Alternative Credentials, Scaled Degrees, and the New Higher Ed Matthew Effect

The potential impact of elite-branded affordable online certificates and degrees on regionally-branded tuition-dependent colleges and universities.

August 10, 2020

HBS Online saw a 650 percent increase in enrollment between April and June compared to the same period in 2019…

Online degrees offered by the Gies College of Business, including an iMBA priced under $22,000 offered in partnership with online learning platform Coursera, have seen record applications this year, Elliott said. Applications have particularly increased among women. More than 2,500 applications have so far been submitted to the iMBA program starting this fall -- a 35 percent increase from August 2019.

Since mid-March, more than 18 million registered users have joined Coursera, a more than 400 percent increase from the same time period last year. Enrollments in India increased by 1,044 percent, followed by Italy at 519 percent and Brazil at 345 percent.

I pulled those quotes from the 8/10/20 IHE article At Home, Workers Seek Alternative Credentials. Given the crazy times, I'm not sure if that article is getting the attention across higher ed that it deserves. Everyone is entirely focused on the near-term challenges of academic continuity during the pandemic. And that is the right place to be focusing. You can't plan for the long-term when the short-term is so unstable.

But today, I'm going to ask you to do just that. If you can, step back from thinking about COVID-19 and what is happening to your school in the fall, and give some thought to the medium-to-long-term impact of the rise of alternative credentials and scaled degrees to your institution.

First, let me ask you a question. How does your school balance its books? Where does the money come from?

For most colleges and universities, and particularly non-profit private institutions and publics outside of the community college space, the answer is going to be tuition dollars.

The problem for almost every tuition-dependent school is that undergraduate programs no longer bring in enough revenues to meet costs. The shortfall is a function of a combination of tuition discounting (now higher than 50 percent), driven by drops in demand due to structural-demographic factors, and rising costs.

To make up for the dollars lost to tuition discounting, undergraduate attrition, and a generally slackening of demand (especially in the Northeast and the Midwest), schools have moved aggressively to offer new master's programs. In the 2017-2018 school year, US colleges and universities awarded 820,102 master's degrees. This figure represents an almost 250 percent increase (up from 235,564) from the number of master's degrees awarded in the 1970-71 academic year. To put master's degrees in context, in 2017-2018, colleges and universities awarded 1,980,644 undergraduate degrees. This represents a 135 percent increase (from 839,730) since 1970-1971.

Tuition costs for master's (including professional) degree programs have increased dramatically over the past two decades. Using constant 2017-2018 dollars, the average tuition at private non-profits for master's programs has increased from $15,401 in 1989-1990 to $25,442 in 2017-2018. Unlike undergraduates, 8-in-10 receive tuition discounts in the form of some sort of institutional aid, less than 4-in-10 master's students receive university-based financial support.

Unlike undergraduates, graduate students are not limited in how much they can borrow to pay for tuition. (Which they borrow for at higher rates than undergraduates). While graduate students only account for 15 percent of all students enrolled in higher education, they make up 40 percent of all federal student loans issued each year. That equates to $37 billion in loans for graduate students. Sixty percent of graduate students will have federal graduate debt, and on average, they will owe $41,000.

What do all these numbers add up to? Two things. Colleges and universities have become dependent on the tuition revenues from master's programs to ensure their financial sustainability, and the cost for master's programs for students is high.

Enter into this picture the growth of alternative online credentials and scaled online degrees. Keep in mind that the schools that are pioneering these programs are mostly colleges and universities with national and sometimes global brands.

Increasingly, working adults will have a choice of either enrolling in a traditional (often online) master's program from a college or university that is known mostly in the area in which they live (regional brand), or a non-degree online certificate or an affordable scaled online master's degree from a nationally or globally known university (elite brand).

It is also a mistake to think about online certificates and affordable scaled online degrees as totally separate offerings. What we will increasingly see is that non-credit certificates will funnel learners into full online degree programs. Students will be able to shorten the time it takes to graduate from an online degree program by applying course credit from the online certificate program. For schools, this new admissions funnel will lower the costs of bringing students into master's programs and increase their applicants' quality.

The danger for regionally branded tuition-dependent colleges and universities is that certificates and scaled-degrees from nationally/globally branded institutions will cannibalize demand for master's programs. If this happens, it could throw the delicate economics of the postsecondary system completely out-of-whack.

In 1968, the sociologist Robert K. Merton published an article in Science called The Matthew Effect in Science. Merton took the name for this phenomenon from the New Testament (Matthew 25:29).

For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.

There is a real possibility that alternative online certificates and scaled online affordable degrees underpin a new higher ed Matthew Effect. It is also possible that COVID-19 will accelerate this trend, as the pandemic is providing momentum for the big scaled online platform providers.

From a higher ed ecosystem standpoint, we should be very concerned about the impact of alternative certificates and low-cost degrees on the broad middle of tuition-dependent institutions. These new types of lower-cost online education may provide many benefits to adult working professionals. But the cost may be to accelerate the financial challenges of already stressed regionally-known and tuition-dependent colleges and universities.


We have retired comments and introduced Letters to the Editor. Letters may be sent to [email protected].

Read the Letters to the Editor  »

Back to Top