still too much college, again
In the past, I have argued that it is erroneous to assume that all people must go to college. Some people don’t have the academic or emotional capacity for higher education. Many don’t learn much when they do go to college. Still others spend years getting degrees as a labor market signal. Individually rational, but not efficient. College is definitely good for *some* people, but not everyone.
Now, Paul Campos, a Colorado law prof, gives a succinct economic argument against the over-investment in college. I quote at length from his discussion of legal education:
Consider how American legal education is funded:
- Law schools calculate a total annual cost of attendance, based on their tuition and the cost of living in the area where the school is located. For example, American University’s law school estimates this year’s cost of attendance as $70,204.
- Any student a law school chooses to admit can, assuming he or she is not currently in default on an educational loan, borrow 100 percent of the cost of attendance for that particular school from the federal government, in the form of educational loans that currently carry interest rates of 6.8 percent and 7.9 percent.
- The federal government puts no limits on how much money a school can make its students eligible to borrow, nor does it make any effort to determine whether the federal loans students are taking out have any reasonable prospect of being paid back.
- Interest begins to accrue on these loans as soon as they are disbursed. This means that a student who enrolled, for example, in American University last fall will have — assuming a 3.5 percent annual increase in the cost of attendance — approximately $260,000 in debt when the student’s first loan payment comes due, six months after graduation. The student will owe monthly payments of more than $3,000 on the standard 10-year repayment plan, and nearly $2,000 on an extended 25-year repayment schedule.
In effect, the system allows any 22-year-old American University chooses to admit to borrow a sum equal to the average home mortgage, but without a single one of the actuarial controls that are supposed to minimize the risk that homeowners will borrow too much money.
The situation isn’t much different for college students. As long as an accredited college accepts a student, they can take out a home mortgage without (a) showing they can pay it back, (b) having any collateral backing the loan, and (c) placing any reasonable limits on the amount of the loan. This is bad.
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I’ve never understood the logic of the “students come out with large debt therefore college isn’t worth it” argument. The estimated median lifetime earnings of a white male, FTFY worker with a professional degree is $4.8M. For a white male FTFY worker with a college degree, it’s $2.8M. With just a high school degree, it’s $1.7M. (Source: Julian & Kominski 2011, “Education and Synthetic Work-Life Earnings Estimates”)
These figures — based on synthetic work cohorts from the 2005-2008 ACS — probably *underestimate* the actual gap in lifetime earnings across education groups, because they don’t adjust for the likelihood of unemployment (HS>Col>Prof), the average duration of unemployment (HS>Col>Prof), or the likelihood of being FTFY (Prof>Col>HS). Even using the more conservative numbers, though, $2M ($4.8 vs. $2.8) > $260,000 by, well, a factor of 7.7.
krippendorf
February 16, 2013 at 1:33 am
I don’t see anything wrong with college amounting to mostly a labor market signal. Initiatory rituals are common among myriad organizations and institutions, requiring loading fees in sacrifices of time and other resources in order to load onto networks where the actor will enjoy a stream of nonexcludable club goods once “in the club.” This type of arrangement seems to bother people normatively. But why should courting before marriage be sanctimonious while spending four years proving you’re a dedicated member of the professional class be “mere signaling?” It shouldn’t.
Graham Peterson
February 16, 2013 at 3:53 am
Graham: Morally, the difference is that everyone can court before marriage (well, unless you’re in a group that is prohibited from marrying), but not everyone has access to college.
We know that access to college isn’t random: children from disadvantaged socioeconomic backgrounds are much less likely to be able to get “the signal” than children from more privileged backgrounds. Barriers to access to adequate preparatory training and barriers to access to financial capital, among other things, contribute to this inequality in access.
Even if you take the extreme position that the only barriers to college entry stem from a “natural” distribution of raw talent (IQ, essentially), there’s still a moral issue. Why should children who are unlucky enough to be born stupid have no hope of a secure economic future, while children who were lucky enough to be born smart do?
krippendorf
February 16, 2013 at 11:31 am
Regardless of the system issues and whether it’s a good policy idea, this should be a reminder to struggling social science graduate students that they should borrow money to get through school. Even $10k per year would really help smooth the graduate school experience, increasing the odds of success (and happiness), and it’s easily payable upon completion of the PhD with a decent job (even if not an R1 job). I hate to see soc grad students living in squalor when students loans are being given out like candy to law school students.
Philip N. Cohen
February 16, 2013 at 2:04 pm
krippendorf: thanks for that. Personally and intellectually, the jury is still out for me on the ethics of equality of opportunity and of result and so on.
I don’t agree there are “barriers” to people getting in to college, because at least in an economistic lexicon it implies those barriers are purposefully erected. A granular debate on education is *way* outside my expertise (and in fact I wouldn’t call myself an expert in anything!).
I have to flatly disagree that there is equality of opportunity in courting. It is a decidedly discriminatory process, mitigated almost exclusively by matters of cultural tastes, in groups and out groups (friend groups, music scenes and so on), and demonstrably by socioeconomic status. People get dumped for making $8 an hour, and can’t pay for college with it either.
Education doesn’t seem at all egalitarian to me. It’s just supposed to meritocratic. Establishing principles of justice and ethics on merit is a tricky business for anyone concerned with how little agency socially situated actors may have.
Graham Peterson
February 17, 2013 at 4:03 am
@graham: second that. The assumption that somehow there is unfettered (wth respect to race/socioeconomic-status/gender etc) access to any exchange relation whatsoever is simply untrue, so comparing education to some ideal of “unconstrained exchange markets” it is merely a thought experiment.
SD
February 17, 2013 at 7:02 pm
@SD: I do hope personally, though, that something like genuine liberty and voluntary exchane within institutions still exists even if we acknowledge these constraints.
Graham Peterson
February 17, 2013 at 7:25 pm
“I do hope personally, though, that something like genuine liberty and voluntary exchane within institutions still exists even if we acknowledge these constraints.”
Welcome to Soc 101.
krippendorf
February 17, 2013 at 7:46 pm
I took soc 101. Most of what I learned was pretty antithetical to classical liberalism. If you can recommend readings that approach these contrasts with more subtlety I’d appreciate it a lot.
Graham Peterson
February 17, 2013 at 7:50 pm
I took soc 101. Most of what I learned was pretty antithetical to classical liberalism(e.g. Blending Compte and Marx with Locke and Hume seems like herding cats). If you can recommend readings that approach these contrasts with more subtlety I’d appreciate it a lot.
Graham Peterson
February 17, 2013 at 7:52 pm
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still too much college, again | Fifth Estate
February 17, 2013 at 9:26 pm
While I’ve long agreed that college is not for everyone, I am deeply concerned that arguments like these have the tendency to become new stratifying tools that discourage talented and hard-working students from economically-disadvantaged backgrounds from pursuing advanced education. I see every single day how students from difficult circumstances, including those who did poorly in high school, can ultimately do amazing things when given the opportunity.
Furthermore, student loan debt is not nearly as big of a problem as most pundits make it out to be. I recently saw that the estimated average debt for public college/university bachelor’s degree grads in 2010-2011 was $13,600, which does not seem too monumental to pay back. Students who are concerned about debt loads can make the choice to attend a public institution. If only student loans went back to being dischargable in bankruptcy, I think the issues with unscrupulous private lenders would be largely resolved.
Mikaila
February 17, 2013 at 10:05 pm
Makaila: I agree the student loan debt pundits are out of control.
But Aren’t student debts not absovable in bankruptsy because they are subsidized by the government? In fact, student debt liabilities are severely more draconian than private debts. The government can and will find you and garnish your wages if you don’t pay student loans. This seems like even more reason to rationalize student debt in a private market.
Student loans largely subsidize the middle class, not the poor, and seem to do more to reinforce stratification than rectify it. Grants may be a different story.
Graham Peterson
February 18, 2013 at 12:22 am
The rule against discharging loans in bankruptcy is not limited to government-subsidized loans or even to the unsubsidized loans administered by the Dept. of Ed.–since 2005, private student loans receiving no government support are not dischargeable either. The only difference between private student loans and other bank-issued loans is the purpose to which the money is put.
On the other hand, subsidized FHA loans for home purchases are treated the same as private mortgages, and both are dischargeable in bankruptcy (though, of course, the debtor does not get to keep the house).
Mikaila
February 18, 2013 at 12:36 am
That’s disappointing to hear. Limited liability is an important part of functioning financial markets.
Graham Peterson
February 18, 2013 at 12:41 am
higher fee is ofcourse little difficult situation for middle class family.
they cant afford this.
Binita
February 19, 2013 at 12:50 pm