs, and play sports and music together...despite getting their actual education online from many different sources. In this way, perhaps universities can earn a bit of money from their “students” and retain some loyalty from their “alumni,” although they will never again be centers of education.
The coming crash in tuition prices will be bad for universities and potentially bad for academic research if nothing changes...but it will be great for students. In a certain sense, the ability to acquire a college education for free or nearly free will be a throwback to the “old days” in which young people started out their careers without any debt. Many of the most dynamic companies are started by young people, but student debt provides a significant drag on this economic engine. Eliminating this problem for future generations could potentially create a large economic boom, as more dynamic companies are born to solve the world's challenges.
By 2021 – The average cost of tuition at the 100 top-ranked brick-and-mortar universities is lower than it was in 2011, after adjusting for inflation.