Let’s start with the uncomfortable truth nobody wants to say out loud:
AI is not disrupting Harvard, Princeton or Caltech.
AI is however disrupting all other universities, maybe even the one your kids attend.
And the data is brutal: Ivy League borrowers represent just 0.3% of all federal student-loan holders, according to CNBC. The real $1.8 trillion in debt lives in the broad middle and bottom of the market—public universities, nonselective private colleges, and for-profit sub-prime schools—the institutions least capable of surviving an AI future.
If you racked up $100,000 to study poetry [at a liberal arts college] and then you wind up selling coffee at Starbucks, you may regret some of your choices, and I sympathize with you, but I’m not sure why you’re deserving of a $50,000 check from taxpayers.
– Frederick M. Hess
AI didn’t start this fire. But it is accelerating it. And Palantir just added a little fuel to it.
The collapse begins at the bottom, not the top
When people talk about “college debt,” they picture Harvard or Yale. But elite universities are statistical rounding errors in the debt crisis. Most Ivy League students graduate with lower-than-average debt, often around $11k–$18k, thanks to large institutional aid, as shown by analyses from Statista and MarketWatch.
Meanwhile, the national average sits around $30k–$38k, according to BestColleges and US News.
Where does the really toxic debt live?
- Nonselective private colleges
- Public regional universities
- For-profit schools whose students borrow more, earn less, and default at the highest rates — a pattern documented by the New York Fed’s study on for-profit colleges
(PDF)
These institutions survive on three blatant snake-oil salesmen lies illusions:
- A degree guarantees a job
- Employers need the degree as a hiring filter
- The university is the best place to learn
AI just eliminated all three.
Sub-prime universities were living on borrowed time and federally backed money.
AI is simply calling the debt.
Palantir lit the match
Palantir’s Meritocracy Fellowship is not a quirky corporate project. It is an open challenge to the college–career pipeline.
A four-month, paid program for high-school grads who are not enrolled in U.S. universities—with Western-civ seminars, real engineering work, and potential full-time roles. The fellowship page spells it out plainly:
“Skip the debt. Skip the indoctrination.”
– Palantir
Coverage across GovTech and Illuminem frames the fellowship as a response to the “crisis in higher education,” where universities are seen as ideological, slow, and disconnected from real-world performance.
Palantir is offering what universities claim to provide but increasingly fail to deliver:
- Mentorship
- Intellectual tradition
- A peer cohort
- A path to meaningful work
Except Palantir does it without the debt, without the bureaucracy, and with real project work instead of abstract prerequisites.
And Palantir is not alone.
The alt-education stack is forming fast
A new ecosystem is emerging around elite employers and AI-driven upskilling:
- Thiel Fellowship – pays young people to not attend college
- Big Tech dropping degree requirements – Google, Apple, and IBM have removed formal degree filters (LinkedIn commentary)
- AI + FAANG fellowships – Meta, Google, and others now prioritize research output over pedigree
- Google Summer of Code + Outreachy – paid, mentored, remote apprenticeships that bypass campus entirely (Dice)
- Palantir Students & Early Talent – standardized pipelines from high school straight into industry
(Palantir)
The monopoly universities once had over early-career access is gone.
Companies are building side doors.
AI is the replacement teacher, tutor, mentor, and internship
Ten years ago, skipping college meant giving up structured learning and mentorship. This is no longer the case.
AI tools like ChatGPT, Claude, and Gemini now replicate large parts of the academic experience:
- Instruction — AI tutors explain anything, step by step
- Practice — open-source projects become the new labs and internships
- Signal — portfolios, GitHub, and writing outperform generic degrees
- Community — cohorts, Discords, and fellowships deliver the peer group universities promise but rarely deliver
Even enterprises aren’t waiting for universities to catch up.
Corporate AI-upskilling platforms like Coursera for Business, Udemy Business, and Degreed allow employers to train people directly — Disco.
If you’re a sub-prime university, this is checkmate.
Bootcamps as training wheels
Before AI, the first cracks in the university monopoly came from coding bootcamps.
They promised faster, cheaper, market-aligned education. Some delivered. Many collapsed.
Investigations into income-share agreements (ISAs) revealed predatory practices, overstated job outcomes, and high pressure to sign opaque financing contracts.
Bootcamps taught us two lessons:
- Students are desperate for alternatives
- Alternatives have to evidently outperform sub-prime universities and their worst practices.
AI + employer fellowships are the next evolution:
- real work
- no debt traps
- faster time-to-income
- skills over pedigree
- mentorship over bureaucracy
Bootcamps attacked universities from below. AI and Palantir are attacking from above.
If you are working in a sub-prime higher-ed institution, better take cover; fast!
The institutions most exposed to AI are the ones already failing students
Data from the CBO and Federal Reserve shows that:
- For-profit institutions take a disproportionate share of loan dollars
- Students at these schools borrow more and default more
- Nonselective private colleges have debt burdens nearly as severe
These are the institutions with the weakest outcomes, weakest career support, and slowest curriculum updates.
They’re also the ones most threatened by AI-replacement effects in knowledge work.
AI isn't killing the Ivy League.
AI is killing the middle.
AI is unbundling higher education
Universities historically bundled:
- Instruction
- Socialization
- Cultural formation
- Credentialing
- Job placement
AI and employer pipelines are unbundling all five:
- Instruction with AI tutors
- Culture with cohort-based programs + online seminars
- Credentialing built from portfolios + verified skills
- Job placement into employer fellowships
- Community from intentional online networks
This is not the end of education. It’s the end of one overpriced distribution system for education.
What happens now?
Let’s look at the scoreboard: who is winning and who is losing?
Winners
- High-schoolers who can self-direct with AI
- Adults upskilling without institutional gatekeeping
- Employers building their own talent factories
- Elite universities (ironically), whose brand is anti-fragile
Losers
- Sub-prime universities
- For-profit degree mills
- Generic business degrees
- “Pay $80k for a PDF diploma” programs
- Institutions whose curriculum updates every 7 years while AI updates every 7 days
AI is accelerating a correction already overdue.
So long and thanks for all the fish
Yes, I know — the title is a slightly-too-on-the-nose nod to The Hitchhiker’s Guide to the Galaxy. In the movie (I still owe the book its proper respect), the dolphins — secretly the most intelligent species on Earth — politely flee the planet just before it gets destroyed.
Higher education is not blowing up tomorrow. But if you squint, you can already see who’s quietly swimming toward the exits.
Now to the matter at hand. Whether you're a parent, a policymaker, a high-schooler, or a VC, the message is clear:
The path to meaningful work is shifting toward:
- Certifications
- Fellowships
- Portfolio-first hiring
- Open source
- Employer-run apprenticeships
- AI-accelerated self-learning
Forget the question “Should a student go to college?”
Today the question is: “What is this institution offering that AI cannot?”
And for most sub-prime universities, the answer is: Nothing.