$1B Lumina Foundation Backs New Education Credentials Framework

Advocates of online education say it can provide learning opportunities as good as college coursework, but at a much lower cost. The broad offerings of edtech companies now range from foreign language instruction to history lessons to computer programming. What non-traditional education providers have always needed, though, is the ability to award their students a credential that’s as well regarded by potential employers as a college sheepskin.

Online platforms have already sprung up to display alternative credentials, such as certificates awarded by non-accredited code schools. Some efforts are now being made to evaluate and rank all those new types of credits—and even compare them to college course units.

Among the advocates pushing for this parallel system of skills verification is an Indianapolis non-profit with an endowment of more than a billion dollars—the Lumina Foundation. Lumina, which focuses solely on education, is devoting substantial time and resources to the drive toward an alternative credentials infrastructure.

In June, Lumina announced it was initiating a national dialog on credentials among business groups and others concerned about education. In October, Lumina held a one-day conference on the subject in Washington, DC, inviting employers, workforce development agencies, industry association representatives, education leaders, philanthropic organizations, think tanks, and students.

Lumina sees a need for affordable learning and training opportunities after high school for millions of Americans, both to sustain the country’s 21st Century economy and to boost the incomes of people who might otherwise languish in low-paid jobs.

“New credentials have value in the marketplace,” says Jamie Merisotis, Lumina’s president and CEO.

In June, Lumina re-upped its funding for a George Washington University research group that’s developing a registry of credentials of all types—from college to code schools—-along with details on the way various outside bodies accredit or validate them.

The Indianapolis foundation recently made its first direct investment in a private company, New York-based Credly, which serves not only issuers of alternative credentials, but also universities that grant degrees. Credly helps its clients design electronic badges that represent specific gains in learning, which students can display on their LinkedIn profiles, on Facebook, and other sites where employers can see them.

Lumina has also invested in venture capital firms that back education companies, including New York-based University Ventures and Fulton, MD-based New Markets Venture Partners. Those two firms led the recent $2.5 million seed financing round for Credly.

The foundation’s work on credentials stems from a policy shift at the organization in early 2008, when it brought in Merisotis as its new CEO.

Lumina, founded in mid-2000, started life as a grant-making organization that supported college and university efforts to increase access to traditional higher education. For example, in early 2004 the non-profit awarded more than $866,000 to nine regional campuses operated by Indiana University, Purdue University, and the University of Southern Indiana. The money fostered programs that helped undergraduate students overcome obstacles and stay in school. An important aim was to increase degree completion rates for students at risk, including first-generation college students, adult learners, minority members, and low-income students.

By 2008, Merisotis says, new learning options were “unfolding before our eyes” as an affordable resource for work-related post-secondary education. The foundation embraced non-traditional education as a significant element of its new mission statement, which it calls Goal 2025. The aim is to increase the percentage of Americans holding post-high school education credits to 60 percent—-whether that’s demonstrated by a college degree or a credential from another kind of provider.

Merisotis says only 45 percent of Americans now hold post-secondary credentials. “We’re 10th or 11th in the world,” he says.

Lumina is no longer awarding grants to academic institutions or specific workplace training programs. Instead, the foundation is trying to spur systemic change within the US network of learning opportunities that equip students to participate in the modern workforce.

The growing array of new education providers will help realize Lumina’s goals, Merisotis says. “Our role is to be a catalyst for large-scale change to serve people better,” he says.

Lumina is now deploying more of its money within the private sector. “We increasingly are getting into impact investing,” Merisotis says.

The foundation has allocated 2 percent of its endowment to investments that advance its core mission. That includes its stakes in venture firms, which include White Plains, NY-based Rethink Education. Rethink was an investor in Smarterer, (now part of edtech company Pluralsight) which offers online tests to gauge an individual’s mastery of certain subjects or digital skills, such as the use of particular computer applications—no matter where they were learned.

Under regulations governing non-profit foundations, Lumina is allowed to invest in for-profit ventures when the main goal is not to make money, but to accomplish the goals of its program, Merisotis says. If the foundation reaps a return of capital, the money could be redeployed into further program-related investments in for-profit or non-profit entities, he says.

Lumina has supported government policy changes that would, among other things, have the effect of nurturing the growth of edtech companies. In his testimony before a U.S. Senate committee about the reauthorization of the Higher Education Act, Merisotis urged legislators to allow students in non-traditional learning programs to tap into federal financial aid.

Merisotis insists, however, that Lumina’s aim is not to help private edtech companies compete with colleges and universities for students or financial resources. The goal is to expand capacity, building on the learning opportunities that established schools already provide, he says.

“I believe strongly in the non-profit model,” Merisotis says. “We’re certainly not trying to promote for-profits at the expense of non-profit institutions.”

Merisotis says he has had to address suspicions that the foundation has a business-oriented agenda. These concerns arise because of the way its big endowment was created, he says. Lumina was formed in 2000 as a consequence of an asset sale by USA Group, a non-profit private guarantor and administrator of education loans, to Sallie Mae (the Student Loan Marketing Association) (NASDAQ: SLM), a major provider of private education loans.

In such cases, government rules bar the for-profit business from unfairly gaining excess assets by acquiring a non-profit that had never paid taxes, Merisotis says. Regulations required the merger partners to carve out a substantial portion of the assets and vest them in a non-profit organization called a “conversion foundation,” which became Lumina.

Traces of that history still remain in Lumina’s leadership. James Lintzenich, the chair of Lumina’s board, was the CEO of USA Group until it was absorbed in 2000, when he served as chief operating officer of Sallie Mae until 2001. But Merisotis says Lintzenich left those corporate posts 15 years ago, and Lumina’s current 12-person board includes only two of the original board members.

“We literally have no relationship to the student loan industry,” Merisotis says.

While Lumina has no intent to disrupt traditional higher education, Merisotis says, existing colleges and universities need to be supplemented by new providers. College is out of reach for many Americans, including minority and low-income students, he says. “It’s increasingly unaffordable to most people,” Merisotis says. It’s also not clear, he says, that investing in the established academic model will achieve a broad expansion of access to post-high school education.

Lumina and Purdue University are supporting an ongoing series of Gallup polls to gauge whether, and why, college graduates believe their education was worth the cost. The second poll in the series, released in September, found that at least half of those graduating since 2006 think their degree was worth the outlay. But the poll also concluded that student loan debt can cause graduates to postpone their grad school plans and delay buying a house or car.

Although tuition costs and student debt have been rising, traditional higher education has enjoyed a powerful advantage in its long-established system of validation: Outside accreditation agencies examine the resources and educational methods of each college and university, then authorize them to grant certain degrees. Employers are accustomed to accepting college degrees as reliable proof of actual learning. Edtech companies have often partnered with accredited colleges and universities to share in that stamp of approval. The alternative—seeking accreditation themselves—could be time-consuming and costly.

Lumina and other advocates of credentialing innovation are turning the tables in a way, by experimenting with new standards for validating learning experiences, and by supporting unified credentialing systems for education both inside and outside academia. Working with the Corporation for a Skilled Workforce and the Center for Law and Social Policy, the foundation has proposed a beta Credentials Framework for the nation that would assess and compare a host of learning options, including college degrees, professional licenses and apprenticeships, badges from online courses, and certificates from on-site computer programming academies.

The foundation is also asking colleges and universities to submit their degree programs for evaluation by research projects like George Washington University’s credentials registry, and to Lumina’s own “Degree Qualifications Profile.”

The long-term Degree Qualifications Profile project aims to identify the key skills students should gain while earning an associate’s degree, BA, or MA in any subject. This skill set would include a mastery of specific knowledge related to each field, but would also encompass general abilities valued by employers such as communication skills, initiative, flexibility, leadership qualities, and experience working in teams.

“Our view is that the credential, whether a degree or a certificate, has to have value—to demonstrate that you know, or are able to do, certain things,” Merisotis says.

Lumina’s underlying vision is an educational network defined by somewhat standardized metrics and units, so that students can assemble the credentials they need for their career goals from a wide variety of sources. These might include colleges and edtech companies, but also institutions whose primary purpose is not teaching, such as libraries and businesses. Credits would be portable—leadership skills gained through a workplace project might count toward a college degree, for example. So might a biology certificate from a natural history museum.

Any unified database of learning options could also facilitate cost comparisons—which might encourage some students to cobble together an a la carte degree rather than pay tuition for all four years at a single college campus. This is a possibility that advocates of educational innovation, such as Mountain View, CA-based edtech company Edcast, call the “unbundling” of higher education.

It’s hard to say at this point whether educational technology, non-traditional learning options, and credentialing innovations will drain resources away from colleges and universities. Online courses can also amplify tuition revenues for established higher education institutions, because they can serve large numbers of students living across the globe.

Some universities are starting to adopt a modular approach to credentials, allowing students to begin by earning a certificate online, and then decide whether to apply those credits to work on a related master’s degree. The University of Illinois at Urbana-Champaign is offering such options in a data science curriculum offered through MOOC-hosting site Coursera. MIT has created a program in supply chain management using similar “stackable” credentials through EdX, another MOOC platform. Universities are also offering new degrees designed in part by employers to meet their hiring needs, such as Georgia Tech’s collaboration with Mountain View, CA-based edtech company Udacity and AT&T.

Yet many traditional higher education institutions are under strain, as state legislatures curb financial support for public universities, and some small liberal arts colleges struggle to survive. Critics question the marketplace value of doctoral degrees in the humanities, and even in overcrowded STEM fields such as the life sciences.

Merisotis sees online learning and other innovations in education as an opportunity for traditional campuses to transform themselves for a new era.

“Colleges and universities are going to continue to be a very important source of high quality credentialing,” Merisotis says.

If the educational market expands as Lumina envisions, the market for university PhD graduates may actually grow as edtech companies build more capacity for students, Merisotis says. Outside academia, private companies such as financial institutions still hire liberal arts majors from traditional schools, he says.

“What employers value most is deep, generalizable skills—critical thinking,” Merisotis says. “This is what we do best in a liberal arts context.”

Trending on Xconomy