The Great University Reset 🎓 Transcend Newsletter #53
How the 2022 recession will bring real change to higher ed
Hola! Alberto here, back in Madrid this week. Welcome to the Transcend Newsletter 👋
The Transcend Newsletter explores the intersection of the future of education and the future work, and the founders building it around the world.
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For a long time, higher education has been counter-cyclical: when the world economy goes into a crisis, people become unemployed. And in the absence of a job, they go back to school.
Higher education grows when the economy shrinks, and it struggles when the economy is doing well.
For instance, during the 2009 crisis, college enrolment grew by up to 50% for students over 22 years old in the US.
To learn or to earn?
As of 2021, the global economy was performing well. With the recovery from COVID, countries opened up their borders to tourists, injected money into the economy through monetary policies, and consumers spent their disposable incomes on goods & services.
The result: low unemployment rates + a sharp decline in college enrolment.
Needless to say, universities did not love this.
Dan Rosensweig, CEO of Chegg (whose performance depends on university enrollment numbers), shared that about 1 million students decided to forego or postpone their enrollment in higher education over the past years.
What were these students doing instead? They took high-paying jobs in a tight talent market, or as Dan phrased it, they chose “earning over learning”.
we talk about inflation today, but this is really about wage inflation.
Imagine you're somebody who has been in a job that doesn't pay very well, and suddenly you can make double or triple if your choice is to learn or earn (…)
So the economic opportunity for them was too great, and it really helps you understand how many people are in that position where the money mattered that much.
Those were the good ole times.
But today, all we see is rising interest rates, mass lay-offs, plummeting stock prices, and red-hot inflation globally. We are diving head-first into a recession.
A recession is here
We know what this means – in the face of a shrinking economy, universities should expect enrollment to come back up.
I disagree with this idea.
There are two main reasons why I think universities won’t go back to a new normal.
Universities are losing the trust of the public.
Increasingly, citizens are skeptical of the value a college degree provides, given the massive underemployment rates and rising costs all over the world.
Instead, it seems that the public sides with shorter programs focused on employment outcomes: 46% of respondents strongly agreed that 2-year community colleges were worth the cost.
Secondly, vocational & job-relevant programs are the ones that grow most during recessions.
Data from the Great Financial Crisis shows that while enrolment for traditional 4-year university programs grew by 3.6%, enrolments at community colleges doubled that rate, and vocational programs grew by 20%.
There are always clear winners & losers from recessions. When the dust settles, shorter programs focused on upskilling & real job outcomes for students will join the list of winners.
I call this prediction the Great University Reset.
The Great University Reset
The Great University Reset will benefit programs that emphasize ROI over brand or transcripts. For the first time this century, we will see an economic recession where students’ decision to go back to school, won’t necessarily translate to greater university enrollment numbers.
So if not universities, who stands to benefit from this?
Challenger Universities: new university programs that cater to different student and skill niches, which we have written extensively about. Challenger universities that we think can benefit during this time include Rivet School, Duet, Kibo, Collective, Quantic, Tomorrow’s Education or PeletonU.
Community Colleges: these local alternatives tend to cater to older and part-time students, and are more focused on job outcomes, which shows in the positive perceptions from learners.
Bootcamps and Apprenticeships: new vocational pathways that start with the employer’s needs will benefit since they directly address a student’s need for job placements while learning. We have written about apprenticeship startups before, and see players like Multiverse, OpenClassrooms, Talentpath or Vendition building great learning experiences for students.
This is a great opportunity for founders today – new startups supporting learners that are unemployed or looking for career transitions should look to attract talent that would otherwise go back to university. By providing a better ROI on learning, startups can truly disrupt the higher ed scene and alter the way future generations view education.
The Great University Reset could serve as one of the key moments in the history of edtech – the moment when the general public crosses the Rubicon and finally becomes comfortable with the new wave of experiences that offer better learning and outcomes outside of the traditional university experience. Let’s step up to the challenge!
If you are building in this space, reply to this email, we’d love to learn about you!
Many thanks to Yash Singh for the great feedback!
The Roundup ☀️
🇪🇸 Will you be at South Summit in Madrid? Our co-founder Alberto will be at the conference and will gather edtech founders, reply to this email or DM him on Twitter/LinkedIn!
📉 Brighteye published a piece on how to fundraise during an economic downturn, with sound advice and resources for founders!
📱 Our friends at Foondamate just announced their seed round to help take education to mobile phones in low-bandwidth environments all over the world!
📚 Of all the IPOs in 2021, only Pearson has had a positive stock return, with the rest of the other edtech startups’ value dropping from 17% to 83%, as shared by Phil on Edtech.
Network Jobs 👩💻
Looking for your next opportunity in the edtech + future of work space? Check out our Transcend Network Pallet to find the best job opportunities from our network:
Co-founder & CPO @ Hyphen (London)
Head of Learning @ Laboratoria (Remote)
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