Education's transformation

The ‘Class of Covid’ has had a disappointing end to life in education. Most universities halted lectures, seminars, labs and field work in March as the pandemic spread west. Sport, shows and competitions were postponed or abandoned as many students left their often-cramped university accommodation to attend virtual lectures and write dissertations from their childhood homes.

Some technology companies have thus proved integral to keeping educational institutions running through the spring and summer terms. US stock darling Zoom (US:ZM) is among a group of companies to have benefited from the increase in remote learning, while many software providers, including LTG (LTG) in the UK and Blackboard Inc. in the US, have quietly operated universities’ digital interfaces at a time when an online connection with students has been more important than ever.

But while tech and software providers have enjoyed soaring demand from the shift to digital learning, the opposite has been the case for the universities, which the Institute for Fiscal Studies (IFS) estimates will endure £11bn of losses (equivalent to a quarter of annual income) due the effects of the pandemic. More startlingly, the IFS states that 13 universities, educating around 5 per cent of students, could end up with negative reserves and may not be viable in the long run without a government bailout or debt restructuring.

Meanwhile, the property companies that provide accommodation both on and off campus for university students are facing a difficult few months. When the pandemic hit and many students left their student halls to return home, accommodation providers chose to release tenants from their lease obligations. All three of the UK’s largest listed student landlords are anticipating a sizeable hit to income in the current financial year.

And just as property and technology have been the two sectors most disrupted by the shift in educational demand in 2020, they are most likely to be on the hook for change if education – like so many other parts of society – is permanently transformed in a post-coronavirus world.

Compulsory improvements

There is no doubt that education needs a transformation, but the extent to which it needs to be changed and the direction of that shift is a vitriolic topic. Questions about the future of education spark hugely emotive responses: everyone has been educated, everyone has an opinion.

For years, teachers have bemoaned a system that rewards rote learning, penalises curiosity and fails to prepare children for adulthood. During lockdown, those issues have become more stark as students have been forced to take exams online, with access to books, the internet and parents to help them out. With A Levels cancelled, university places for the 2020/21 academic year have been determined by teachers’ opinions of their students’ ability. Eighteen-year-olds will be arriving at the next stage of their education having ticked all the boxes required to get them there, but with a learning gap spanning several months.

Coronavirus could have been an opportunity to reset the agenda and taper the focus on exam results. But in the UK the government prioritised the return of years 10 and 12 – exam years – thus reinforcing the view that education is for exam results and exam results only.

Change may still be afoot, albeit a far more subtle shift than a complete overhaul of the exam system. Policy makers, academics and learning institutions are increasingly asking questions about the purpose of education. Is it a set of assessments that allow countries to quantify the intellectual capacity of their citizens? Is it a process that aims to help its citizens form a fair and productive society, where literacy and numeracy are a welcome by-product? Scandinavian countries increasingly employ the latter strategy – children don’t start school until the age of seven, learning takes place in nature, homework is never assigned – and these countries have some of the highest literacy and productivity statistics in the world.

It’s true that assessment matters. Policy makers are not the only players in education who value what can be measured; students, parents and teachers also like to compare grades. But teaching to pass exams is increasingly becoming an outdated way of thinking. Finding a new measurement system that can properly assess students’ readiness for the world is becoming a matter of critical importance. 

That includes preparing a generation for a new future, which is likely to see an increase in the use of automation and robotics. Lawyers and paralegals (reading), sports reporters (writing) and accountants (arithmetic), are among a growing list of professions that could be taken over by robots. The ‘three Rs’ of education are not preparing children for the world in which they will seek jobs. “We’re marking kids on something that machines will be able to do in a silicon heartbeat,” said futurologist Ed Gillespie on the popular podcast he shares with Jon Richardson and Mark Stevenson. He argues that “there is a disconnect between what is needed and what we are preparing kids for”, which needs to be fixed by a shift in the purpose of education. Perhaps that means testing based on the ‘three Cs’ of modern education: collaboration, creativity and critical thinking.

So where does that leave today’s providers of school and assessment materials? Are the charities that own the AQA or OCR exam boards in the UK, or listed group Pearson (PSON) capable of shifting with demand, or is it more likely that innovative companies will develop novel ways of assessing progress? There are already some early signs of big tech venturing into education. Alphabet’s (US:GOOGL) Google recently announced 100,000 scholarships for online certificates in fields such as data analytics, project management and user experience design. The certificates are created and taught by Google staff via the online platform Coursera. Now that the company has taken its first steps into higher education, it is surely only a matter of time before it enters the compulsory space as well.

Meanwhile, ways of working have begun to change as a result of the pandemic and ensuing lockdown. Although there is no questioning the challenges of educating young people remotely, teachers have begun to report an increase in engagement across a wider range of topics than the curriculum currently allows. Children are naturally curious learners – a trait that is stamped out by rote, autonomous schooling – and lockdown has provided an opportunity for them to be curious again. That includes exploring the vast array of information provided by the internet and not being dictated to by the exam providers. In a world without textbooks or specific school materials, many of today’s educational material providers may struggle.

A higher level

It’s not just in schools where rote, autonomous learning is being questioned. Universities and the purpose of lectures, coursework, exams and degrees have come under the spotlight as coronavirus has forced a big rethink. Many students are pondering the reason they attend university, now that sport, societies and socialising have been disrupted and whether it is worth the price – three years of partying doesn’t necessarily justify £27,000 in student fees, especially if the world is entering a prolonged and painful recession.  

That said, evidence from the last financial crisis indicates that recessions don’t necessarily deter students from engaging in higher education: between 2007 and 2010, when UK economic growth contracted by 4.5 per cent, applications to UK universities jumped by a quarter, according to data from UCAS. But student fees weren’t as a high back then and alternative opportunities were thin on the ground. In 2020, the UK government is increasingly pushing apprentice schemes and traineeships as it attempts to bolster the embattled employment market.

And there is the greater provision of alternative education solutions from the technology industry to consider. About a decade ago, some believed that ‘massive open online courses’ (MOOCs) such as those provided by digital education charity Khan Academy had the potential to compete with face-to-face university courses. But there was a significant quality deficit and many complained that the MOOCs lacked the credibility of traditional courses. That is changing. A shift to remote learning could bolster the quality of online courses and lead the way to degrees from world class universities that are entirely online. Professor Scott Galloway, who specialises in marketing at the New York University Stern School of Business, thinks that this could happen soon through partnerships between prestigious universities and big tech. In Professor Galloway’s view, education could represent the next big growth opportunity for the FAANGs – Facebook (US: FB.), Amazon (US: AMZN), Apple (US: AAPL), Netflix (NFLX) and Google. 

The former chief executive of Microsoft (US:MSFT) Bill Gates argues that qualifications should be “proof that you have the knowledge, independent of how you acquired it”. That suggests that the role of prestigious, expensive universities is diminishing.

The knock-on impact on universities is already being seen in the immediate fallout from lockdown. Some universities are unlikely to have the capacity to withstand the strain of lost income from the 2019/2020 financial year, which industry body Universities UK estimated at £790m across the sector. More significantly, lost income from fewer students attending university next year could result in a £2.5bn funding “black hole”, according to the University and College Union.

This could undermine the quality of the tuition within universities, adding more weight to the argument that online courses might be better. The UK government has agreed to give universities an advance on tuition fees of around £2.6bn and £280m to stave off cuts in research, although Universities UK has argued more funding is needed.  

But making the argument for more generous bailouts is difficult when universities are the victims of their own overexpansion. A decade of £9,000 annual fees and relentless demand for university places (to a certain extent the function of the lack of alternatives) has appeared to give university strategists a license for unfettered spending. Campus building projects have rocketed in the last few years as universities make space for even more big fee payers.

Universities will argue that governments supported growth in the good times and should therefore provide financial assistance as demand shifts, but for now the message from the government is clear: any university approaching the Treasury for financial aid will be subject to a rigorous debt workout. Mergers and closures will be forced upon institutions with low-quality offerings and it is those low-quality institutions that seem to be heading for the biggest financial trouble. The main reason some universities will be in greater danger than others of not surviving is that they entered this crisis with lower financial reserves, according to Elaine Drayton, research economist at the IFS. According to a study she co-authored, institutions ranked in the lowest quarter of the Complete University Guide league table had the lowest level of net assets per student prior to the pandemic. 

And while higher ranking universities may have entered the pandemic in better financial health, they could still face a knock-on impact from others failing. “If a small number of universities do get into trouble then universities that are much more profitable might also become impacted if the people that are lending to universities don’t view universities as such a safe bet,” says Ms Drayton.  

Not many Brits will be too concerned that the financial outlook for the universities is poor. The government’s hard stance reflects the disillusionment that many people feel for an industry that has accepted exorbitant fees, overexpanded to the detriment of its current students and paid its vice chancellors far too much.

An international shift

But despite its failings, the British higher education system has long been a source of great international pride. Rightly so if traditional measures of success are applied: Britain boasts three of the world’s top 10 universities and 31 of the top 200. These centres of excellence attract the brightest brains from around the world, meaning Britain comes second only to the US in capturing a share of 5m overseas students. These international students bring in roughly £7bn of fees and a huge wealth of expertise in a wide range of subjects.

A world in the midst of a pandemic with huge pressure on reducing international travel is not a world in which British universities can continue to operate as they have done for many years. Travel restrictions are expected to dent the number of international students at many top universities in the 2020/21 financial year. Indeed, student landlords have already taken fewer reservations from students, citing uncertainty over international numbers – at the end of May, 47 per cent of rooms were reserved, compared with 54 per cent at the same point last year. International students make up a large chunk of tenants, for example, last year non-EU students accounted for 59 per cent of Empiric’s (ESP) tenants and 30 per cent were Chinese.

It’s not just the property companies that look set to be badly affected by a decline in international students in the UK. British universities lag many other leading academic institutions in the shift to digital, and if the world’s brightest researchers can’t attend British universities online, they might seek out the centres of learning that allow them to study remotely. A brain drain from big British universities would impact the quality of research, creating a vicious circle of falling demand. Meanwhile, a drop in international student numbers will threaten the economic outlook for many university towns and cities.

Although lower ranking universities stand to be less impacted by a reduction in international student numbers, they are more vulnerable to domestic students taking advantage of the fall in attendance numbers to “trade up”, according to Elaine Drayton. “If you see lots of international students not turning up at UK universities this year then at least for higher ranking universities there’s the option of recouping some of those losses by attracting domestic students,” she says. 

The inequality issue

Contrary to popular opinion at the beginning of the pandemic, coronavirus has been anything other than a ‘great leveller’ and nowhere has disparity been more significant than in schools. In the last four months, private school pupils have been provided extensive online resources and one-to-one tuition as the schools attempt to justify fees for just over half a year of teaching. Children with supportive parents have also been disproportionately advantaged, while students without access to high-speed internet and working devices at home are not able to engage as fully with their teachers while schools are shut. There are also disparities in school resources. “The schools that are serving the predominantly disadvantaged catchment areas are the ones that are most lacking in resources and the most unlikely to have online platforms,” says Diane Reay, professor of Education at Cambridge University.

Inequality makes it very hard to solve education’s failings. In schools, arguments around mixed ability teaching versus streaming have raged since the 1960s when streaming, which has long been used as a way of controlling unruly children to stop them disrupting progress of the smart ones, first began to be pushed out of the classroom. But streaming, and variants of it, continue to be used and it is now being discouraged again on the grounds that putting people in boxes reinforces the belief that they only have a certain capacity to achieve.

The inequality arguments continue in the higher education space where paid-for academic research is under scrutiny. Relx (REL) tussled with the University of California last year when the latter complained that research was only available to learning institutions that could afford to pay big money. There is now a rising tide of momentum behind ‘open-access’ journals that are freely available to read and growing calls for publishers to reduce the prices that researchers have to pay to have their articles featured in these publications.

Universities certainly seem to pay exorbitant process for access to the best research – in the wake of its high-profile clash with Relx, the University of California cancelled an $11bn (£9.9bn) contract. But Relx and its peers argue that the price is justified to ensure students and academics get the best quality research.

But the rise of free online learning materials is undermining the publishers’ arguments. And the rise of technology in education goes even further in its capacity to narrow the inequality gap. The wider availability of MOOCs, cheaper online courses and even free training materials, has helped to democratise the ability to gain new skills. In schools, nervous or ill children can stay at home without missing out on tuition.

But policy makers, education leaders and teachers must ensure than any digital transformation does not undermine the drive towards more functional learning across all levels of education. Coronavirus is an opportunity to reassess failings. In education, perhaps more than any other industry, that opportunity should not be wasted.