CNBC Disruptor 50

The threat unleashed by the coronavirus that could make traditional college degrees obsolete

Key Points
  • Over 90% of students around the world saw their schools close as a result of Covid-19.
  • Online learning platform Coursera, founded by two Stanford professors, has seen more than 25 million enrollments since mid-March, a 520% increase from the same period last year. 
  • In response to the pandemic, the company is offering thousands of free courses to unemployed workers and university students worldwide for a limited time.
  • Coursera ranks No. 4 on the 2020 CNBC Disruptor 50 list.
The Covid-19 pandemic led to a boom in online learning that has increased the revenue of education technology company Coursera.

One thing the pandemic and ensuing economic slowdown has done is to make people rethink their finances and the value of big-ticket purchases. That includes the value of a traditional college degree. 

As the coronavirus pandemic swept the globe, 91% of all students worldwide saw their schools closed, according to UNESCO. In many cases classes continued virtually, putting an unexpected spotlight on online learning.

Online learning platform Coursera, valued at $1.6 billion, is among those capitalizing on the paradigm shift and massive adoption. Since mid-March the company has had more than 25 million enrollments, a 520% increase from the same period last year. 

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"What Covid did is an acceleration in the adoption of online learning," said Coursera CEO Jeff Maggioncalda. "Just millions and millions of people trying for the first time going online and taking online courses." 

In response to the pandemic, the company, which ranked No. 4 on the 2020 CNBC Disruptor 50 list, is offering thousands of courses for free to unemployed workers as well as university students worldwide for a limited time. The goal is to help reskill a workforce and help college students in the throes of a recession. The company, founded by two Stanford professors, offers everything from one-time courses on SEO to master's degrees in computer science.

Covid-19 shifts in higher education    

Just as Covid-19 is changing the way people work, it's expected to have a lasting impact on where and how students learn. Online learning has been growing steadily for more than a decade but suddenly has become much more critical. The abrupt emptying out of traditional campuses and ensuing shift online left some — especially those who paid big bucks for a degree — to think hard about the cost and method of education. 

Maggioncalda, who believes that universities won't be going back to a campus-only model, said this will lead students to rethink education prices: "I can still get the education, but it's going to be online. I'll get the college degree, but I'm not allowed to go to campus. Do I want to pay the same price for that?" he said. 

The average price of undergraduate tuition, fees, room and board at public institutions rose 31% in the decade between 2007 and 2017, while prices at private nonprofit institutions rose 24% after adjusting for inflation, according to the National Center for Education Statistics.

We'll see more online learning, given the economic changes. Degrees are valuable, but they are very expensive right now.
Glenda Morgan
research director at Gartner Research

The rising cost of traditional education coupled with changing demographics has fueled the growth of online learning and MOOCs (massive open online courses) such as Coursera, Udacity, Udemy, and others, which made online learning more accessible. Today, many undergraduate students are "nontraditional," meaning they tend to be older and are juggling families and jobs on top of education. 

"Most higher ed in 2005 and 2006 were not stepping up to the plate," said Glenda Morgan, research director at Gartner Research. That opened the door to online schools such as the University of Phoenix. As online learning gained acceptance, traditional institutions started introducing more online degrees and courses as a way to increase revenue.  

For-profit education learning history

As in the last recession, online learning is likely to see a big uptick as students question how much they can spend on a degree or certification. Online degrees generally are seen as less expensive. And as traditional universities face class-action lawsuits from students and parents demanding partial refunds because students were sent home and given online-only instruction, cheaper online-only degrees can look even more inviting. But the for-profit higher education sector has a checkered past, which some are still working to shake off.

In December the University of Phoenix agreed to a $191 million settlement with the Federal Trade Commission amid claims the school used deceptive advertisements and falsely touted relationships with companies such as AT&T, Yahoo, Microsoft, Twitter and others. In 2016 DeVry University, a for-profit school that offers classes online and in person, agreed to a $100 million settlement after claims of false advertising about the success of its graduates. Both companies settled without admitting any wrongdoing.

Even with missteps among the original wave of for-profit schools, experts expect more development of online alternatives, especially as companies like Coursera partner with leading universities that are increasing their own focus on online degree programs.

"We'll see more online learning, given the economic changes. Degrees are valuable, but they are very expensive right now," said Morgan, and the rising costs have been "increasingly unsustainable." 

Coursera, founded by Stanford professors, offers 4- to 10-week courses on everything from data science to medicine, and the company is offering thousands of courses for free to unemployed workers as well as university students worldwide during the Covid-19 outbreak.

Before Covid-19 the bulk of Coursera's revenue came from individuals buying courses, particularly in technology, data science and business. The company launched Coursera for Business five years ago and now has about 2,400 businesses worldwide that use Coursera to upskill employees.

Since the crisis, Coursera has seen huge growth in its higher-education business as well as Coursera for government, which works with various governments to retrain their employees. Free access to Coursera for University Students is being offered through September and for Coursera for Government through the end of the year. 

"A lot of companies that introduce something new to the world, they can get a lot more trial and familiarity if they offer something for free," Maggioncalda said, noting that Dropbox, Pandora and Spotify are among the companies that offer free versions or trials. Coursera offers many classes for free, but learners need to pay to earn a certification or degree.

"We wanted people to see this is what it's like to learn on Coursera," he said, with the hope that "some of them will say that was really pretty great."

More online degrees, mixed reviews 

So far, the abrupt switch to online learning hasn't been a great experience for many.

Schools, understandably caught by surprise, threw some tools at teachers and expected them to carry on with lessons in much the same way, just online. According to a recent survey by Deloitte, 43% of students found the quality of classes in the new online learning environment "negative," while 80% found the experience "neutral" or "negative." 

Michael Griffiths, principal at Deloitte who leads the firm's learning consulting practice in North America, says that figuring out how to make online classes more engaging will be a new challenge for institutions that haven't invested much in the area before. 

"The idea of just putting a professor onscreen is just not viable," he said. 

To make online learning successful, schools need to rethink lesson plans, shorten lectures, break up lessons into shorter segments, and introduce interactive elements. One-hour lectures — rarely engaging in real life — are even less so online. 

Maggioncalda likens the transition to plays versus movies. "If you have a play and you just put a video camera on the play, you wouldn't have something that resembles a movie. There are different techniques that you use to keep people interested," he said.

Anecdotally, "the places that had bigger online presence, they are dealing with this better," Gartner's Morgan said. 

McGraw-Hill sees demand for its digital textbooks as students learn from home
McGraw-Hill sees demand for its digital textbooks as students learn from home

Among traditional universities, there is a spectrum that have invested heavily in online education and others that have not. Georgia Tech teamed up with Udacity to offer a low-cost computer science master's degree, while MIT, Harvard, University of California at Berkeley and others have been offering free online courses in a variety of subjects through EdX. Coursera also collaborates with universities, including Duke, Stanford, Caltech, Carnegie Mellon University, University of Pennsylvania and others to offer classes or degrees and certificates.

These arrangements highlight the increasing overlap between alternative educational providers and traditional institutions. Online program management providers, or OPMs, work with universities, often specific departments, to expand their reach and bring in new students by offering online classes and degrees. The costs can be high, with OPMs taking up to 50% of revenue, Morgan said. 

It's unclear how the fall semester will shape up, but education experts say the focus on online learning is expected to continue. That gives traditional schools that have invested in online learning, as well as online learning companies, including Coursera, a big opportunity. That also means more competition for online learning companies and traditional institutions dipping into the online world. 

"People should recognize that a company like Coursera has been working with the best universities in the world to build online courses from the ground up for eight years. ... We have 61 million people from around the world taking courses on Coursera. And they come from the best professors," Maggioncalda said. About 10% of Coursera users pay for courses, and there are currently around 6,700 students working toward degrees on the site.

Coursera's classes are ranked, much like Amazon products, on a scale of 1 to 5. Anyone who checks out Coursera's 4,300 courses can take a look at the rating from other learners.   

Consumers rather than colleges driving education

To stand out in this increasingly busy space, companies and institutions will need to be creative and focus more on the consumers' needs and wants. Traditionally, education has very much been driven by institutions, with schools creating two- or four-year degrees.

With Covid-19 there is the opportunity to shift this model. 

"There is potential for Coursera to take marketplace away from traditional learning," said Deloitte's Griffiths. Online learning organizations have valuable data about hot skills for the job market. Instead of offering courses, they could do more to offer statistics and find ways to work with organizations to package those skills in new, creative ways.

Griffiths says micro certifications, rather than "macro" degrees like a master's degree, may be a way for people to distinguish themselves in the near future. 

"That is a real market opportunity, but there are other players in that space," he said, noting Skillshare and LinkedIn Learning. 

Coursera also works with large corporations such as Google, Autodesk, IBM, Amazon Web Services, Intel and others to offer courses or certifications.  

Coursera's Maggioncalda says Covid-19 has accelerated existing trends in the educational space, and the shift to online learning can help make learning more equitable by reducing economic, regional and language barriers. 

"I think that the ability to get an education is going to be far more accessible because of this. ... So I look forward to the new normal. I think it's going to be more positive for society," he said.