This article originally appeared on US News & World Report.
For decades, the progression of the American dream was fairly straightforward: Graduate high school, go to college and get a job. But new developments in higher education may upend that traditional progression. In time, the pathway could become: Learn a skill, get a job, learn another skill while working, get another job or promotion, learn another skill and so on.
Instead of a traditional, time-based model, where students carry a specified number of credit-hours for eight semesters, a new concept in higher education is the competency-based model, where students stay in school for as long as it takes to learn a particular skill. Credit is awarded based not on the time spent learning, but on demonstrated ability in a particular field. For students, this means less time spent earning a degree and more time developing their potential in the job market.
A pioneer of this approach is Western Governors University, an online university based in Salt Lake City, Utah. Students at WGU enroll for as many six-month "semesters" as it takes them to learn a particular competency. WGU offers bachelor's degrees in business, nursing, teaching and other fields. Students work with mentors individually to learn skills – with no set course meeting times – while a separate team of faculty evaluates the students once they feel they have mastered their skills.
Students who enter WGU with existing skills can move through the process much more quickly, while those who are new to a field of study can take more time to master their chosen competency. The program's online nature allows students to balance other obligations with their studies. And it can be completed at any time in life – 92 percent of WGU students are age 25 or older. In an advanced economy, where jobs and skills may quickly become obsolete, such a model can offer a fresh start for older workers without great personal cost.
While one school's results do not indicate a trend, the student outcomes for WGU are promising. The student loan default rate for attendees is just 5 percent, compared to 12 percent overall. Seventy-five percent of borrowers who attended WGU are paying down principal, compared to a national average of 66 percent.
Competency-based education is not limited to upstart institutions: The University of Wisconsin now offers a competency-based degree track. Praise for competency-based systems transcends ideological lines, as both the right-of-center Heritage Foundation and the left-leaning Center for American Progress have expressed excitement about this potentially disruptive innovation.
The trouble is how to pay for it. The federal government dominates higher education financing, originating about 90 percent of new student loans. To be eligible for federal student aid, an institution must be approved by an accreditor, which is in turn approved by the Department of Education. This system is slow to adapt to new ideas and until recently required students to take a minimum number of credit-hours. For a system not based on time, that is a difficult hurdle to overcome.
In 2013, the Department of Education invited institutions to apply for federal student aid for their competency-based education programs. But only accredited institutions are allowed to apply, and even these can struggle to get approved. Most accredited colleges and universities will not want to create competition for their lucrative traditional models. With an almost-completely nationalized system of college finance, innovative new models will have a hard time breaking into the business.
But simply making competency-based programs eligible for federal student aid is not the answer, either. One of the benefits of competency-based systems is their affordability, but there is strong evidence that federal student aid has driven large increases in tuition at traditional colleges over the past several decades. Moreover, colleges in the current system suffer from a lack of accountability for student outcomes. It would be a shame to see competency-based education succumb to the same weaknesses of the current model.
Fundamental reform of federal student aid is needed to allow competency-based education to succeed. This does not require ending federal involvement in college finance, but it does make a strong case for opening the market up to private investors, who will have a financial incentive to both encourage and properly vet innovative models.
Education is not fundamentally different from information technology or transportation, industries which have been upended by disruptive innovation. Competency-based education may be just the beginning of a revolution in how students achieve the American dream. When markets in higher education are free to prosper, there is no telling what innovation can accomplish.
An earlier version of this article stated that Western Governors University's default rate was 7 percent. It is 5 percent. The figure has since been updated.
Preston Cooper is a policy analyst at the Manhattan Institute. He is the author of the new issue brief, "Reality Check: Only One-Third of College Enrollees End Up In Jobs Requiring College Degrees." You can follow him on Twitter here.
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