Ever since the federal government started granting loans for higher education, the money has only been available for traditional, accredited colleges and universities. On Wednesday, the Education Department unveiled a pilot program that could change all that.
As student debt loads for four-year schools have risen, with falling certainty that a job is waiting on the other end, many young people — and even mid-career adults — have looked to short-term intensive classes that might get them hired with less up-front investment. For instance, the department estimates that some computer coding “bootcamps,” such as General Assembly and Galvanize, will graduate 16,000 people in 2015.
Thus far, such instructional programs have only been available to those who can shell out thousands of dollars for a six-week course, rendering the classes out of reach for many who might benefit most. That’s why the Obama administration is experimenting with allowing people to use federal student loans for a wider range of training programs that haven’t met traditional accreditation standards.
Education reform advocates hailed the move, saying giving “career accelerator” programs access to federal funds is a key step toward democratizing access to the skills people need to succeed in a fast-changing economy.
“It can’t become a viable alternative to college as we know it today until they’re on a level playing field financially,” said Ryan Craig, an investor who works with colleges and universities to develop new educational programs. “We think honestly that that would solve a lot of what ails higher education.”
The pilot comes at a time when the education and philanthropic communities are buzzing about the need to deliver credentials that employers recognize and value. Many businesses simply use a bachelor’s degree as a screening mechanism to identify people they think are likely to have the skills they need, even if the four-year degree wasn’t really necessary — which bars many competent people from jobs for which they might otherwise qualify.
But the move is also another step toward opening education up to the private sector, which reminds some of the failings of for-profit colleges — several of which have collapsed in the past year as regulators found they delivered very little value for the billions of dollars they accepted in federal student aid.
“There’s a ton of scamming going on,” said Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University. “All you’ve got to do is get an ad on the subway, and you’re in business.”
The Education Department experiment is designed to mitigate that problem. Training programs would have to partner with a college or university in order to apply. The programs would qualify based on the student outcomes they deliver.
Some big-time investors are already interested in the business opportunity these programs represent. This week in Washington, investors, start-ups, interested foundations and nonprofit education policy organizations met to talk about creating training mechanisms that can educate people continually, rather than in one four-year chunk — and also generate a return on investments.
“You have to refill your gas tank again and again and again,” said Manoj Govindan, a technology discovery and business development executive with Wells Fargo Securities. “That’s creating all kinds of opportunities.”
The conference, put on by nonprofit organization InnovatEducate, featured sponsors and speakers from some of the biggest companies in education technology finance — Pearson, Kaplan, Amazon Web Services, Capital One and Verizon. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
In a paper released today, investor GSV Advisors estimated that money spent on education could expand to four percent of the capital markets by 2025. “This represents a mind-blowing trillion dollar opportunity,” the report said.
Some in the higher education community worry that pumping federal student aid money into these private-sector providers could attract slick salesmen with an ability to work the new system.
“The question the department ought to ask is, “What happens once you turn on the federal spigot?’ ” said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities.
Nassirian said that the department should pay attention to the fact that some for-profit education companies that have come under federal scrutiny in the past for their recruiting practices are now investing in computer-coding programs.
In June, Apollo Education Group, the parent company of the for-profit University of Phoenix, made an undisclosed investment in the Iron Yard, a leading computer-coding school based in South Carolina. A year earlier, Kaplan Inc. purchased Dev Bootcamp, adding the coding school to its for-profit chain.
On a call with reporters, Education Undersecretary Ted Mitchell said that the department is working on “innovative approaches to quality assurance” to “identify ways to protect students and taxpayers from risks in an emerging area of post-secondary education.”