The alternative credential market is picking up steam. Amidst rapidly expanding options for post-secondary training, some have even gone so far as to advocate that students be able to use Title IV funds—federal financial aid—to enroll in these programs.

There is tremendous potential for this growing ecosystem of new, innovative providers to benefit students, taxpayers, and the workforce. Some of these models even have disruptive potential. But despite this promise, we don’t advocate extending current Title IV programs to cover alternative credential programs. Here’s why:

1.) The market for alternative credentials is growing—in a healthy way

For instance, one type of alternative credential, coding bootcamps, which barely existed five years ago, has grown tremendously. Course Report found that by 2017 bootcamps were a $260 million industry, graduating nearly 23,000 students. We are beginning to see some consolidation in the industry, a number of bootcamp acquisitions, and more pressure around regulation and quality control.

There are signs that providers with strong outcomes are growing, and that providers who can’t help students get ahead in the labor market are being winnowed out. This is a good thing; it means that market is working, and that providers are being forced to compete on outcomes. Students who have to plunk down their own cash are less likely to pay for programs that don’t yield return on investment and help them make progress in their lives.

2.) The Title IV system lacks good quality control mechanisms

Traditional college, on the other hand, doesn’t operate as a free market. Federal financial aid programs play an important role in helping millions of students to access college. However, without systems in place to ensure that schools are consistently producing strong outcomes for students, Title IV money can enable bad actors to stay afloat.

Accreditation functions as the quality assurance mechanism for traditional institutions eligible for federal financial aid. But it’s worth noting that accreditation was originally designed to help schools align their standards and practices, not to police higher education. Because of this original design, accreditors rely on inputs, not outcomes, meaning that they don’t provide minimum standards that colleges need to achieve for students in order to receive federal money. Instead, they look to make sure that a college has all of the resources, policies, and structures in place that should theoretically allow a school to produce good outcomes.

Extending Title IV funding to alternative providers would mean extending our current quality control system as well. Existing accreditors have no expertise in evaluating bootcamps, and given the diversity and fluidity in bootcamps’ instructional models and business models, it’s not clear what an input-driven evaluation process would look like. Flooding the alternative credential market with a new source of revenue would certainly allow it to grow faster. But regulating that growth with input-driven processes would all but ensure that the industry’s growth outpaces its ability to deliver on quality. It would bring the current winnowing process to a halt.

3.) Designing a new funding system for these emerging providers could transform how we fund traditional college

Instead of expanding a broken system, we should design a new one. Any initiative to provide federal funding for alternative credential programs should require audited outcomes around learning, program completion, job placement, earnings, and graduate satisfaction, as Entangled Solutions has proposed.

While alternative credential programs that don’t meet minimum standards in these areas could still operate, there is no reason they should receive funds from taxpayers. Above that minimum standard, the government could invest in programs based on a sliding scale, subsidizing successful programs more generously, and diverting funds away from those that produce worse outcomes.

New funding models for alternative credential providers could provide a blueprint for the rest of higher ed. Traditional higher education sorely lacks transparency around outcomes. Making federal funds contingent on those outcomes would be revolutionary—and it could protect students while encouraging innovation.


  • Alana Dunagan
    Alana Dunagan