The U.S. Department of Education is now encouraging American colleges to seek federal approval for “competency-based” programs. Competency-based means institutions could grant degrees based on student demonstration of actual knowledge and skills. This would allow students to obtain college degrees based directly on what they know and can do, not how many hours they spend in class.

According to a letter released by the department today:

Instead of using credit hours or clock hours as a measure of student learning, instructional programs may use direct assessment of student learning, or recognize the direct assessment by others of student learning. Examples of direct measures include projects, papers, examinations, presentations, performances, and portfolios.

An institution that wishes to award Federal Student Aid (FSA) funds in a program using direct assessment must apply for approval from the Department. The application must specify the equivalent number of credit or clock hours for a direct assessment program (including how equivalencies will be established if students are permitted to take less than the entire program based on an assessment conducted at the outset). The Secretary will use these equivalencies to determine whether the program meets the minimum requirements for an academic year and as the basis for payment period and award calculations.

Direct assessment, traditionally associated with somewhat scammy programs that grant degrees for “life experience” have, as a model, been gaining traction among education reformers as a legitimate way to improve college in recent years.

One of the major reasons for this is that direct assessment could really reduce the cost of college. If you can obtain credit for what you already know, you don’t necessarily have to spend 60 hours (roughly the time spent in the classroom for one academic course), and thousands of dollars, showing a college you know it.

The credit hour, which awards academic credit based on hours spent in the classroom, is a legacy of an old-fashioned way to award pensions to professors. It only exists as a proxy for student learning. Why not just measure student learning directly, and award degrees for that learning?

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Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer