How to make a mint off the coming higher ed contraction

Exploit the trust failure now

The next few years will be a bloodbath as colleges and universities close. Hundreds of people will lose their jobs and thousands of students will join the millions who have taken a bunch of courses but don’t have a degree.

There is an enormous business opportunity for anyone who recognizes that the “college degree” is losing its monopoly on what counts as “completed learning.” Transcripts and diplomas are already weak signifiers. “Trust but verify” has turned into “double check and make a phone call.” But who to call about an online program from a closed institution?

Whoever builds the first credible institution that records what students actually know and turns it into a respected form — not a credential, not anything borrowed from a dying system — will define a brand new category, set a new standard, and authorize a new public language for bundles of learning. Tyler Cowen suggested some years ago that if he were designing a school from scratch, “the people who write and grade the students’ tests would not be their instructors.” Arnold Kling has also lauded the de-linking teaching from grading and certifying.

It is time to separate what a student learned from whether he or she finished the degree. Whoever can figure out a new way to do this, wins. Many have tried this. Nobody has succeeded largely because they have been captured by the institutions that want students to “stay” in school.¹ That’s ideal but it doesn’t solve the orphan or stranded credit problem.

Stranded credits are not a deficit. A student with seventy-two credits has not failed to finish. Those seventy-two credits are completed academic labor. Colleges don’t have a halfway term because a completed degree is their only social product.

This new product would be a registry, a kind of credit bureau, land registry, and LinkedIn all at once. The registry confirms you learned something and registers it. The world can check the registry when it needs to know what the student can do. An examination will surely be involved but the registry, not the examination, is the asset.

A student’s registry will summarize what has been verified about the coursework. There would be a scale defined to measure what was learned, additive rather than subtractive, growing as the student adds verifications rather than shrinking against an absent ideal.

Joining would be voluntary, which means any score derived from comparisons against that population will measure verified-competence-among-people-who-chose-to-be-measured rather than verified-competence-among-stranded-learners-overall. Verifiers would eventually figure out the difference. In the early years, the score would be a measure of how much has been verified at what level. Later, percentile-against-the-registry could be a meaningful claim. The number will not be obvious to set.

The new company would be like LinkedIn, the default place to look up someone’s professional identity because it accumulated records faster than any competing institution could. It took LinkedIn fifteen years to become canonical and operated at a loss for most of that time. A registry of verified learning will likely have the same establishment curve.

The population that needs this is already enormous. The National Student Clearinghouse counts 37.6 million working-age Americans with some college and no credential. Even at a loss-leader price of fifty dollars to record a verified competence, one percent of that population recording three competences each is $56 million. Five percent is $282 million. Those are gross figures before charging a single employer, workforce board, or state agency for access to the registry. The student side is the loss-leader to acquire the population the way LinkedIn lost money to acquire its database. The company’s value is the market position and the population it registers.²

The company will need to be able to refuse registration of old and unverifiable coursework, too-easy classes, no testable skills, failed examinations. Here’s the opportunity. A higher education system whose prestige once rested on the ability to deny admission and refuse to award degrees has been quietly granting degrees for AI work product. A registry of verified learning may become more meaningful than a college degree in the short term, if universities do not move quickly on AI work masquerading as student work. The company should publish its refusal rates the way a selective college publishes its admit rates, and for the same reason.

Headwinds: the enormously well-funded, high-minded foundations — Lumina, Aspen, Gates — that are all-in on the completed college degree. Follow the money. Lumina was created in 2000 with $770 million from the sale of USA Group, a student loan guarantor, to Sallie Mae. The endowment sits in the markets and compounds. It is now $1.5 billion. Lumina has no financial stake in whether a college survives or whether a student gets a degree. The 5 percent the foundation is required to distribute each year goes into the system that keeps more students borrowing. The same money runs both sides of the trade. Many of the students whose loans generated the original $770 million may now be stranded learners. Do not take their money. They don’t want to fix the problem.

The time is now, not three years from now. The market for verified stranded learning independent from the current and corrupt infrastructure is exploding. The list of failures is long and instructive. The first credible entrant has to be technically competent to serve the stranded cohorts, to handle them with seriousness, and to become the obvious place the next cohort goes.

No laws stand in the way and none smooth the path. The whole institutional claim rests on becoming canonical through reference rate rather than through law. Whether reference-rate authority is durable enough to support a real institution in this category, or whether the registry eventually requires statutory recognition to remain canonical, is a question the first entrant will not be able to answer in advance. The opportunity is to find out, on the way to becoming the institution that the question is asked about.

What will this do to universities? Sadly, if the new company is successful, it would accelerate the contraction by showing how much tuition was going for certification, not teaching. Certification can be done more effectively by someone who does not have to maintain a campus. The message here is that universities should go back to teaching and let someone else do the certifying.

1. CAEL, the Council for Adult and Experiential Learning, has been doing prior learning assessment for fifty years on Lumina money. Stranded learners are more numerous now than when CAEL started. Not a success

CLEP, the College Level Examination Program run by the College Board, has been administering credit-by-examination tests since 1967.The degree is still the credential. Not a success.

Open Badges, the Mozilla-launched digital credential standard, started in 2011 with MacArthur funding. By 2017 it had been handed off to a standards body, and Pearson holds patents on the underlying technology. Not a success.

Credly, the largest commercial badging company, sold to Pearson for $200 million in 2022 on $13.3 million of revenue. The badges did not replace the degree. Instead they became corporate certifications inside the existing labor market. Credly did not succeed at what it was supposed to do. It succeeded at becoming HR software.

Degreed, the corporate learning platform whose mission statement is “jailbreak the degree,” reached a $1.4 billion valuation by abandoning individual learners and selling enterprise software to Cigna and PepsiCo. Nobody is jailbroken. Not a success.

Western Governors University, founded in 1997 to pioneer competency-based education, became an accredited degree-granting university because that was the only way to be taken seriously. They failed at the thing the others were trying to do, joining the system instead.

2. The company makes money on both sides of the registry. Students pay a modest fee to record a verified competence — closer to the cost of a transcript request than to the cost of a course, because the asset is the registry entry rather than the examination. The substantial revenue comes from the verifier side. Employers pay for subscription access to confirm records on applicants they are considering. Workforce boards and state agencies pay for cohort recording contracts when they route stranded learners into work. Institutions in teach-out pay for cohort recording as a student-protection product they are accreditor-required to provide. Verifier-side revenue is stickier than consumer-side revenue, because once an employer has integrated registry checks into hiring workflow, switching to another verification source means revalidating every prior hire. The student side acquires the population; the verifier side is the business.