November 3 2011
Has college been oversold?
Educated people have higher wages and lower unemployment rates than the less educated so why are college students at Occupy Wall Street protests around the country demanding forgiveness for crushing student debt? The sluggish economy is tough on everyone but the students are also learning a hard lesson, going to college is not enough. You also have to study the right subjects. And American students are not studying the fields with the greatest economic potential.
Over the past 25 years the total number of students in college has increased by about 50 percent. But the number of students graduating with degrees in science, technology, engineering and math (the so-called STEM fields) has remained more or less constant. Moreover, many of today’s STEM graduates are foreign born and are taking their knowledge and skills back to their native countries.
For much of the history of civilization, academia was a prestigious pursuit reserved only for the noble classes. Then the enlightenment and the industrial revolution came along and showed the world that knowledge, particularly of the sciences, could net a high financial return for those who put it to good use. In recent decades, education experts have taken that message and tailored it to the masses, selling the 4-year degree as an admission ticket for the middle-class lifestyle. Easy, federally-guaranteed money has allowed even the least academically talented high school graduates to extend their adolescence for four years while studying such mind-sharpening subjects as athletic coaching, fashion design, or communications. Other students choose to spend four years and thousands of dollars credentialing themselves in the liberal arts, educations they might have received in their spare time from a public library.*
These days, America faces a glut of young adults who are holding bachelor’s degrees of questionable value. And they are mad about it. Many Occupy Wall Streeters have included in their nebulous list of demands “student loan forgiveness” and President Obama has answered with a student debt refinancing proposal that would lower the income-based caps on monthly installment payments and shorten the time until loan forgiveness to 20 years, from 25 years.
For all the talk about the plan, it’s not clear how much it’s actually going to help students facing a financial crunch. Over at The Atlantic, Dan Indiviglio calculated the average monthly savings will be around $10. This refinancing plan only applies to federal direct or federally-guaranteed loans, not private bank loans, so if you racked up tens of thousands in private debt for a name-brand BA from a designer mill, you’re out of luck. (It’s also worth noting that getting a forbearance, deferment, or reduced payment plan for federal loans is typically easy for graduates who are unemployed or under financial stress.) Even more troubling, continued government subsidies for higher education will prolong the higher ed bubble, as more would-be students, seeing the attractive borrowing terms for student loans, opt into a system of increasingly dubious value. Given that we're starting to see how little real-world value a 4-year sociology degree holds, why on earth should the government continue throwing money into them? Why not just exit the industry entirely and let private lenders, educational institutions, and students determine what an optimal education system should look like?
Shaky financial assumptions aside, the real point worth mentioning is this: Student loans are a middle-class entitlement. The majority of post-secondary students are not from poor and struggling families, for whom need-based financial aid and scholarships already exist. Moreover - and I cannot stress this enough - college graduates are in a much, much better position to find remunerative work than people with less education. The unemployment rate for degree-holders was 4.2% in September, compared to 9.7% for high school graduates and 14% for high school dropouts. Why should the relatively well-off be a higher priority for policy makers than the uneducated, homeless, hungry, or sick? ("…to each according to his need…") The most obnoxious part of all of this is that most of these OWS kids demanding debt forgiveness are completely oblivious to the fact that they’ve just become another part of the broken political system they say they despise. Obama’s student loan repackaging scheme is another handout, and they are just another a loud and (somewhat) organized special interest group.
*Yes, there’s an argument to be made about how college degrees aren’t about specific subjects, but about signaling to employers that you’re able to show up on time, follow directions, and get your work done. But that raises the question of why four years and X amount of dollars is necessary for that signal in the first place.