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With a number of leading for-profits beset by legal and financial woes, enrollment in online education leveling off, and MOOCs off the front pages, one might reasonably conclude that the threats to higher ed posed by what was hailed as “disruptive innovation” have abated. 

No so. At this point, institutions are disrupting themselves from the inside out, not waiting for the sky to fall. True disruption occurs when existing institutions begin to embrace the forces of transformation.

The innovations taking place may not seem to be as dramatic as those that loomed in 2012, but the consequences are likely be even more far-reaching, challenging established business and staffing models.

Advocates say competency-based ed puts the focus on students’ capabilities rather than how many hours per week they spend in the classroom. The benefit for employers, they say, is that prospective employees can be judged more easily, based on their demonstrated competencies rather than guessing how their grades will translate to real-world work. By

In September, an audit by the department’s Office of Inspector General found that the department was not adequately addressing the risks posed by competency-based/direct assessment programs, increasing the likelihood that schools would create programs that didn’t meet criteria to receive Title IV federal financial aid.

The Higher Education Act of 1965 is due for reauthorization this year, and direct assessment programs could be in the spotlight. The law, which governs how federal student aid functions, could see some major changes later this year. As part of ongoing discussions for revisiting the act, the U.S. House of Representatives unanimously passed legislation in July that would aid colleges employing competency-based education programs, according to Inside Higher Ed. The educational approach allows students to pursue a degree based on their demonstration of skill mastery instead of their letter grades. The intent is to provide more concrete skills that translate directly to a work environment rather than a theoretical educational approach.

The government should learn from its lessons and shift from funding based on inputs to focusing on incentivizing the outcomes it would like to see from higher education.

A better path forward would be for the federal government to encourage a variety of experiments over the coming years that try out different approaches in a controlled way, all while releasing programs from the current input-based constraints to learn what works, in what combinations and circumstances, and what are the unintended consequences.

A key tenet of all the efforts is that employers, along with students, are likely best positioned to determine program quality—and programs that align their assessments to the competencies employers need will likely be in a strong place.