By Simon Grey, on November 1st, 2012
Maybe parents might want to consider the effects of pushing their children to get a college education:
Cyndee Marcoux already was stretched thin, thanks to the $80,000 in student loans she racked up after getting divorced and going back to school a decade ago. Her breaking point came in 2010, when her daughter defaulted on student-loan payments of her own.
That’s because Ms. Marcoux, a 53-year-old library administrator in Seekonk, Mass., co-signed for about $55,000 of her daughter’s loans. When the daughter was unable to keep making payments, Ms. Marcoux was on the hook—a burden that forced her to reshuffle her entire life. To scrape up the extra $550 a month she owed, she sold her house, then took a second job registering emergency-room patients on the weekend overnight shift. “You work your whole life and never pay a bill late,” says Ms. Marcoux. “You don’t ever think your kid isn’t going to pay.”
As certain internet writers have noted, this outcome wasn’t exactly unpredictable. When supply of college-educated labor outpaces demand, due in large part to federal subsidy and state propaganda, it should come as no surprise that the average income of college-educated individuals decline. And since demand for college has outstripped supply (though it should be noted that supply is radically increasing right now, almost like a bubble), two things began to happen at once: wages for college-educated workers declined while the cost of college education went up. The outcome? Lots of college grads are stuck with a lot of debt and no way to pay for it.
Making matters worse, the federal government—in conjunction with the major banks who lend out college loans, service the debt, and even act a collections agencies in the event of default—has conspired to basically make the recipients of student loans into debt slaves by preventing students loans from being discharged in bankruptcy. Furthermore, the federal government strongly encourages parents to co-sign for their children’s college loans by requiring their financial information when filling FAFSA.*
All this has started to bite a good number of parents in the rear. Deservedly so, I might add. Hopefully this will help other parents to wake up and start to actually consider whether a) their child should really go on to college and b) whether they will legally bind themselves to pay for their child’s worthless majors.
* Note: while this is only technically required to determine students’ grant status, it is assumed that parents are going to pay for their children’s education (hence the parents’ expected contribution) portion of the FAFSA calculation. Parents implicitly agree, since they are often expected and encouraged to sign for their children’s loans. Thus, the rarely-challenged assumption is that parents are good for their children’s education costs.
By Simon Grey, on May 9th, 2012
D.C. students would be required to apply to college or trade school and take the SAT or ACT under the most sweeping education legislation passed by the D.C. Council since a 2007 law set the stage for former Chancellor Michelle Rhee’s aggressive reforms.
Under the Raising the Expectations for Education Outcomes Omnibus Act of 2012, the District is set to become the first “state” in the nation to require students to apply to a postsecondary institution, according to council staff.
If college is going to mean anything, it must have standards, preferably in realm of intelligence and academic accomplishment. This implies that some people won’t live up to the standards. If everyone could live up to the standards, then either the standards are too low or everyone is an ubermensch. In the case of the former, the standards are irrelevant; in the case of the latter, the standards are irrelevant.
Anyhow, what’s interesting is how little thought DC officials have apparently put into this program. Consider: either every student in DC has the potential to go to college or they do not. Since DC is not Lake Woebegone, it stands to reason that either collegiate standards have devolved into a flaming pile of crap or not every student has the potential to go to college. Given the sheer amount of federal money in postsecondary education (not to mention state money besides), and seeing the corresponding increases in college enrollment as a result, it seems likely that collegiate standards are becoming more meaningless.
At any rate, this continued emphasis on going to college simply indicates that college is becoming worthless, in terms of educational value and in terms of labor market value. After all, if everyone can presumably clear the bar, how high can it really be?
By Simon Grey, on February 14th, 2012
No Child Left Behind requires all students to be proficient in reading and math by 2014. Obama’s action strips away that fundamental requirement for those approved for flexibility, provided they offer a viable plan instead. Under the deal, the states must show they will prepare children for college and careers, set new targets for improving achievement among all students, develop meaningful teacher and principal evaluation systems, reward the best performing schools and focus help on the ones doing the worst. [Emphasis added.]
The reason the college bubble exists is due in large part to the federal government’s actions, predicated on politicians’ assumptions that college is a universal good to be enjoyed by everyone. This is, of course, predicated on several fallacious assumptions, including the belief that a college education increases one’s knowledge, that a college education improves one’s intelligence, that a college education is either evidence of or brings improvement in one’s work ethic, and that there is a general correlative or causal link between a nation’s collective level of education and its economic output. As such, this continued emphasis on college will only lead to higher college costs, and have nothing to show for it.
By Simon Grey, on February 9th, 2012
Like this isn’t an attempt to split a non-existent hair: The segregation model predicts that as the society gets wealthier, the dollar cost of college will get higher. The signaling model would not necessarily predict that. In fact, it would predict that the market would try to find less expensive signals.
It’s like Kling has never heard of anyone signaling their status through conspicuous spending. As anyone who has ever observed human beings can readily attest to, there are plenty of people who spend money just to show that they have money to spend. Why shouldn’t this form of signaling extend to higher education?
Let us suppose that college serves as a way for young people to be sorted into their societal roles. Those who go to more prestigious (read: expensive and/or exclusive) colleges will likely come from families that are relatively wealthy.* They will also spend a lot on their education, relatively speaking.
Signaling theory would suggest the exact same thing, for there is a) a general correlation between the cost of college and its prestige and also b) a general correlation between family wealth and college choice. That is to say, the children of wealthier parents are more likely to buy social prestige at college, and will be charged a lot to do so. Now, given the limited number of prestigious colleges and universities, it should be the case that more prestigious universities command a higher price, and that students from higher-class families are able to pay them. Thus, signaling theory predicts an outcome extremely similar to segregation theory.
What Kling neglects, then, in attempting to differentiate segregation from signaling is that some signals do not become “cheaper” over time because some signals only work because they are expensive. What Kling must prove, then, is that the signaling theory of post-secondary education is flawed because college is not a cost-driven signal. Until then, his assertion regarding the predictive ability of signaling theory is incorrect, and his attempt to differentiate between signaling and segregation is pointless.
* There are some general exceptions to this, obviously, as even impoverished minorities can occasionally make it to Harvard. But, for the most part, the people who go to pricier colleges can generally pay for them.
By Simon Grey, on February 6th, 2012
I suppose that the original intent of financial aid—most particularly scholarships—was to attract good scholars who would be likely to become famous and thus increase the prestige of the university. By offering intelligent, driven individuals an opportunity to be educated for reduced rates or for free, universities could be assured that they would attract some number of desirable students, and increase their prestige. Note that increasing prestige has a tendency to turn into a self-reinforcing feedback loop, which means that increasingly prestigious universities attract increasingly desirable students, thus making the university more prestigious. As such, universities engage in a sort of arms race to increase their prestige, and thus offer scholarships to scholastically-minded students.
However, the role of financial aid has morphed in recent years to serve as a marketing tool, and functions similarly to a price-sensitivity indicator.* By this I mean that financial aid is to colleges as coupons are to grocery stores. The comparison is not perfect, of course, but the general comparison is the same in that both financial aid and coupons both serve to differentiate the price-sensitive from the price-insensitive.
What’s interesting is that both the original function and the modern function of financial aid are both the same: marketing. The original form, though, is less direct and has a longer time horizon. The latter is more price-driven. This suggests that the product has changed in some way. Assuming that a postsecondary education is a way to signal employ-ability, it should make sense that colleges emphasize affordability in their advertising because the signaling benefit has declined due to the increase in noise.
When only a few people graduate from college, there is likely an appreciable difference in the graduates of different institutions, hence the need for prestige. However, if a lot of people graduate from college, it will likely be difficult to discern a difference in the graduates of different institutions. The lesson in all this is that colleges that emphasize prestige in their marketing are colleges that will offer a clear signal of prestige while colleges that emphasize affordability are all likely interchangeable in terms of signal utility. Therefore, if you aren’t going to a prestigious university, the best course of action is to acquire a college education as cheaply as possible. And if you can’t a get a cheap college education, you are probably better off skipping college.
* I recall when I was being recruited by various colleges that many would state what percentage of students received financial aid. There were a large number of colleges that claimed that over three-quarters of their students received some sort of scholarship money.
By Simon Grey, on January 19th, 2012
Statistics are often thrown around in the media, showing that people with college degrees earn higher average salaries than people without them. But such statistics lump together apples and oranges — and lemons.
A decade after graduation, people whose degrees were in a hard field like engineering earned twice as much as people whose degrees were in the ultimate soft field, education. Nor is a degree from a prestigious institution a guarantee of a big pay-off, especially not for those who failed to specialize in subjects that would give them skills valued in the real world.
But that is not even half the story. In countries around the world, people with credentials but no marketable skills have been a major source of political turmoil, social polarization and ideologically driven violence, sometimes escalating into civil war.
People with degrees in soft subjects, which impart neither skills nor a realistic understanding of the world, have been the driving forces behind many extremist movements with disastrous consequences.
These include what a noted historian called the “well-educated but underemployed” Czech young men who promoted ethnic identity politics in the 19th century, which led ultimately to historic tragedies for both Czechs and Germans in 20th century Czechoslovakia. It was much the same story of soft-subject “educated” but unsuccessful young men who promoted pro-fascist and anti-Semitic movements in Romania in the 1930s.
The targets have been different in different countries but the basic story has been much the same. Those who cannot compete in the marketplace, despite their degrees, not only resent those who have succeeded where they have failed, but push demands for preferential treatment, in order to negate the “unfair” advantages that others have.
The government, by continually pushing college education, has sown the seeds for its own collapse. And this collapse will come at the hands of those who have fully committed themselves to the government’s own propaganda. How fitting.
By Simon Grey, on January 2nd, 2012
Tabarrok focuses on four policy areas in which changes could yield very positive results. He kicks off the short eBook by focusing first on patent reform, noting that many areas of patent coverage (software, technical processes e.g.) have low innovation costs and, as such, are not worthy of patent protection. In fact, his recommended patent reform is basically total abolition of all patents, save for medicine and a handful of other fields. This seems rather viable given that most inventions and innovations are generally cheap and likely inevitable. He also has a few short steps that would help as well, like requiring a functioning prototype and capping terms to seven or fourteen years depending on category.
He next turns his sights on to a prize system for innovation. His proposed policies are well-intentioned but naïve. He proposes that the government fund sizeable prizes (to the tune of millions or billions of dollars per prize) with specific goals—not methods—in mind. This should work in theory, but the fundamental problem with this method is that it fails to discern how the government would go about setting the most economic goals and prizes. This process could become highly politicized, as anything involving billions of federal dollars tends to. However, venture capitalists and innovation firms should take note of this recommendation and implement it.
Tabarrok closes his short book by looking briefly at education—both public and post-secondary. Regarding the former, he recommends reform. Why this is preferable to privatization is unstated, but perhaps that is beyond the scope of the book. One curious thing about is argument is how he claims that there is a correlation between high school graduation rates and GDP growth. While statistical analysis bears this out, it is worth noting that there is no proven causal relationship between the two. It could be that GDP growth causes increases in the rate of High School graduation as families become wealthier, and better able to secure leisure time for their children, thus reducing teenagers’ need to work.
It is worth pointing out, though, that public education in the US is crap, and is entirely too test-driven, thanks in large part to No Child Left Behind. Tabarrok doesn’t dwell much on this, which seems to be a bit of an oversight.Finally, Tabarrok turns his sights on to college education, noting that there is undoubtedly a college bubble and that there should thus be fewer college students. Government reform is recommended, since that is a source of the current malinvestment. Better education as to the benefits of a post-secondary education is also recommended, though this seems largely fruitless.
In all, this short book is a rather thought-provoking read. Readers are not likely to agree with all the answers, but the questions are worth mulling over. In fact, the questions the book asks make it worth the purchase. There is a lot to consider and debate, thanks to this book, and the answers Tabarrok provides are considerably less hackneyed than what has been heretofore seen. As such, the book is a recommended read.
By Simon Grey, on December 30th, 2011
In Academically Adrift, Arum and Roksa paint a chilling portrait of what the university curriculum has become. The central evidence that the authors deploy comes from the performance of 2,322 students on the Collegiate Learning Assessment, a standardized test administered to students in their first semester at university and again at the end of their second year: not a multiple-choice exam, but an ingenious exercise that requires students to read a set of documents on a fictional problem in business or politics and write a memo advising an official on how to respond to it. Data from the National Survey of Student Engagement, a self-assessment of student learning filled out by millions each year, and recent ethnographies of student life provide a rich background.
Their results are sobering. The Collegiate Learning Assessment reveals that some 45 percent of students in the sample had made effectively no progress in critical thinking, complex reasoning, and writing in their first two years. And a look at their academic experience helps to explain why. Students reported spending twelve hours a week, on average, studying—down from twenty-five hours per week in 1961 and twenty in 1981. Half the students in the sample had not taken a course that required more than twenty pages of writing in the previous semester, while a third had not even taken a course that required as much as forty pages a week of reading.
One of the subtle cultural shifts arising from the education bubble has been how people are inclined to view college. It used to be that people went to college for an education. Now people go to college in order to ensure having a good job later on.* In essence, the role of college has shifted from education to credentials.
As such, it should not be surprising that colleges dumb down both their admission requirements and their curriculum, for the goal is not education. Rather, the goal is giving students customers a piece of paper that says they are smart. This claim doesn’t have to reflect reality in any meaningful way because most students don’t bear the direct costs of their “education.” Therefore, students are considerably more willing to spend their parents’ money and their future income on degrees that become less and less valuable.
Basically, then, the dumbing down of academic standards is proof of the education bubble because the free and cheap money subsidizes marginal students who would otherwise have no business being in college. This subsidy is then seen in the dumbed-down curriculum, for students expect to have something to show for the time and money they’ve put into college, and it’s easier to satisfy customers by giving them a degree regardless of their actual accomplishments.
*One thing that always puzzles me is how parents think that four to six years of extended adolescence is better for their children’s future than having an actual full time job is. But that’s for another post.
By Simon Grey, on November 9th, 2011
Seriously, what’s so difficult about allowing student loans to be discharged in bankruptcy? Today, President Obama is effectively giving college students and their parents his middle finger. Whereas Jobs’ prank was harmless and symbolic, the President’s plan to bail out student loans will derail the entrepreneurial dreams and financial security of countless young people. [Ed. - this claim is utter bulls**t.Bailing out student loans will increase their financial security because they will no longer be slaves to the banks. And, with less debt, they can actually become entrepreneurs.]
By executive order, the President’s unconstitutional “We Can’t Wait – Pay As You Earn” plan modifies the existing Income-Based Repayment Plan so that, effective in 2012, graduates may cap their loan payments at 10percent instead of 15 percent of their discretionary income. Anything remaining after 25 years (formerly 20 years) becomes fundamentally the taxpayers’ responsibility. And, if a student wants to become a public servant (i.e. work for George Soros) his loan will be forgiven after just 10 years.
Obviously, Obama is playing for political points with this plan, presumably to mollify the OWSers, so I understand outrage for that reason. But what I don’t understand is how anyone thinks that student loans weren’t already the taxpayers’ responsibility. The government guaranteed student loans a long time ago, which is one of the reasons there’s a college bubble—private lenders face virtually no risk on the loans. In fact, the government guarantee of repayment is why default was taken off the table as an option: the government didn’t want taxpayers to take it in the shorts.
Neo-con bomb-lobbing aside, Obama’s plan is pretty terrible. It shouldn’t wreck the economy(at least no more than seeding a college bubble would), and it’s better than a jubilee for the loans, but there is still a much better solution available: the federal government should stop guaranteeing student loans and allow them to be discharged in bankruptcy. This way, college student wannabes won’t be as inclined to pursue worthless degrees and banks won’t be as inclined to fund the pursuit of worthless degrees. You don’t need bailouts, you don’t need special debt laws, all you need is the ability to discharge student debt during bankruptcy. Problem solved.
By Simon Grey, on November 8th, 2011
If you weren’t sure about the existence of a college bubble, here’s proof:
When the number of psychology majors increase by 135% over25 years, you can be reasonably sure that there’s a college bubble because a) psychology is not a science, it’s a form of bovine fecal matter and b) economies don’t need psychologists in order to grow and thrive. In essence, more than doubling the number of psychologists in the economy is not going to cause massive growth.
So why are there so many psychology majors? Simple: The ease of obtaining student loans makes it appear that there is more demand for psychologists than actually exists. And why do current students believe there is more demand for psychologists than actually exists? Again, simple: the government has incentivized the extension of student loans by guaranteeing repayment thereof. When a student defaults, the government pays the lender then goes to collect the remaining debt. Sometimes the government uses the banks’ collections agencies to collect the loan, which then makes defaulting on student debt a very attractive proposition for the bank that originated the loan.
So how do we know that the increase in psych majors proves there’s a college bubble? Easy: the government’s involved, and is actively encouraging the pursuit of a college education. Plus, does anyone think that so many would pursue a psych degree if they couldn’t finance it so easily?
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