Higher education is going through a time of change. The United States federal government and its Department of Education are calling for reform as student debt has increased and the cost of college tuition has risen steadily to unattainable levels. In the next decade, the number of jobs requiring a college degree will increase to 70% of all new jobs. Competency-based education is currently being explored as an alternative to a traditional college degree. Under this umbrella, students will be assessed on what they know rather than how much time they will spend seated in a classroom. Competency, rather than credit, is now being given serious consideration by federal and state agencies. This literature review examines the research and provides an overview of competency-based education. New and existing programs demonstrate a variety of formats and approaches to competency-based education. The literature also addresses various types direct assessments including prior learning assessments, formative and summative assessments. It is increasingly evident that there is a need for an alternative to the traditional, expensive college degree.