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Every year the percentage of American high school graduates enrolling in college increases. Yet the cost of attaining those degrees has been growing at an astronomical pace, one that is harmful and unsustainable.
Using the Consumer Price Index (CPI) to assess the rising prices of goods, it is immediately clear that something very strange is going on in the higher education market. The cost of attending college has increased by nearly three times that of the CPI taken as a whole.
Today, most students can only afford college by taking out loans. While less than half of undergraduates needed loans in the early 1990s, the figure has risen to more than two-thirds. The average loan burden is now an astonishing $29,400.
In a recent interview with CCTV America, The Heartland Institute’s Director of Government Relations, John Nothdurft, described the serious woes created by the more than $1 trillion in federal student loan debt currently hobbling a generation of young Americans. Rather than being a sure way to enter the middle class, the lodestone of debt has made life a struggle for many young graduates trying to start careers. Instead of being liberating, college has shackled these people to a struggle to stay afloat, forcing many to make hard decisions; some have to move back in with their parents because they cannot get decent work, while those who can work are so laden with debt that they have to put off life milestones, like buying their first houses or starting families, far longer than did previous generations.
The sheer amount of debt is staggering, and it continues to grow as costs increase and post-college employment prospects remain the doldrums.
Why then are students continuing to enroll in college in record numbers? One reason appears to be the bizarre sensibility propagated by the media and education establishment that college must needs be the natural follow-on from high school, that all normal people go on to college. Essentially, college has been transformed in the public psyche from an optional undertaking designed to educate professionals and develop human capital into a mandatory rite of passage. Should it hold such an exalted place?
In a country ever more dependent on technology and innovation to stay ahead of global competitors, a well-educated populace is essential to success. It is absolutely true that America relies upon its superior advancement to remain a powerhouse in world commerce. Some promoters of increased college enrollment argue that it is only by getting more people into college can we retain our knowledge edge. However, that argument is not borne out by the facts.
In reality, increased college enrollment and graduation do not translate to gains to a “smart economy.” When lots of students enroll in college to study the humanities, they do not contribute to the technological gains of the country. What college so often turns out to be is an expensive four-year detour that does little to boost the career potential of a graduate.
The problem is exacerbated by the heavy government involvement in the student loans market. The government makes loans on the basis of financial need alone, and does not consider what the recipient intends to do with the money. The result is countless billions of dollars of taxpayer money spent on educations that will yield no great economic value for the country. It is the definition of a poor investment decision. In the interest of treating students equally, the federal government does nothing to shepherd the people’s funds which are entrusted to its care, instead treating the people who might be able to succeed in the information economy with an engineering degree as an equal risk to the students of 19th century French poetry. This willy-nilly assessment of the value of college has no doubt contributed to the poor allocation of educational resources.
If the government insists on funding higher education, then it should make assessments in the same way private loaners would, namely to actually assess the risk-reward frontier of the loans it gives. Such assessments could go a decent way toward blunting the currently distorted incentives of loan recipients whose interest rates and borrowing amounts are unaffected by chosen courses of study.
Yet there are better ways to allocate these federal resources. One way would be to just stop distorting the higher education mark with its deluge of cash, so that colleges have to set tuition more along the lines of market-price, rather than tuition based on the amount they think they can squeeze from the government. It could also make access to vocational education more readily available so that there is a genuine alternative to college that won’t break the bank or waste government funds egregiously.
The way to an innovative society cannot be paved with crushing debt. Ultimately, something’s got to give. Rather than bankrupting the next generation, we should lay the groundwork for its success. Radically reforming the federal loan system would be a good start.