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How would you like to go to MIT – for free? You can now. Starting this spring, the Massachusetts Institute of Technology will be offering free online courses to anyone, anywhere in the world, through its new digital arm, MITx. These courses will be much more than lectures on videotape. Students will be able to interact with other students online and have access to online labs and self-assessment tools. And here's the really revolutionary part: If you can show you've learned the material, for a small fee, MITx will give you a credential to prove it. No, it's not a full-blown MIT degree. But employers will probably be impressed.

Or maybe you want to get a BA, but you're focused and self-directed and not all that interested in hanging around the campus pub. Why waste four years at the Provincial University of the Masses? There must be a better way – and there is. At the non-profit Western Governors University (founded by the governors of 19 U.S. states) – and accredited as a state university in Indiana and Texas, among others – you can get a BA on your own time and at your own speed. The tuition is $6,000 a year and covers as many courses as you want to take.

WGU, which specializes in career-oriented degrees in business, health sciences, teaching and IT, isn't one of those online diploma mills that offer iffy teaching and a degree to anyone who pays the fee. Its standards are high, yet you can get a degree faster and cheaper than at public state schools. It has 30,000 students, most of them adults in their 30s. They earn their bachelor's degrees in an average of 30 months.

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Until now, online education has been regarded as the poor stepchild of the higher-education world – widely suspected of being a second-rate substitute for the real thing. But that's about to change. The digital revolution is going to disrupt higher education in the same way it's disrupted so many other industries. And it's about time. Higher learning still relies on the medieval model, when scholars gathered in one place to listen to professors lecture at them. It's increasingly expensive, and doesn't do a very good job of delivering what a lot of students want and need in a way that society can afford.

The digital revolution will make higher education better, cheaper, more accessible, more engaging and far more customized than anything that exists today. It'll also turn our current institutions upside down. For example, there'll always be room for the old-fashioned lecture. But do we really need 10,000 professors in 10,000 classrooms lecturing on the same subject? Why not let students watch the best explainer in the world explain calculus or physics – online, on their own time – and use local professors to work in smaller groups with students? Makes sense – so long as you're prepared to upend the entire professoriate, which is geared to research, not teaching, and is paid accordingly.

But the real disruption comes when you stop measuring academic accomplishment in terms of seat time and hours logged, and start measuring it by competency. As all employers know, the average BA doesn't certify that the degree-holder actually knows anything. It merely certifies that she had the perseverance to pass the required number of courses. The most subversive element of Western Governors University is that it certifies students by competency, not seat time. In fact, students don't sit in a "class" at all.

There's no prescribed curriculum. Students are assessed before each course to see which concepts they already grasp and which ones they need to master. Then they're offered a variety of "learning resources" – textbooks, videos, online simulations, conversations with a tutor – to close the gap. They can complete a course in eight weeks or 80. Routine assessments along the way – and a tough exam at the end – ensure they've mastered the material. As one graduate told Washington Monthly, which recently profiled WGU, "If you can prove your competence, why pay all of that money to sit through something you already know?"

WGU was dreamed up in the 1990s by a bunch of state governors who faced the same dilemma Canadian premiers and university presidents face today: how to make higher education fundamentally affordable in an age when public money is increasingly scarce. The demand for higher education is exploding, but so is the cost. And the universities' traditional business models aren't sustainable. Non-elite universities (that is, nearly all of them) spend too many resources on research, prestige, bricks and mortar, and trying to be everything to everyone, and not enough resources on effective teaching and learning.

Harvard Business School's Clayton Christensen believes higher education is ripe for its great disruptive moment. "America has sought to make higher education available to all through massive spending to subsidize its cost through government and philanthropic funding," he writes. But that model has reached the end of the line in Canada, too. From now on, universities can expect their funding to be cut, not increased. They need to disrupt themselves, or be disrupted, to survive. The years ahead will be the worst of times for higher education – but also the best.

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