Over the past several decades, it has become accepted that the cost of higher education will continue to rise every year, far outpacing inflation or any other category (save perhaps health care). Every year, more and more colleges raise tuition to ungodly levels, fully knowing that the federal government will cover the difference. There is little incentive for them to do otherwise. Quite simply, college is not anything close to resembling a free market. We have come to accept the idea that everyone should be able to go to college, including ones that are wildly overpriced, and that government - that is, taxpayers - should foot the bill.
And yet, even questioning this is akin to wanting poor kids to suffer. During the 2012 campaign, Mitt Romney, supposedly from the party that likes free markets, was a staunch defender of Pell Grants, one of the primary government programs used to subsidize college tuition. Romney even expressed a desire to expand the program. For those who don’t know, the basic principle of Pell Grants is that the government gives you money towards your tuition - with no obligation to pay it back. There are various qualifiers for this money, but it is basically a gift if you get it. So needless to say, when I heard this during the debate, one thing was clear - you’re not allowed to question the basic idea that government has an interest, even an obligation, to pay for college for those who cannot afford it.
Written by Jason Bedrick, a visiting policy analyst with the Cato Institute’s Center for Educational Freedom. Posted with permission from Cato @ Liberty.
In 2008, then-Senator Barack Obama pledged to make college more affordable. President Obama kept his promises to increase grants and expand loan forgiveness, but the cost of attending college continues to rise. As the College Board Advocacy & Policy Center reports today, tuition at public universities rose 4.8% this year. While tuition didn’t grow as fast as in previous years, tuition continues to rise faster than inflation and growth in family income. And, as we know, student debt is exploding. Graduates of the class of 2011 carry an average of $26,600 in student loan debt, up 5% from the class of 2010. Nationwide debt from student loans exceeded $1 trillion this year, surpassing all other forms of debt that Americans carry, including credit card debt and auto loans.
As fall approaches, hundreds of thousands of high school students are being asked that nagging question: “What college are you going to?” These students would be wise to follow the advice of Peter Thiel, a billionaire Silicon Valley investor. For most of us, college is an expensive waste of time.
Not only is entrepreneurship a nearly impossible skill to truly teach at college since true entrepreneurship boils down to risk-taking (read: outside the box thinking) and self-motivation (read: not a classroom environment) — but enormous amounts of student debt severely limit the options of graduates in the marketplace by forcing them to take jobs that cover loan costs and provide for basic living costs.
This may be the ultimate folly of college education in my eyes. How many bright, young people are stuck in the rat race of professional jobs, or worse government, who are simply unable to follow their passions, be entrepreneurial, or develop something socially useful because they took on $100,000 in student loans when they were 18 and they just are not able to take the risk due to that looming $600/mo tuition payment.
This is why the Thiel Foundation is offering $100,000 scholarships to budding entrepreneurs to drop out of college for two years and develop their ideas. At least 20 students are awarded the scholarship each year, with some impressive results.
40% of full-time students fail to get a degree in six years, and with roughly one of three college graduates in a job the Labor Department says requires less than a bachelor’s degree, it is clear that our emphasis on the need to go to college is misguided.
People are spending a large amount of time getting degrees for jobs that may never be there.
Yesterday while campaigning at the University of Chicago ahead today’s primary, Mitt Romney made a profound remark about young Americans voting for Democrats; one that needs to be addressed:
GOP presidential front-runner Mitt Romney said Monday he doesn’t understand how young people could vote for Democrats.
“I don’t see how a young American can vote for, well, can vote for a Democrat,” Romney said in a speech at the University of Chicago.
The former Massachusetts governor said Democrats were saddling young people with debt while Republicans are committed to reducing spending and balancing the budget.
“My party is consumed with the idea of getting federal spending down and creating economic growth and opportunity so we can balance our budget and stop putting these debts on you,” he said.
Given that Democrats seem to want to spend endlessly on government programs that will only add to the river of red ink flowing from Washington, Romney has a really good point here. But it’s not that difficult to understand why young Americans tend to vote for Democrats instead of Republicans.
Most of the young voters that I encounter are, loosely defined, libertarian. They consider themselves fiscal conservatives, but socially liberal. But when it comes down to it, in my experience talking with younger voters, that they care more about social issues. They’re tired of endless crusades by social conservatives against gays. They are also exceedingly weary of more wars, though that seems to be a lesser concern.
Well, DC, you did the impossible. You got dumber. From Fox News:
Lawmakers in the nation’s capital have floated a plan to require high school students to apply to college or trade school — even if the students have no interest in attending.
The proposal is a bid to ensure students in the troubled Washington, D.C., school system at least have the know-how to navigate the admissions process.
D.C. Council Chairman Kwame Brown, who introduced the bill, said the proposal would establish a “mandatory workshop” to teach teenagers how to apply for aid and admission. It would then require everybody to apply to at least one post-secondary school before graduation.
“I believe that every child should have the opportunity, even if they don’t go, to at least apply to a college,” he said as he introduced the bill Wednesday.
Okay, maybe I shouldn’t take it out on all of DC. But Mr. Brown, you sir, are a moron.
In a time where the value of college is plummeting while the cost of said college education and the unemployment rate among recent college graduates is increasing, such a suggestion is mind boggingly boneheaded. Apparently, Brown forgot that most colleges charge around $50-$75 for an application, in effect making this dumb idea a tax on poor students and their families, and a gimme to already well off educational institutions—who are then going to just throw the applications in the trash anyways. (If you haven’t heard, DC public schools are horrendous.) Oh, no wait, he didn’t forget, as the article adds “Brown said he would work with the school system to make sure students have the ‘resources’ to apply,” or in other words, make this dumb idea a tax on poor students and their families in DC.
It appears that many do not understand why college costs so much, even though it is relatively simple to explain. Some—who I will leave nameless—even go as far to say that the reason tuition is rising is because states are subsidizing less of it! Well, Holy Postnominal Letters, Batman, where did you get that idea?
In reality, the situation is a bit more complicated than that, though not by much. Here’s a simplified explanation:
- Federal government guarantees education money
- Pell Grants
- Stafford Loans (Both subsidized and non-)
- Backstopping all other education loans
- Private lenders lend wildly, as their loans are guaranteed by Uncle Sam
- Students take on loans to pay for their education
- Universities notice this, realize their customers are guaranteed to have money, and jack up prices
- Students suffer, while university presidents and lenders prance around in glee
Okay, so maybe the prancing part is a bit much.
Mish Shedlock, who I regard as one of the finer macroeconomists out there, has taken some stabs at this. You can read here. Or over here. Or yes, even more on this one. Mish also wrote, in response to Obama’s aide, David Plouffe, saying that they will “safeguard” student loans: “Bragging about safeguarding student loans is like bragging about safeguarding the plague.”
A while back, I wrote a post asking the question of whether college was over-hyped. This was based on a John Stossel column and it really deserves some consideration. After all, many very successfully people never went to college, and some college educated people are sleeping on park benches in this country. Well, Atlanta Journal-Constitution columnist Maureen Downey isn’t ready to say they’re over-hyped, but she seems to think they’re definitely overcharged:
My niece loves most of her academic classes at grad school, but found that some living legends of her department are only there because of reputation rather than teaching skills and put in minimal effort or appearances.
“Ultimately, the faculty are really what makes a school,” says Naomi Schaefer Riley, author of “The Faculty Lounges and Other Reasons Why You Won’t Get the College Education You Paid For.”
“They have the most long-term effect on campus atmosphere and student’s educational experience,” she says. “Students on campuses come and go, but faculty are there forever in many cases.”
In her book, Riley deconstructs the cause of such faculty longevity, taking on one of the most cherished perks of high education, tenure.
She asks whether the awarding of jobs for life, often as a result of a professor’s research and publication in rarefied journals, leads to some faculty staying too long at schools and doing too little of what ought to matter most — teaching.
Tenure, she contends, is dragging colleges away from their original and most important mission, and stifling the young, innovative professors, in addition to cheating students of the education they deserve.
John Stossel, former anchor of 20/20 and current host of Stossel on the Fox Business Channel has a piece over at Real Clear Politics about whether college education is something of a scam. For people actually in college, this isn’t something they want to hear. For people who didn’t go to college or dropped out, it’s a different matter entirely. [Fair disclosure, I’m essentially a college drop out myself]
It’s a well known fact that those who graduate college tend to earn more over the course of their lifetime. Up to $1 million more. Study after study seems to show this, making it an inescapable fact, right? Well, Stossel doesn’t seem to be so sure of that:
I spoke with Richard Vedder, author of “Going Broke by Degree: Why College Costs Too Much,” and Naomi Schafer Riley, who just published “Faculty Lounges and Other Reasons Why You Won’t Get the College Education You Paid For.”
Vedder explained why that million-dollar comparison is ridiculous:
“People that go to college are different kind of people … (more) disciplined … smarter. They did better in high school.”
They would have made more money even if they never went to college.
Honestly, it’s a fair point. Driven, intelligent people have a tendency to do more than folks who just don’t care, regardless of education. The idea isn’t exactly groundbreaking, is it? However, Stossel doesn’t just stop there. Of particular interest to me was this paragraph:
Also, lots of people not suited for higher education get pushed into it. This doesn’t do them good. They feel like failures when they don’t graduate. Vedder said two out of five students entering four-year programs don’t have a bachelor’s degree after year six.