As regards the state of higher education in this country, allow me to offer a couple of propositions we’ll all agree on: 1) a college education is a good thing, that’s being pursued by more and more students, and 2) the cost of college is rising awfully fast.
Right? But combine the implications of 1 and 2 above, and here’s what you get: $1.2 trillion of education debt outstanding, being borne largely by youngish borrowers whose earnings power isn’t always up to the task of servicing that debt properly. And the debt is permanent. It can’t be discharged in bankruptcy no matter how dire the borrower’s circumstance become. Too often, the debt becomes a long-term financial millstone that will make it harder for the borrower to get on with other key milestones in life, such as buying a house.
What a disaster. And it’s a disaster, I should add, that has been brought about largely by the efforts of the federal government. I’ll get to the federal-student-lending piece of the disaster in a moment, but first, who’s the genius in Washington that came up with the notion that it’s a good idea that everybody in the country ought to go to college? The idea has somehow become a semi-religious Revealed Truth inside the Beltway and in academe.In his 2012 State of the Union speech, for instance, President Obama talked about “the basic American promise that if you worked hard, you could do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement.”
So going to college is now part of the part of the “basic American promise?” That’s nuts. For starters, there aren’t enough jobs that require a college degree around to sop up the hordes of college graduates the president has in mind. For graduates who don’t land those few choice jobs, college will turn out to be a colossal waste of time and money.
What’s more—and I apologize in advance if you’re easily offended—not every high school student has the intellectual horsepower to be able to successfully navigate an even remotely rigorous college course of study. That doesn’t make them bad people or unworthy of respect. There are probably plenty of things they’re great at that you’d make an absolute hash of. But these kids aren’t smart enough to get much out of college. To tell them that they won’t live a successful and fulfilling life unless they have a college degree is mistaken and wrong. It’s especially wrong, in fact, since there are plenty of rewarding, high-paying jobs that don’t require college degrees (in the skilled trades, for instance) that are going begging. Would it kill the president to make acquisition of high-priced manual skills part of the American promise, too?
So please, federal government, stop telling high schoolers that college is a must-go-to. It’s not. And as long as I’m begging the government: please stop ladling out tens of thousands of dollars in loans to borrowers who don’t know enough to not take them. By definition, these people are the least-sophisticated, least-educated borrowers in the financial system. Many have no clue how serious a burden they are taking on. Nor does the government do much to educate or protect them. Federal student loans are essentially not underwritten for risk; the government basically hands out money to all comers. And you wonder why federal student debt tops $1 trillion, with delinquencies above 15% and rising.
The federal student loan program has turned out to be a tragedy for too many borrowers—and a tragedy for non-borrowers, too. Here’s why: the government’s splurge in higher-education spending is almost certainly the main driver in the decades-long spiral in the cost of higher education. The rise has been enormous, and crushing to middle-class students. For perspective, since 1978, the cost of college tuition and fees has risen at twice the rate of increase in health care spending, and at four times the rate of increase in CPI. The zoom in health care inflation is at least understandable. The business is capital- and R&D-intensive, and outcomes are better than they were 40 years ago. But what’s higher ed’s excuse? Did they invent a new kind of differential calculus I’m not aware of? Has Shakespeare written any new plays? No. Costs are rising because the federal government is pumping ever more dollars into the system. It ought to stop.
The federal government needs to stop badgering kids into going to college then larding them up with debt when they do. In fact, the government should be out of the student-lending business entirely. If that happened, tuition increases would slow and probably reverse. For students who do need assistance to pay for college, let private-sector lenders (who’ll actually underwrite the loans and price them for risk) take up the slack. What we have instead is madness. It has to stop.
What do you think? Let me know!