In the Washington Examiner, Glenn Reynolds lays out some arguments that higher-ed financing is about to go soft. First of all, he cites the reasons why colleges have been able to raise tuition much faster than rates of inflation.
“First—as with the housing bubble—cheap and readily available credit has let people borrow to finance education. They’re willing to do so because of (1) consumer ignorance, as students (and, often, their parents) don’t fully grasp just how harsh the impact of student loan payments will be after graduation; and (2) a belief that, whatever the cost, a college education is a necessary ticket to future prosperity.”
If people start to become, first of all, more pessimistic and, next, more knowledgeable about the actual benefits of a college degree, or rather an expensive college degree as opposed to a (relatively) cheap college degree, the system is in trouble.
“College is often described as a path to prosperity, but is it? A college education can help people make more money in three different ways.
“First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women’s studies, not so much.)
“Second, it may provide a credential that employers want, not because it represents actual skills, but because it’s a weeding tool that doesn’t produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.
“And, third, a college degree—at least an elite one—may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it’s a degree from Yale than if it’s one from Eastern Kentucky, but it’s true everywhere to some degree).
“While an individual might rationally pursue all three of these, only the first one—actual added skills—produces a net benefit for society. The other two are just distributional—about who gets the goodies, not about making more of them.
“Yet today’s college education system seems to be in the business of selling parts two and three to a much greater degree than part one, along with selling the even-harder-to-quantify ‘college experience,’ which as often as not boils down to four (or more) years of partying.”
As we hear more stories such as the New York Times profile of the NYU student who ran up $100,000 in student loans and majored in religion and women’s studies, more teenagers and parents will increasingly disregard the latter two benefits and focus on the first one. Higher ed better be ready for the adjustment, Reynolds warns.