More on the Higher-Ed Bubble

Stuart Schneiderman cites a report that aggregate student loan debt has now surpassed $840 billion..and is still climbing. He suggests that these debts will have a major impact on the choice of marital partners, via a sort of reverse-dowry effect, as well as creating a long-term overhang on the housing market.

So what are students getting in exchange for debts that they may be paying off for a significant portion of their entire lives?–and what are we as a society getting in exchange for this vast expenditure of resources?

Certainly it is possible to get a good education at many American colleges–“good” in the sense both of an economic return that will justify the student loan debt and from the standpoint of individual intellectual development and preparation for citizenship in a democracy. But in what fraction of cases does this positive result actually occur? The current Businessweek reviews the book Higher Education? by Andrew Hacker and Claudia Dreifus. Excerpt:

After three decades of tuition increases exceeding the overall rate of inflation, a ritzy college degree comes with a $250,000 bill. Uninspired—and usually underpaid—part-time instructors do 70 percent of the teaching these days, according to Hacker and Dreifus. At the University of Pennsylvania’s Wharton School, often described as the country’s top undergraduate business program, freshmen in Management 100 are taught, in part, by undergraduates who took the course just a year or two earlier. “Few sophomores,” the authors write, “have the fund of information, techniques for coping with questions, or the skills for conducting discussions that college-level teaching requires.” Or that Penn’s $53,000 annual tuition would suggest.

At many schools, liberal arts students are cast adrift in a curricular sea of the overly vocational (at Ohio State, Turfgrass majors can specialize in either golf course or sports turf management) and the unnecessarily narrow. The authors raise an eyebrow over Stanford’s 229 undergraduate history courses, maintaining that many of these highly specialized classes simply “make life easier for the professor who often just has to use notes from his last article or the galleys of her next book.”

Some data on student loans, including a comparison to the housing bubble, here. (via Instapundit)

23 thoughts on “More on the Higher-Ed Bubble”

  1. In way to many instances the institutions have become like all large businesses, a growth industry, too concerned with endowments, federal monies, and staff pay than the young adults education. As an earlier article on this site mentioned, is a one person show that is free on the internet to learn a number of courses in math and finance. My son used it last year and got a lot more from it than his teacher. However, if he went to take a test to graduate and passed it with flying colors and didn’t attend a bricks and mortar institution with state accredidation , the test result would be for naught. It is way past time to put the brakes on this waste of resources. We are at a point in the country’s financial condition that means testing must be demanded.

  2. Great stuff, David. Thanks for keeping a light on the Higher-Ed bubble.

    RE the debt aspect of the bubble: My Dad always said that, in general, it is a bad idea to adopt debt to buy daily treacles. Swipe your credit card at a five and dime for a silly Snickers bar, and 15 months down the road you’re still paying for the thing. Worse, the $0.50 gew-gaw has gone and cost you ’round two bucks-eighty.

    But, Dad also allowed, adopting debt to buy durable goods, like a new car, or a new fridge, is OK. Chances are, you can hope to pay-off the principal and the interest with a reasonable expectation of getting a few more good years out of the thing.

    Now, if we apply this father’s wisdom to the consumer good we call “higher education,” it raises some interesting questions. Like, is a college degree a “durable good?” That is, does it continue to function for its owner for many years after graduation, or does it degrade quickly, leaving its owner ill-prepared and inflexible in challenging economic times?

    Many would simply answer this question with a, “Some degrees are durable, and some aren’t.” OK. So, not all “education” is equal…which begs, then,”Which degrees are durable? And how could we find out?” It’s not easy. The success rates of, say, the UC system’s indebted graduates, is not track-able. Probably for reasons of privacy, not the lenders, nor the school admin’s, nor the department’s dissertation advisors, and oftentimes, not even the student’s parents, bother to account for the indebteds’ financial fortunes after graduation. Certainly, the student ‘councilor” who convinced the eager applicant to take on the debt in the first place doesn’t keep tabs. It’s not her problem!

    To drive home my point, take two students, both borrowed over $60,000 to finance an “higher-ed” degre, and both graduated in 2000. But one majored in advanced chemistry, he currently declares an annual income of ’round $210,000, and is fully employed with two dependents. This graduate makes regular interest and principal payments, and only owes $5K P on his student loans. And the other student majored in Transgender studies and Foreign Relations, only makes $35,000 each year ( teaching at his alma mater), and he has no dependents. Over the past ten years, this student has only paid $500 to principal.

    Which one has a “durable” degree? Who has “succeeded?” Which has left the campus to test his skills and credentials? Which one hasn’t?

    I’ll end this here , David, to keep it short. It’s not hard to see that this issue is a sore spot for the progressives’ academic militias, not least because it attempts to measure the value of academe’s paper products against real, long-term dollar-earnings off campus. If we can just get academe’s professorial ranks to admit that some of their products may be more “durable” than others outside of the Uni’s high walls, it’ll be a big step in the right direction.

  3. I certainly would not argue that higher education should be judged only in terms of the income of the graduates: true liberal education really does have value measurable in non-dollar terms. But (a)the *economic* value of higher education should in general be high enough to pay back any debts incurred without excessive pain, and (b)it is highly questionable how many people are actually receiving anything that could reasonably be called a true liberal arts education.

  4. I previously posted about the ridiculous “education” my daughter was receiving a a well respected state university. The response here was to threaten to ban me. Cooler head have prevailed and the higher education bubble is now a serious topic. My opinion still remains that people have to learn how to do “things” and education will follow as the desire to learn develops. As the father of five children, I have seen the whole process develop. My oldest son is 45. My youngest daughter is 20. She seems to find pretty good jobs and that gives me hope she has figured out the rules of self preservation.

    This is a situation in the country we have not seen in a very long time.

  5. A distinction needs to be made between job training and a liberal education. Because a liberal education was the path to a job in one of the professions, it was seen as the path to economic success. But a liberal education was and remains a luxury expense that one hopes benefits the young by imparting some of the wisdom gained through sore experience by those who went before. It provides no guarantee of economic result beyond possibly opening some doors. The elite in charge of liberal education has departed from its moorings to enter the world of commerce and prosperity as Mr Hamilton points out. They too are human. The result is that an important institution for preserving our cultural values has been lost. And it’s not the only one.

  6. Mrs. Davis brings up the distinction between job training and a liberal education, which I think is important here.

    The internet has made getting a liberal education accessible to all. You can go to discussion boards on literature or philosophy and learn way more than you would ever be able to learn in a typical undergraduate course. So, while knowing the fundamentals of philosophical thought is absolutely a benefit to a person, it is not the case that this knowledge can only be obtained through a BA degree. Same with all the liberal arts.

    So, rather than getting a BA in a liberal art to be “educated,” one ought to get the accounting or engineering degree and develop the liberal arts side on ones own. I mean, it’s also important to be physically fit in this life and yet how many degree programs require 6 hours of physical education?

    Job training should be the focus of a college degree. This includes basic domain knowledge as well as the critical and creative thinking skills needed for success in any field.

    The higher ed bubble is there because people don’t see this distinction–that the “liberal arts” degrees are luxury expenses and should be treated as such. They honestly believe a BA in psychology is a good investment for those without the intention of getting advanced training in clinical or research methods.

    If people would go to college with a bit more seriousness of purpose and thought put into “how can I support my family with this degree” rather than “how can I express myself with this degree” perhaps the higher ed bubble wouldn’t be a problem.

  7. Mrs. Davis and Mr. Hallan both make important statements on the luxury of a liberal education. Hr. Hallan points out that a lot of students don’t attend college with enough serious consideration. In my estimation,this is one of keys to solving the higheer education bubble. Parents have bought into the constant drumbeat from academia and the media that without a degree their child is consigned to a world of hard toil with no upward mobility. What they fail to think critically about is the return on investment they are entering into. Most children, I would venture to say 90%, are clueless the direction they want their lives to lead, but are expected to be making decisions in the 11th. grade about the future, when the majority of these children have been sheltered from the economic realities in this world.

  8. A friend who teaches microbiology in a small university sees this attitude of entitlement in students taking his class. One would think that such students would be more serious about learning than those in women’s studies or other frivolous fields. Unfortunately, he is concerned that it may cost him tenure as students who don’t get “A”s are quick to write poor evaluations.

    I got a bad evaluation one time from a medical student who I had criticized rather sharply at mid-year because he was not doing the work and was sliding along. This was a clinical course and objective measurement is not easy at that stage. My response was to warn the department to keep a close eye on him during the third year. Fortunately, tenure was not an issue for me.

  9. Another aspect of the college degree conundrum is that many employers require college degrees for positions that have no need for a 4 year degree. A friend had over 3 years in college before dropping out to have a child. After staying at home for a year, she started working as a bank teller, took classes at the bank for buying and selling securities, and then was made trust officer handling major account transactions. After 10 years at this position, her husband was transferred to another state. After setting up her new home, she applied at the local university to be an administrative assistent in the Financial Development Office. The interviewer told her that her 10 plus years of accounting and trust experience were more than any other candidate had, and fit the duties of the position to a “T”, but the successful candidate needed a college degree. On the job training is such a major part of all jobs. It seems that employers need to step back and consider how they can help young people, and older ones re-entering the job market, obtain jobs with in-house education or testing. Opening up more jobs that do not require college diplomas will help curb the unnecessary expenditures for university educations.

  10. Parents have bought into the constant drumbeat from academia and the media that without a degree their child is consigned to a world of hard toil with no upward mobility.

    I might have agreed 5 years ago, but not today. At $100 K for public, $250K private, parents are re-evaluating the economic value of tertiary education when it includes reducing the child’s earning capacity by 10% (yeah, that’s 4 out of 40 years that could have been 44, 10% or nearly so)and the four most valuable years at that, and when most jobs are, unlike illegal immigrants, subject to deportation. So how hard is the toil of an electrician, auto mechanic, or welder. Sure it’s dirty work, but it isn’t going overseas.

    I’ve long suspected this is part of the reason for the decline in the proportion of males attending college. For the boy at the margin, why wast the time? The economic payoff isn’t there and if he’s at the margin, I suspect the allure of a liberal education is evanescent. But girls, by and large, don’t engage in these mechanical crafts.

    I would also observe that while many aspects of a liberal education can be obtained on-line, there is a moral aspect that will ultimately be difficult to obtain through that medium. Answers to, or at least consideration of, questions such as why are we on earth, what is our duty to others, how deep is our commitment to our values, what constitutes a good life, are not as easily inspired electronically as by sitting on a log with Mark Hopkins. But, alas, he isn’t seen often around Hanover any more, either.

  11. The struggles at Hanover about the role of Dartmouth as a “research university” versus excellence in undergraduate teaching are a microcosm of the problem.

    Harry Truman, in another age, became an educated man through his autodidact activities. I have a nephew who has completed a college degree, then entered an apprenticeship program in elevator repair and installation. This was a four year apprenticeship conducted by the union. He also completed a four year enlistment in the Marine Corps where he did well enough to have an appointment to Annapolis mentioned. I haven’t asked him to rank each of those four year phases of his life in the order of value. I wonder what he would say,

    His sister is the niece who declined medical school to avoid debt. She went to nursing school instead, already possessing a BS in molecular biology and a masters degree. One from U of I and the other from Loyola. She also has a successful rock band playing in Chicago called “The 1900s.” Her nursing schedule allows more freedom for tours which are becoming more frequent. These kids are getting it even if their elders don’t seem to.

  12. My son, who was an econ and math major at a college on the other side of town, took a course last year taught by the school’s new president, on the economics of higher education.

    While he was home for a couple of weeks between graduation and his new job we were talking about just that subject. He told me of the President’s insistence that tuition paid only a part of the cost of undergraduate education.

    He also told me of the President’s demonstration that although the cost of higher education had far outstripped the cpi, it had tracked the incomes of its natural customers the top ten percent of the income distribution.

    I replied with my complaint that University accounting was opaque. We argued about that for a while.

    I realized the next day that I had missed the real problem. The real problem is that the President was right. College education in this country is expensive, insanely expensive.

    The universities have become bloated and wasteful. At a time when their educational product is more necessary than ever, they have become like the carnivorous plants in the little shop of horrors, only capable of saying “feed me”.

    In this sort of situation, Henry VIII had an efficacious policy response. Seize the monasteries, turn out their inhabitants and sell their assets.

    I am a bit chary of recommending the same response to our current plight, but one thing I think we can do is to stop feeding the monster. Stop promiscuous lending to all and sundry for college tuitions. Don’t pass out grant money like candy pops.

  13. It’s a shame that folks think getting a college degree is somehow a virtue–something that is always a positive thing. Our President talks about increasing the college graduation rate without a care about what sorts of degrees are being granted. Not all degrees have value beyond personal fulfillment. I won’t complain that someone wants to get a French Literature degree in the same way that I don’t complain if someone wants to watch the Super Bowl. But people don’t get $40K in debt watching the Super Bowl. That’s the problem–parents and college admissions people and our own President are telling young people that they need a degree to be valuable. And that’s such a lie. It saddens me.

    Yes, sometimes a degree is required and it can be pragmatic to get one for all sorts of reasons. But to go into debt for it? To not actually engage the course content and learn from it? To think a history degree is a good idea just because you “love the middle ages” or something?

    I wonder what happens to a society when it values the inane so highly? Can it survive? Most college courses are inane either because the course has no content or because the students are too ill prepared or motivated to take advantage of the content offered. Back in the 40’s, when people didn’t have to go to college, what inanity was highly valued? Is this a new thing that will lead us into dangerous waters, or has every era had something like this that they valued for no good reason? I don’t know. I try to stay positive, but sometimes it’s a struggle.

  14. “I previously posted about the ridiculous “education” my daughter was receiving a a well respected state university. The response here was to threaten to ban me”

    I hope that’s a joke. Why ban?

    “The elite in charge of liberal education has departed from its moorings to enter the world of commerce and prosperity as Mr Hamilton points out”

    Whatever else their flaws, and this may be one, the change in a liberal arts education from, well, the liberal arts to studies programs (to be kind in designating them) is not a change towards entering the world of commerce and prosperity. Students of the liberal arts no longer are liberals, instead they are totalitarians who follow one idiocy after another (which here will not be named, but which are frequently cited at David Thompson’s blog).

  15. I misspoke. The threat was to delete the comment. It’s in the archives. I didn’t mean to make a big deal of it but I think this is one of the two or three most serious problems we have today. My daughter, whose curriculum I was complaining about, is now back in junior college getting basic courses out of the way. Some of her instruction at U of A was simply not true. Examples:

    She was taught that the “silent majority” of Nixon were white people opposed to the Civil Rights Act of 1964. She was taught that the frontier settlers survived by copying the Indians. This was in a course on US History since 1877. The “frontier” at that time was the Great Plains and the plains Indians were hunter-gatherer societies who knew no agriculture. There are a number of other examples. Her only textbook in that course was a book on “Whiteness Studies.” The rest were teacher handouts which I read.

    It was a total waste of $25,000 plus expenses. She also did not like the social life at U of A. Lots of drunkenness. Lots of “Walks of shame.” She is a very pretty, social girl but that was too much.

  16. the change in a liberal arts education from, well, the liberal arts to studies programs (to be kind in designating them) is not a change towards entering the world of commerce and prosperity.

    I apologize for being unclear. My point was that the people in charge of liberal arts colleges have abandoned their mission of providing a liberal education to young people for building endowments, building buildings, and building faculty salaries.

  17. Much of the problem here is due to people in the business world—managers, executives, and HR people—who focus excessively on educational credentials rather than doing a better job of actually thinking through the requirements for specific jobs and improving their own interviewing skills. Every job gets such a flood of resumes, though, that it’s always tempting to layer on degree requirements, experience requirements, etc so that a relatively low-level employee or a keyword-seeking system can screen out as many of them as possible. The decline in the reliable value of a high-school degree also plays a part: note the problems being encountered by Marlin Steel Wire. Should people really be graduating from high school without knowing what a *radius* is?

    Some related thoughts at my post on the hunt for the five-pound butterfly.

  18. I was going to link this article:

    September 3, 2010
    How Debt Can Destroy a Budding Relationship

    Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.

    Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn’t know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn’t focus on the bottom line, she said, because it was so profoundly depressing.

    But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”

  19. Debt didn’t destroy that relationship.

    Her asshole fiancé did.

    The debt did her a favor: it revealed the sort of person he really was, and how much he really loved her.

    She’s lucky this came out before the marriage.

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