Mike Konczal has an interesting post that is popping up all over the place (here, here, and here, and probably somewhere else by now) analyzing a throwaway human interest piece on a woman named Karen King from the Wall Street Journal:
Her biggest chunk of debt, $26,000, stems from student loans to pay for her two-year associate’s degree from a community college — loans now in the hands of collectors. The remaining $10,000 or so includes old credit-card balances, debt to a store that rents furniture, utility bills and back taxes. Another obligation is $400 a month she contributes to the rent on her grandfather’s two-bedroom apartment, where her mother, uncle and sister also live.
The Journal article would have us believe that Karen and others of her generation are wild spenders who never learned to appreciate the value of a dollar because of easy credit. In fact, the Journal furnishes a handy graph of mortgage delinquencies, even though Karen does not have one:
![[Chart]](http://s.wsj.net/public/resources/images/P1-AR974_CREDIT_NS_20091009204020.gif)
Karen’s problem is not that she bought into the American Dream that everyone should have a house with a great room and a Viking range. It is that she believed the American Dream that education is priceless.
American higher education is unique. Other nations have their flagship schools – Oxford and Cambridge, Normale Sup and Polytechnique, Tokyo University – where the ruling class is incubated, but for the most part, college is vocational school. You live at home and take mass transit to a few dingy buildings somewhere in your hometown. The school has nominal fees, and the undergraduate curriculum is fairly specialized for the expected profession of its graduates. When you finish, you go to that job, unless you are in a European social welfare state, in which case you finish, go on government assistance, and then go to your job when enough people have retired from it to open slots.
Not in the US. In the US, college is THE GREATEST FOUR YEARS OF YOUR LIFE. You are not there to acquire a specific set of skills; you are there for the Experience. It doesn’t matter if you study Sanskrit poetry or Basque political systems or Maori painting; you can do anything you want when you graduate, and the important thing is to do what you like. The roommates, the football team, the hitherto unrecognized aptitude to bounce a quarter into a red Solo cup – this is college. This is what old men fly across country to celebrate. A German would as soon attend the reunion of his driver’s ed class.
How can you put a price on THE GREATEST FOUR YEARS OF YOUR LIFE? It’s disgusting; would you condemn yourself or your child to sadness over money? Ask St. Lawrence University, which goes for the hard sell:
[Y]ou get what you pay for. Quality costs money. Things cost money. Your investment in your children’s education is one of the most critical of your life. And you have only one or two chances per kid to get it right. If that expensive car doesn’t work out, you can trade it in and try again. You can’t do that with a college education. So why scrimp? It’s often said, top-notch higher education is costly, but consider the alternative. Do we want our world to be led by poorly educated people?…Following is cheap; leading requires an investment.
De Beers couldn’t have said it better. And like any other merchant who insists his article is beyond rubies but proceeds to charge, you can be sure the college comes up with a high price for its incomparable product:
The cost of a college education has skyrocketed. There are a few reasons for the upward pressure:
- The addressable market has increased dramatically. Although births are cyclical – the Baby Boom, the low-birth period of the mid-1970s, the echo boom of the 80s – the percentage of the population that considers college has had secular growth. What might have been an unaffordable luxury became, thanks to a series of government programs, a no-money-down investment. Schools also wisely began shopping abroad for students who are shut out of their nations’ meritocratic, elite-focused admissions systems and would like to go to college.
- It is increasingly difficult to build new schools. Since it is assumed that a new school must have hundreds of acres of land and beautiful buildings, the startup costs have increased with the real estate bubble in areas of population growth. In addition, expansion of the university system has been a low priority for state legislatures. The growth in social welfare expectations (and, between state employee pension/payroll and special education and Medicaid mandates, required expenditures) has strained state resources.
- The governance system of universities makes the incest of Fortune 500 boards look like a model of probity. Professors rarely consider themselves employees, and once they have tenure behave like NBA players in a non-contract year. Administrators cater to alumni – in some form, they pay the bills through direct donations and indirect pressure on legislatures – who by definition are people who finished consuming the educational product and somehow managed to afford it when they were there. There is precious little energy spent on delivering a better product in the classroom, so cost inflation is rampant.
The enormous escalation in college costs has been matched by the escalation in student loans. In part, this stems from the simple reason that the government subsidizes banks who issue student loans, and there is more support for giving grants than loans. And even if the grant amounts were increased, schools would simply capture it by raising tuition to encompass (grant money + maximum borrowing capacity).
It also stems from the conventional wisdom that “education=good investment”, which is the cousin of “real estate=good investment.” As with real estate, it is too subtle to say that “education is often a good investment,” or “education that increases your marketable skills is a good investment,” so we leave out the qualifiers. And Karen King and the rest of folks who by circumstances – poverty, death of a parent – are shut out of the four year-college market grasp at community colleges to try to “rise above” their situation. For that, they are saddled with notional value of debt that is greater than their household income.
Taunter’s College Reform Ideas
- Regulate co-pays. Doctors who accept Medicare are forbidden from requiring any other payment from patients. CMS does this because if it did not, doctors would simply price to (Medicare+indifference point of sick people), and CMS does not want its subsidy to the elderly to be captured entirely by the medical establishment. Bring the same approach to college. If the government provides a grant or a loan guarantee, make it contingent upon tuition being no more than a certain percentage greater than the grant or guarantee [eg if the grant is $10,000/(x credits), cap total tuition at $12,000/(x credits)]. Some schools would opt out of receiving grants at all, and that might frustrate people who wanted to use their grant money to attend Ivy League schools, but it would put downward pressure on the rest of the system.
- Encourage commuter education. We have plenty of available real estate in lousy neighborhoods. We have plenty of underskilled, underemployed high school graduates in lousy neighborhoods. This should be charter school heaven. Acquire the land and offer a capitated fee to any school that wants to open up in poor areas, with two conditions: the school cannot charge any fee to the students; the school only gets paid for students who pass an exam at the end of the term – an exam designed and administered by the government, not the school. That encourages the school to teach to the test, which is better than teaching to nothing, and keeps the employees out of government labor restrictions.
- End tenure. I know – it’s an employment contract, it should be sacred. But the government regulates all sorts of employment contracts. It regulates the length of non-compete arrangements, and thanks to Olivia de Havilland, the length of personal service contracts; in both cases, the presumed beneficiary of the restriction is the employee. Might as well turn it around and require professors to continue to demonstrate that their classroom performance warrants their employment.
Some of the problems of today’s recent graduates are simply functions of the economy. Jobs are generally more scarce, and people are less likely to leave jobs, so new entrants are especially challenged. Personal credit markets are exceptionally tight, which particularly hits people with little to no documented income history. Employers are increasingly using credit checks to screen applicants, which is ludicrous in most cases and should be banned unless the company has a good faith reason to believe fiscal probity is a necessary quality (Brinks courier OK, Greyhound driver not OK). But we should be doing what we can to make the ride easier and to ensure that when the economy picks back up, we don’t keep on sticking children with the bill.
And as for the Experience…by all means, have it. Life is short and not guaranteed. If anything, college is wasted on the young; no point corralling a mind at twenty-two. Just understand the magic, and be ware of the guy ringing the register while you chase your dreams.
UPDATE
Mike3550 has an interesting comment below, and one of its strands is a defense of tenure in the name of academic freedom. Tenure is not my major grievance, but having heard this argument often, I want to point out that the logic is suspect.
First of all, I don’t know what sort of political pressure for conformity would possibly be brought to bear in the absence of tenure. If a non-tenured professor came up with evidence that the earth is really 6,000 years old, or found dinosaur bones in the pre-Cambrian, or proved that Aborigines in the Kimberley had a viable space program before the last ice age, he would be in great demand, not ostracized for overturning accepted wisdom about the history of the world. In recent memory scientists have been cheered for claiming cold fusion (which turned to criticism only because it does not, in fact, work) and, for good measure, dressing up old racism as new data. What, exactly, would be so radical as to disqualify?
Moreover, even if there were a series of topics, thoughts, or beliefs that are so controversial that a university would feel compelled to fire a professor for espousing them, tenure is a pretty dumb solution. Before becoming tenured, an academic is non-tenured. During his non-tenured phase, he is reviewed for tenure – generally by the faculty among whom he seeks tenure, the very cradle of the orthodoxy he is expected to challenge. If these faculty members are intolerant of dissent, why would they award tenure to a dissenter?
To believe that tenure is important you need to believe that an academic will mask his revolutionary ideas when he is young and most likely to have them, and only reveal them when he is old, secure, and unlikely to have them. That’s bizarre.
Take a parallel from political history. Until the time of Lyndon Johnson, the Senate committees had complete discretion in matters under their jurisdiction. Committee chairmen were selected by absolute seniority, and had free rein over the conduct of their committees. Since the South did not have contested general elections and Southerners therefore had the most seniority, Southerners were the chairmen of the committees.
There were northern senators, and they had to be seated somewhere. So the southerners would park them on unimportant committees and observe them. If the northerner were sufficiently inoffensive, eventually he would be allowed onto a meaningful committee. Once on, he theoretically could go rogue and agitate to do things differently – but who does that after twenty years of sucking up?
If there were no tenure, there would be no tenure review. There would be no need to please other faculty members at any point in time; faculty would be directly beholden to the administration. This would encourage, not discourage dissent. That professors object is not driven from some desire to be outlandish, it is for the simple reason that they would like to be able to go into retirement with a paycheck as soon as possible. And there is nothing less outlandish.
The funny part is that it WAS the Best Years of my Life in some respects. I had a ball.
You are of course correct. Much of the college experience has nothing to do with day to day living. Nevertheless, I think I would be a poorer person if I had not taken classes in English Literature, Philosophy, Computer Sciences, etc… None of these classes really help me in my day to day employment, but I’m glad I took them anyway.
I would add a 4th point to your previous 3.
Expand/extend/offer a 2 tiered high school curriculum. 1 tier for college bound; the other which focuses on trade schools and apprentice programs. An electrician does not need to learn about Goethe for heaven’s sake.
I think that you hit on several important points, but I think that I disagree with you in several respects.
First, there is one big item here that you do not address at all: universities are thinking of themselves less as places that educate students and more as research centers. There are many reasons for this. Teaching is barely considered for tenure review. Universities are hoping to capture the lucrative patent money from successful inventions. Donors like to have their names on buildings rather than paying for students to be able to walk into and use those buildings. But, teaching needs to be made a priority at ALL U.S. institutions.
Second, institutions are ending tenure — they are just doing it through the back door by hiring adjuncts. Although many adjuncts are wonderful teachers, their structural position makes it very difficult to be a good teacher. When I was in Michigan, I personally knew adjuncts that would teach four classes, at four different institutions in order to make ends meet. No office hours. No study sessions. Papers were not returned promptly. And they were paid terribly. Looking at a field without tenure is not going to justify the five to eight years required for graduate education.
I also believe that tenure is a system that protects academic freedom. It is not the only system that could do so, but if we are not going to let the flat-earthers of the world dictate voices, then faculty need to have the ability to challenge existing powers at both their institutions and policy-makers.
Lastly, community colleges are in a deplorable state. These institutions largely serve low-income and marginalized populations by design (e.g., those who can’t take off the opportunity costs of four years of labor while incurring debt). They need to have regular and guaranteed sources of funding because they, more than any other institution, can help reduce educational disparities in this country. For that reason, I really like your policy prescription #2 to transform existing real estate into educational training.
My response to your tenure point is in the article, but I am glad to see we agree on community college. Only about a twentieth of the population is college-aged at any point in time, and the gains to society from educating this cohort take time to manifest themselves. An active community college program, especially one that emphasizes continuing education, addresses the entire working population. Instead of sending extra checks to the elderly, why aren’t we bombing Detroit and other pockets of unemployment with teachers to try to remedy decades of skill deficiencies?
Taunter, thank you for the thoughtful reply. I think that I agree with you more than I don’t. In interest of full disclosure, I am currently seeking tenure-track jobs and it would be great, someday, to have a tenure-track position. Having said that, I have also been in the awkward situation of being with colleagues and making the argument that long-term contracts and true faculty governance can have the same effects of tenure while allowing for the possibility of removing dead-weight.
However, being an academic at-will employee just isn’t going to work if we value research. Most research programs take 3-4 years to set up. If we set up a system where people need to annually prove their “value” (I know, this is not what you are suggesting, but I fear that it is what some university administrators will turn to), then we are going to have the educational and research equivalent of the stock market: splashy, but interesting work that can be done quickly at the expense of long term investment in basic and fundamental research.
On the issue of academic freedom, I want to present you with a hypothetical that gets to the academic freedom piece. Let’s suppose that a researcher finds that drinking non-diet soda is really bad for you (n.b., it is). Now, let’s further assume that this is a large university with a top-25 football team that has a very lucrative contract with Giant Soda Company (I won’t wade into the taste wars). Dr. Soda Is Bad For You publishes her study and Giant Soda Company finds this highly objectionable. Would Giant Soda Company put pressure on Large University to not renew that professor’s annual contract? Now, the university is faced with the proposition of losing Dr. Soda Is Bad For You or a multi-million dollar contract. I think that this presents a conflict that shows why there needs to be some mechanism to protect academic freedom; that leaves the question of whether tenure is the best system.
One additional reason that the cost of education has continued to increase: Baumol’s law, which Robert Shiller describes as, “The costs of those goods or services whose production is amenable to technological progress will tend to decline over time relative to the costs of goods or services that are by their nature not so amenable to technological progress.”
Like a string quartet, the cost of the service doesn’t (until recently) lend itself to technological improvement, so the price of the service tracks wages closer than it does inflation. As a non-scalable, human service (until recently) it increases a lot faster than things like furniture and DVD players. And in the case of education, it tracks wages at the high end.
However, as you point out, it’s only the last few years where we’ve seen economies of scale achieved through technology, mostly due to video quality and culture playing a bit of catchup. I’m too lazy to research the hard data, but I’d bet we’re seeing entry-level prices in education for things like accounting degrees drop significantly.
True, but I would be very surprised to see individual faculty compensation show the same sort of cost inflation. Krugman has written that when he finished his PhD program, there was a modest but not overwhelming pay difference between academia and Wall Street. It’s safe to say the next Krugman would pick East Setauket over Cambridge.
The waste in education comes from the outrageously inefficient use of the faculty – all the guys on payroll who don’t actually teach. So while the cost/professor has not increased outrageously, the cost/unit taught has.
Furthermore, schools, like the defense industry, have a bizarrely cavalier approach to expense. Let’s go back to St. Lawrence, because their website is so bold:
That is beyond stupid. Exxon and Goldman Sachs and Pfizer pay for their computers. They pay a fortune, and they are not limited to back-office processing. They are used for subsurface mapping to make drilling more efficient, modelling to make better and faster investment decisions, and data analysis to adjust formulations. The money to buy the computers comes from the productivity improvement delivered by the computers.
If St. Lawrence doesn’t think that its computers make it more productive, it shouldn’t buy them. A student only cares about whether his professor has a computer to the extent that the professor’s computer makes him a better teacher. If the computer does, then St. Lawrence has saved the money of poaching a better professor from somewhere else. But don’t buy the computer because the computer:student ratio doesn’t seem attractive. Does anyone think that a competent CTO shops this way?