Volume VIII, #4
Perhaps because college was so consumed with pranks, it wasn’t until the relatively mirthless years of law school that I was able to achieve my dream of playing in a rock and roll band.
My brother Aaron had always been a drummer and I played a passable tenor sax in high school jazz band. We quickly found law school classmates who played guitar, bass, and keyboard and began assembling weekly to jam to 80s tunes. Unfortunately, the bass player soon graduated – a decade or so later, he would further graduate from Yale to jail on an indictment for insider trading (such is life at an elite law school) – so we had to resort to recruiting a bass player from the Divinity School. We were soon joined by our frontwoman, and all that was missing was a name.
At the time, Aaron and I were taking a course in land transactions. When referring to a random plot of land, instead of referencing it as Plot X (as more mathematically minded students might), it turns out the custom is to refer to it as “Blackacre.” Much of the course consisted of introducing complexities upon complexities surrounding the ownership of Blackacre, and then trying to figure out who gets Blackacre. Naturally, we named the band Blackacre and added the tag line: Who Gets It? (Get it?)
Blackacre had its one and only public performance a few nights before graduation. A friend lent us his living room and demonstrated deft law school humor by introducing the band as follows: “Folks, we’re in an endgame with our landlord, so feel free to break anything you want. Now put your hands together and give it up for a band that breaks all the rules except for the Rule against Perpetuities, Blackacre.” At which point, we launched into our best cover: The Pretenders’ Back on the Chain Gang.
These days, it seems like we’re all back on a chain gang of sorts: blockchain. For the last few years I’ve done my best to block out blockchain frenzy, which seemed more like financial blockheadedness than blockbuster (not the defunct video store). It was hard enough when one of the universities we’re involved with – University of Nicosia – became the world’s first university to offer a degree in digital currency, and its dynamic President Antonis Polemitis became one of the world’s leading authorities on the subject. But no more. Not because of the exponential appreciation in the price of blockchain’s prodigal son, Bitcoin (from near zero just five years ago to over $10k), but rather due to clear implications for postsecondary education. (When I told President Polemitis I wanted to write about blockchain, he said it’s about time, and make sure you don’t write it IN blockchain, because I’m pretty sure that’s how you wrote some of your more incomprehensible pieces. Which sounds about right.)
Credentials are a currency. And as far as it goes, higher education’s current degree-currency is an unwieldy one – not unlike the giant stone coins from the island of Yap. These coins – up to 13 feet in diameter – were laboriously mined and shipped from Palau, an island nearly 300 miles away. On Yap, they remained in one place, and unit ownership was transferred virtually; because the community was small and tight-knit, everyone knew the current ownership of every stone coin.
Blockchain – or distributed ledger technology (DLT) – is a similar digital solution for a community that’s not so small or tight-knit. To achieve a Yap-topian virtual currency, DLT codes ownership of the currency unit into the currency itself in the form of a lengthy data file that is built, stored, and verified in a distributed manner. So the analogy for credentials is clear. Credly, the leading provider of digital credentials, has demonstrated the power of unbundling credentials down to the level of the competency and thousands of employers, associations, training providers, colleges, and universities are already issuing digital credentials via Credly. DLT credentials are simply the next logical step for digital credentials as the authoritative distributed ledger will allow anyone to easily and immediately verify any credential – no more résumé fraud. University of Nicosia is also the first university to award blockchain-based credentials. According to Polemitis, “Employers can take our diplomas to our Web site, which will hash it using the same algorithm, and our system will confirm whether it’s genuine or not.”
But what most intrigues me is DLT’s potential to fix our broken system of student financing. The DLT credential future will be much like the present in one important respect: providers won’t issue credentials unless they’ve been paid or have some guarantee of payment.
It’s the prospect of payment guarantees that I’m giddy about. As the supply of credentials or programs or pathways that lead directly to good first jobs continues to grow, more and more students will vote with their feet in favor of such faster + cheaper alternatives to college. These alternatives will be financed by income share agreements – repayment contracts with a minimum income floor, and strict limits on income share % (e.g., 15%) and time (e.g., 5 years) – and employer-pay models like apprenticeships, placement fees, or staffing. What do income-share and employer-pay models have in common? Unlike college, they don’t charge tuition upfront, but they do guarantee future payment to providers.
DLT allows this information to be written into the ledger for each credential. In other words, a DLT-based credential means the mechanism by which that credential is financed will be verifiably baked into the credential itself.
As a result, the combination of non-tuition-based faster + cheaper alternatives and DLT sets the stage for a revolution in higher education financing. Whereas our current system provides equal subsidies for the most well-off students (or for students in programs that lead to the most remunerative careers) as for students of lower socioeconomic status (or students in programs producing large social benefits but limited pecuniary gain), DLT-based credentials have the potential to radically focus government support on those who need it most. Because current postsecondary spending isn’t targeted, early childhood educators, K-12 educators, and social workers aren’t getting enough help, while tens of billions of dollars a year are wasted on supporting future top earners in fields like technology and finance.
To do this, governments would simply read the blockchain. Public support for postsecondary education could be restricted to those credentials from approved providers that are ready to issue, but where the ledger demonstrates a lack of an alternative payment mechanism. Despite this government backstop, providers would be highly incentivized to make alternative (employer-pay or income-share) arrangements because they should lead to higher revenue per student, and because the job guarantee or skin-in-the-game signal will attract more students.
Doing some rough math, based on the current level of federal and state spending on postsecondary education, government should be able to backstop these programs directly, leaving students (and student loans) out of the equation. How so? First, many students will pursue DLT credentials with private payment mechanisms. Second, government should change the rules irrevocably and not pay unless and until students complete. Programs would unbundle into competency-based components with much higher likelihood of completion, and completion rates would soar.
In the past few months, we’ve been subjected to a number of irresponsible articles suggesting we cancel all $1.4T in student loan debt. One piece in New York Magazine had this gem: “Student debtors were, in many, many cases, persuaded to make poor financial decisions by their own government — which, as the owner of their debts, now stands to profit from those mistakes. By wiping the slate clean, Uncle Sam wouldn’t just improve the macroeconomy, but also increase its fairness, and reduce racial inequality.”
If you’re focused on fairness, rather than tilting at windmills, think about how DLT could lead to a fundamental reordering of how we fund postsecondary education. Embedding financing information in the credential itself has the potential to eliminate a world where providers get paid upfront and all risk is borne by students. Once we’re Back on the Chain Gang, the current system will seem archaic.
It’s been said that DLT and its manifestation in digital currencies like Bitcoin demonstrate a future free from government control of currency. Similarly, DLT credentials have the potential to free government to finance higher education in a manner fit for a digital age, and in so doing eliminate student loan debt and provide true free college. As DLT becomes the basis for postsecondary credentialing, we’re going to find out who’s asleep at The Switch, and Who Gets It.