Education and Skills

How private investment can boost education access and quality in the digital economy

Image: Good Free Photos/Unsplash

Jennifer Wong
Research Analyst, Private Investments - Impact, Glenmede Trust Company
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Education can close achievement gaps and lift communities and individuals from poverty. As literacy rates rise around the world, the link between education and income is more evident. At the same time, the cost of education has increased dramatically.

When properly channeled, private capital can spur innovation in providing quality education outcomes and democratizing access to education products and services. As the $6 trillion education market experiences a digital revolution, the sector is ripe for investment.

The Limitations of the Current Model

A person in the United States with only a high school degree will earn a median weekly salary of $712. This median increases to $1,173 upon completion of a bachelor’s degree, and more than doubles to $1,836 upon completion of a professional degree.

 Figure I.  Education levels correlated to income (median weekly earnings).
Median weekly income by education levels Image: U.S. Department of Labor Bureau of Labor Statistics

Simultaneously, the cost of education has also increased. Over the past 10 years, the average price of tuition and fees at U.S. four-year private colleges and universities has jumped over 44% to $39,529 per year in 2015-16, up more than $11,000 from 10 years ago, when tuition was $27,333. While public institutions can be more affordable, costs here too have increased 58% from $12,108 in 2005-06 to $19,189 in 2015-16. The financial commitment of education can be untenable for the majority of families seeking an education in the United States. Americans now owe over $1.5 trillion in student loan debt spread among 44 million borrowers.

Average tuition and fees at 4-year institutions in the US
Average tuition and fees at four-year institutions in the United States Image: U.S. Department of Education, National Center for Education Statistics
Improving How People Learn

In an increasingly digitized and data-driven world, students, teachers and parents alike expect to use technology to improve learning outcomes and enhance engagement. Many education technology (“edtech”) companies enable more productive instruction from teachers and learning by students. The use of data, predictive analytics and artificial intelligence technologies allow learning experiences to become more digitized and personalized. For teachers, companies like Abl Schools and ClassDojo are bringing data and digitalization into the classroom through parent-teacher communication apps, digital-curriculum, gradebook and tutoring platforms. For students, learning personalization technologies are being developed from private companies that improve education outcomes. For instance, India’s BYJU’S leverages big data analytics to create a personalized experience for students through unique learning journeys, guided paths, actionable feedback and recommendations.

Upskilling Employees in the New Economy

Changes to traditional industries are causing companies to think through how to shift resources to upskilling current employees, whose jobs may be affected by technology and automation. According to McKinsey Global Institute, 375 million workers may need to upskill or transition jobs by 2030. Given this, employers and individuals are seeking digital tools to address the widening skills gap. Investments in corporate education and training systems and companies, such as Degreed, Thinkful and EVERFI, have increased as technology is seeking new ways to deliver different content across different mediums.

Lowering Costs of Education

Technology can help lower costs and expand access to education. Companies, including online lenders CommonBond and SoFi, provide low-cost financing platforms for post-graduate students at the world’s leading schools. Both companies leverage technology to simplify and expedite the process of getting a student loan. By simplifying the process and eliminating the “middle man,” companies are able to offer less expensive and cumbersome financial aid services. Other companies, such as Future Fuel, focus on building out infrastructure to make student loan repayment and refinancing easier for enterprises, platform providers and users.

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Democratizing Access to Education

Higher costs are driving higher education institutions to offer more digital access. Currently, 26% of graduate students take courses fully online, which is the only segment of the graduate schooling sector that is growing. The move towards digitalization, known as the “massive open online course” (MOOC) space, has gained much investor attention in the past decade. Coursera, the largest of the MOOC platforms, raised $103 million recently and was valued at more than $1 billion. With these large platforms, millions of students can enroll in online courses at lower costs. Companies like Coursera are also working with higher education institutions to separate degrees into smaller, less expensive certificates.

Innovation can work hand-in-hand with other players to provide quality education outcomes, upskill workers as job demands change, democratize access to products and services and drive down costs of education, leading to further economic potential for education recipients.

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