The higher education bubble
Yesterday there was a Bloomberg article that explained how badly students understand their student debt. It occurred to me reading this, and not for the first time, that students are really the perfect choice of victim for the educational financing machine: they are typically naive about money, and a combination of incredibly hopeful and incredibly thoughtless about their futures – if they think about the future at all, they project themselves to be as successful as some chosen role model, against all odds. I was lucky enough to go to a state school which my parents could afford and were willing to pay for, graduating in 1994, but looking back I would have signed away on whatever dotted lines if I’d been asked.
Students don’t think to shop around for a better deal, or even bother to understand the deal they’re in. What’s the incentive for good deals in these circumstances?
More generally, the existence and price of college itself is a perfect trap for students. It’s been a growing assumption in the past few decades that one needs a college education to get a good job, and certainly in a poor job market like the one right now that is certainly true. And yet, the student debt load is increasing faster than the opportunities higher education provides.
We are just now finally seeing a “market reaction” to the outrageous costs and relatively meager returns on law school education. For example see this recent New York Times article, which I found through Naked Capitalism (and which also gave me the title for this post).
My mother and I were recently talking about Occupy Wall Street protesters and student debt. She’s been a professor in computer science for more than 40 years, and explained how she sees it:
Academia expands for students and gets subsidized by all the loans to them, without regard to what the society actually can accommodate.
So not only are students fed the line that they have to go to college, no matter the cost, and whatever the resulting debt, but they then go to college and end up with majors and/or knowledge that is actually not needed or useful to them or anybody else when they graduate.
In a given individual situation, you can always sort of blame the choice someone makes- why did you major in that at that over-priced college with that outrageous private loan? Did you really think you’d be a hot item on the job market?
But when you step back and look at this system, it’s maddening. We are essentially forcing, as a rite of passage to adulthood, each generation of our young people to go through a process which leaves them with ever more questionable skills and saddles them with an ever-increasing debt burden. When you add to this that fewer and fewer jobs are willing to train people while paying them, the advantage that a wealthy young person gets from having no debt and being able to intern for free means this system is also increasing inequality.
I understand that professors don’t like to think of their departments as businesses, and I am not someone who wants to corporatize academics in the sense of wanting departments to prove their business models by producing revenue streams or winning grants just to stay alive. But at the same time we’ve got to do a better job with this overall and help give our younger people a better chance.
Update: apropos article from Bloomberg just published here.