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Econ 101 For Colleges
A commonly-held leftist meme is that conservatives hate education. The technical word for this is “nonsense”: conservatives value education just as highly as liberals, and it bears repeating that the majority of college graduates vote Republican. Conservatives do, however, have strong criticisms of academia, which is a related but distinct matter from higher-education itself.
Of late, a new criticism has grown regarding the rise of the government-educational complex, specifically regarding the positive feedback* loop between tuition prices and easy student credit. The more money the government offers at below-market rates, the more colleges raise the fees, prompting even more generous loans, and setting up another cycle of the same. When you further consider that the availability of the loans is completely divorced from consideration of the degrees’ potential value and that their value is almost uniquely protected from normal market pressures, you realize that we’re not dealing with a market failure, so much as a conscious and successful effort to prohibit the existence of one.
As usual, Megan McArdle puts it best. Writing about students trapped under mountains of debt for nearly useless degrees, she says:
[Acknowledging the students’ culpability in their predicament is] not to say these students shouldn’t get relief. They should. Happily, we already have a system for dealing with people who are burdened with excess debt: the bankruptcy system. The government should change the law to make it easier to bankrupt student loans.
But at the same time, this case points to an issue that I’ve highlighted before: the need for better underwriting in student loans. Simply allowing students to borrow large amounts of money and then bankrupt it is a recipe for big government losses. We should allow people to bankrupt student loans, but the corollary to that is that we need to be more careful about the loans we make in the first place.
Right now the system indiscriminately lends to any marginally well-equipped institution that can claim to be teaching anyone any skill, even if that skill isn’t going to increase a student’s ability to repay their loan. It’s no wonder that institutions are setting up lots of useless programs to collect those tuition checks; the real wonder is that there aren’t more stories like these.
So yes, we need to offer debtors like these some relief. But we also need to stop making loans for programs that have poor graduation records, high default rates and little evidence of economic benefit to degree holders. I’m not just talking about for-profit colleges here, but also about the wide array of programs at accredited four-year schools that allow students to amass substantial debt without giving them anything of value in return.
Formal education– be it motivated by remuneration or a simple desire to learn — is a great thing, but not all great things are public goods. The sooner we start treating education like a normal thing we have to be sensible and rational about, the less damage there will be from the impending education-industry crunch, and the more people will be able to find educations they can afford and value.
* The original version of this post erroneously described this as “positive feedback.” Many thanks to anonymous for the correction.
Published in Culture, Education
We should also be more sensible and rational about the fact that college is not for everyone. There should be far more resources dedicated to trade schools. In fact, why not have a system of trade schools analogous to that which we have for traditional “higher” education? For example, the existence of certain more-prestigious trade schools would be a benefit to all. Why not have a “Harvard” of plumbing?
As far as the college financing racket is concerned, I’m just starting to get my feet wet, as I have a daughter who is a high-school sophomore. For what other purchase of goods and/or services do we have to disclose so much confidential financial information, so that the providers of such goods/services can decide what they will charge us?
I especially like the colleges’ “expectations” as far as family contributions are concerned. The student is “expected” to contribute up to X% of his or her assets and the parents are “expected” to contribute up to Y (some multiple of X) % of their assets. It’s all rather insulting and contrary to the operation of normal markets.
If the amount of tuition paid depends on the wealth of the student and his or her parents, why not also have it vary in relation to the marketability and earning-power of the degree?
A degree in Chicano and Chicana Studies? That will be $50,000, please. A degree in engineering? That will be $250,000.
…conservatives value education just as highly as liberals,
Since when do liberals value education?
I stand corrected. Edit being made, with citation.
One way to make colleges more cautious about accepting students with student loans is to place them on the hook for defaults.
They should be at least partially liable for a student or former student who defaults on a student loan.
It would put a whole new perspective on how they evaluate a prospective student, including his or her chances of finishing, how long it takes to finish, and the earnings potential of the degree the student is seeking.
Why not have a “Harvard” of plumbing?
I work in a skilled trade and went to a trade school. There will never be a “Harvard” of the trades because it isn’t necessary. One doesn’t need to make connections in school to get hired by the right employer. There is no special knowledge of the trades that require the world’s best instructors. Beyond your first job no one cares where you received your training.
Tradesmen and future tradesmen are practical people. They know that any schooling will only amount to a tiny fraction of what they’ll learn in the first couple years on the job. They favor a good education at a good price over the very best education at the most ridiculous price. That kind of rules out Harvard.
I wasn’t suggesting an ivy-covered institution where future plumbers make connections (no pun intended) and which fosters the creation of a network of friends and instructors who can further them in their careers. Nor was I was suggesting that such a trade school offer training at a super-premium price.
Perhaps I chose my words poorly. I merely wish that trade schools could take their rightful place alongside universities, colleges, and community colleges in the public imagination as places that are worthy of more resources to train future workers, good citizens, and, yes, even leaders. Too many people hear “trade school” and think of bad, late-night TV commercials. The funds streaming into colleges from the positive feedback loop of higher college tuition and bigger college loans has led to the hiring of legions of administrators (such as Deputy Vice Provosts for LGBTQ Diversity) and to the construction of acres of facilities that would not have occurred in the absence of “easy money”. I wish that some of those funds could instead have been funneled to solid, well-equipped and -staffed trade schools that the public holds in high esteem.
You make a good point that “any schooling will only amount to a tiny fraction of what [one learns] in the first couple years on the job,” but that could be said about any schooling. I would certainly say that about my business school training.
Johnny Dubya,
I certainly agree with the sentiment of wanting trade schools to carry more favor in the popular imagination. I make more money now than I did as a quasi-IT guy for a bank in my past life. I don’t spend half my day clearing out my inbox and I don’t sit in endless meetings. I don’t have to write my own performance appraisal and I’m not judged by the whims of my supervisor. I am tired at the end of the day, but unlike before , I know exactly why. The life of a tradesman has much to offer. I wish more people knew what they were missing.
Nice post, Tom!
I’d say Liberals care about education no less than Conservatives–or at least they care about what they think education is. And Conservatives care about education no less than liberals.
The worldview differences between the Conservative and the Liberal affect their ways of educating. Conservatives think we have a lot worth conserving.
Performance appraisals and endless staff meetings,
Clearing out email with constant deletings…
These are a few of my not-so-favorite things.