THE BLOG
10/02/2014 06:04 pm ET Updated Dec 02, 2014

What's the Value of a College Degree?

Shutterstock / ollyy

Earlier this month billionaire entrepreneur John Sperling died. His son, Peter, is in charge of John's crowning accomplishment, the University of Phoenix, which finds itself struggling to survive. In 2010 Phoenix graduated more students each year than the entire UC system. Today, according to recent financial disclosures, Phoenix's total enrollment has dwindled to 241,000. Phoenix, and schools like it, have become a sad joke.

It is too soon to finish the University of Phoenix's obituary. Still, its story presents a unique vantage point into the difficulties of disrupting the simultaneously fast and slow changing world of higher education while Phoenix's rise and fall provides a cautionary tale to supporters of education's latest online fad: Massive Open Online Courses.

At first glance, MOOCs have nothing in common with proprietary universities like the University of Phoenix and its myriad sister schools and spinoffs: DeVry, ITT, and Capella. For starters, MOOCs are idealistic non-profits. Coursra's mission is to "empower people with education that will improve their lives." The University of Phoenix's mission is to unabashedly earn money. MOOCs rightly chafe at any association with an industry known for its ubiquitous advertising, deceptive recruiting tactics, and default rates that dwarf graduation rates.

But there are certain similarities between the two online programs. Both have been predicted to disrupt education, in part due to their dazzling growth. They even share the same pedagogical criticism. In the early 2000s academics, worried that Phoenix would displace them by cheaply spreading their core curriculum online, defensively claimed that "The material may be the same, but that's not like being in a [college] classroom."

At second glance, the rise of both for-profit colleges and MOOCs can be traced to the same societal change. Over the last few decades, parents have become convinced that that college is not an idle luxury but an employment necessity. Today 94% of parents expect their child to attend college in spite of rising tuitions and contrarians (most of whom attended college themselves) who are begging parents to reconsider.

Sperling, through Phoenix, brilliantly played to this market. His was one of the earliest schools to answer the philosophical questions posed by William Deresiewicz in his influential new book "Excellent Sheep," excerpted in the New Republic:

'Return on investment': that's the phrase you often hear today when people talk about college. What no one seems to ask is what the 'return' is supposed to be. Is it just about earning more money? Is the only purpose of an education to enable you to get a job?

Phoenix realized that the answer for most Americans is a resounding "yes." Most Americans (61% according to Pew) think that college is a place to learn "work-related skills" not just a place for students to grow "personally and intellectually."

These students don't care about fancy libraries or manicured quads; nor do they want to attend a late night kegger. College is the path to the moneyed middle class. Sperling understood this and built an immensely successful business, and ad campaign, out of it. As their chief operating officer explained, students don't enroll for the degree; they come "for what the degree will do for them."

Students today aren't particularly interested in parsing Proust. Many simply want a credential that will help them navigate a terrible labor market for young adults. Politicians are listening. A year ago, President Obama proposed a new college ranking system (partly in response to for-profit universities) based on "measures like tuition, graduation rates, debt and earnings of graduates." Perhaps our most intellectual President yet agrees that, today, what matters in higher education is return on investment.

This way of valuing college explains both the rise and the fall of University of Phoenix. Adults, surprised to find that a degree was an employment prerequisite, desperately flocked to the only school that would accept them while letting them work full time. Upon graduating, it increasingly became clear to these newly degreed students that their time, tuition, and degree weren't guaranteeing the promised high paying jobs. Phoenix, the innovator in online distance learning, stopped being perceived as disruptive and started being viewed as impoverishing.

This wasn't entirely the University of Phoenix's fault. Sperling created a school that gratefully accepted anyone with a high school diploma or GED. He nobly, although not altruistically, tried to educate the students that society forgot.

Upon graduating, or dropping out, these forgotten students struggled to find higher paying jobs. Many went back to old jobs burdened with debt. This led to waves of defaults which led to bad press. The negative coverage caused the best students who might have gone to Phoenix to enroll elsewhere, increasing the proportion of weak students. This, in turn, increased the proportion of defaults leading to more bad press and, finally, regulatory oversight. This is the death cycle that Phoenix, and other proprietary open-admission universities, can't seem to rise out of.

MOOCs, meanwhile, aren't in any danger of dying off. More classes are being offered and more students are enrolling. University Presidents are publicly looking for "professors who know that they need to teach 150,000 people and not 150." Professors are desperate to sign up.

Harvard Business School professor and disruption guru Clayton Christianson has claimed that universities will soon be in "real trouble;" while the normally stoic New York Times gushed that 2012 was the "year of the MOOC." David Brooks warned colleges to beware the incoming "tsunami."

Yet Google Trends suggests that, like many allegedly disruptive technologies, the MOOC tsunami may end up not making much of a splash. Just like the University of Phoenix before it, MOOCs have struggled to find a way to offer students a tangible return on investment.

Christianson thinks that MOOCs can create value through a hybrid certification process, whereby MOOCs partner with existing colleges. The MOOC provides the coursework, the college provides the certification.

In a much heralded experiment, San Jose State - where John Sperling once taught history - did just that. In 2013 San Jose State partnered with Udacity (a rare for-profit MOOC) to offer five classes; in each, roughly half of the students took the class online while another part took them in person. Students who passed would receive credit.

The result was a disaster. Half of the online students failed the final and only 83% of students bothered to complete the class they paid for. San Jose State scuttled the project deciding it would be best to absorb three of the classes "into the regular framework of the institution."

edX, a 2012 joint venture of MIT and Harvard, doesn't opt for a hybrid model. Instead it lets users audit the class for free, or pay around $100 to get a traditional certificate of achievement in one class or pay $250 for a certificate from a series of classes.

This spring, nostalgic for college, I enrolled in a few classes. I excitedly picked a full slate: Computer Science, Sabermetrics, and Biology. A semester later I, like 95% of edX users, had failed to complete any of the classes I signed up for. I did, however, make it into the ranks of the select few (about 4.2%) who managed to finish more than half a class without earning any form of certificate.

Although I found the courses intrinsically rewarding, at least at the start, the lack of end-goal made it hard to prioritize and harder to get through the dull parts. Why complete a boring problem set when I could go to the beach? If I simply wanted to be entertained by an informative and well-rehearsed lecture, a 20 minute TED Talk is a better fit than 20 hours of lectures.

Even though the course was free, it took time; and after dozens of hours, I could pay for a certificate. But who would look at it? Was it worth anything? For MOOCs to seriously challenge traditional universities (not just the online lecture circuit) they need to offer an enticing reward to push students through the drudgery.

No MOOC has found a way to do this. Like Phoenix before them, this isn't entirely their fault. Degrees from universities are primarily valued not on their outputs (how much students actually learn) but on their inputs (SAT scores, acceptance rates). As Sperling found four decades ago, massive open online programs will - by definition - never have glamorous inputs. Outputs, as Deresiewicz hints at, are difficult to measure. And the outputs that can be counted, often don't count.

Slowly, and quietly, supporters are beginning to temper expectations: MOOCs won't transform higher education, but they might improve introductory college courses! MOOCs and Phoenix may only be the catalyst for professors to weave online instruction into their existing lesson plans. The much heralded rapid disruption looks increasingly like a slow evolution.

To be truly disruptive, MOOCs must do more than offer a sleek website: they need to fundamentally transform the way that Americans think about college; outputs must be measured and more influential than inputs. Until that changes, neither will higher education.