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Pound Foolish

Tom Toles
© Tom Toles

In the last ten years, the total level of student loan debt has gone from $300 billion to $1.1 trillion. And we are now learning that this level of debt among people just starting to enter the real economy is significantly hurting the economy.

It makes perfect sense – people with crushing student loans can’t afford to buy a house, so this is hurting the housing market. Just since 2008, the number of 27- to 30-year-olds with a mortgage dropped from 30% to 22%. They are also less likely to buy cars.

Even worse, they cannot start their own businesses, and since 60% of jobs are created by small businesses, there is a long-term negative effect on employment and the economy.

Other countries subsidize college educations, or even provide it for free.

And it isn’t just our shortsightedness about higher education that is turning around and biting our economy in the ass. There is plenty of evidence that each homeless person costs taxpayers $31,065 a year (in emergency room visits, and homeless-related crimes), while it would only cost around $10,000 to house them. And after spending that $30K+, they are still homeless and less likely to have a job and otherwise contribute to the economy.



  1. ebdoug wrote:

    So did California provide free college education before they elected an Actor who followed his lines as Governor. Same actor went on to become President of the United States and still followed his line. The 70% of ignorant in this country loved him and still do.
    George H.W. Bush did not pay for his college education. He did not choose to be born in a wealthy family.
    Baby Bush the same.
    Mitt Romney’s father made a fortune. Mitt the same.
    I the same. How is it fair that I who did not chose to be born in a wealthy family and am not the brightest light bulb on this earth, did not have to pay for my education?
    Then my son is one of the brightest light bulbs and had “free” college education with the scholarships.
    We should give free education as you said for those who apply themselves.
    Also on-line courses which are expensive but taken at home save the lodging cost of college and the mass murders at college now.

    Monday, May 26, 2014 at 6:17 am | Permalink
  2. Michael wrote:

    Part of the reason for this shift has been budget cuts at the state level ( In 1987, tuition accounted for only about 23% of the total cost of attendance, but now it’s over 45%. The reason for this is that state budgets have also been slashed; they used to provide about 65% of the cost, but no longer. At the same time, costs are up, but not for instructional faculty (costs for instructional faculty have been kept low by hiring adjuncts willing to work for peanuts).

    Having said all that, though, I’m ambivalent on the idea of providing free college. Part of the problem is that reducing the constraints on spending will make the problem even worse. As it is, at top universities, students have access to phenomenal rec centers (better than ones I’ve paid $100 a month for memberships), dining courts with great food (better than the local place where they’d pay $12 for a similar lunch), and other luxuries. At our campus, we’ve got a new multi-million dollar stadium expansion and a new multi-million dollar athletic field complex. We also have a 5-year-old soccer field that is being completely torn up. Oh, and except for this year, faculty salaries have been frozen for about 6-8 years.

    Costs for non-academic niceties are out of control in many places. My feeling is that eliminating tuition will exacerbate the problem. That is, the funding model would most likely turn into a dollars-per-student model like public schools. Schools with the nicest facilities will be most popular, so students will flock there. This could turn into a sort of arms race, as everybody would then try to build such facilities. To accommodate this, faculty salaries would remain frozen while more and more adjuncts are hired to work cheaply.

    The other problem that really concerns me as an educator is student incentives. No tuition would mean larger student bodies (simple supply and demand). Without additional funding for faculty, that just means bigger classes, which leads to worse outcomes. At the same time, if you include some sort of progression testing (i.e., free tuition only if you keep a 3.0 GPA), you dramatically increase the stakes of grades. This has been shown to have a VERY negative effect on student motivation. It also means more pressure for grade inflation (gotta keep the students in school to keep the revenue flowing). It also means more bureaucratic headaches for faculty to waste time on, when they could be doing research or improving their teaching.

    In short, I don’t think that free tuition is the solution. We first need to have a cultural change that values and encourages work and productivity more than wealth.

    Tuesday, May 27, 2014 at 9:03 am | Permalink
  3. Iron Knee wrote:

    I’m not necessarily disagreeing with you Michael, but I would like to see data on what has happened in countries where they do provide free college. Maybe they have found solutions to the problems you mention.

    It just seems funny that we can provide free education up through high school, but then after that people have to go into horrible debt to go to college.

    Tuesday, May 27, 2014 at 11:56 am | Permalink
  4. PATRIOTSGT wrote:

    From my point of view, any kid can go to college for free. Now here’s the caveat to that, they need to work hard to get there. I was and still am amazed at the number of colleges, good schools, IV league level institutions, that state if we accept you we’ll meet 100% of your demonstrated financial need.

    There are other ways to pay for college if you want to go to a public university, which is the way I chose. Join the military, either Regular Army or Guard. Most/all state Guard units have tuition assistance and will pay 100% or close to it at any state college.

    If students want to casually go through their high school career and expect to attend whatever college and follow that by walking into a great career then we have mislead them. Not everyone can, should or wants college. Every time we put more money into college ie. Fed and State dollars the cost of tuition rises. That last fact alone has caused tuition costs to skyrocket more then anything else.

    No way, free college for all is a farce and not the best course of action. It may work for a country with the population of California or New York, but not with our “what am I entitled to now” society.

    Tuesday, May 27, 2014 at 4:28 pm | Permalink
  5. ThatGuy wrote:

    I don’t necessarily think free tuition is the way to go, but we do need to look at limiting the amount of debt that students can incur while getting an education that studies show is worth it. Some sort of service based credit would be a good start, not only the military but perhaps other community service or Peace Corps-type programs.

    A couple of PatriotSGT’s points are of note here. The first and most important is that state and federal grant money is also encouraging degree mills to pop up, prop up their students through their courses, and spit these kids out the other side without much care of how well the degree has actually prepared them for the job market while still saddling them with debt.

    The second is that the “needs based” financial aid that schools offer is still typically not enough to get kids through school, particularly if they need to set up away from home to chase those degrees. Some schools may cover housing and food, but I’m fairly certain that the cost of housing covered can be taxable. Add that to the cost of books, any groceries (plus food, if not covered) and depending on where these students live, they can still be racking up debt that hurts the economy on their way out.

    I don’t think there is a single silver bullet, but we need to figure out how to lower costs, increase attendance, and improve job readiness once students graduate if we want to stay economically competetive both in terms of allowing grads to contribute by paying for things like cars and houses and also by being competent and valuable workers.

    Tuesday, May 27, 2014 at 5:30 pm | Permalink
  6. David Freeman wrote:

    Well, I’ll dive in on the side of free universities and technical schools. It worked great in California until Reagan screwed it up. It could work again. I agree that not everybody should go to college, technical schools should be a respectable option and also free.

    I don’t know how they do it but Berea College charges no tuition and provides good quality education primarily for lower income but well qualified students from Appalachia. Every student does work 10 hours a week on campus which I think is a good thing regardless of the savings.

    By the way, Berea has a proud history too. It was founded 6 years before the civil war as the first coeducational and interracial college in the south (Oberlin College in Ohio was first in the country)

    Tuesday, May 27, 2014 at 7:40 pm | Permalink
  7. Hassan wrote:

    Two points:

    1. Usury/Interest is bad and its enslavement. All major religions (specially Abrahamic) forbid it.

    2. This may not apply to all, but it can apply to many. Basically in my culture parents spend money on children (as much as they can) till they establish themselves, in return children support them in their (parents’) old age. So this saves children going into debt with interests, and parents still have security of knowing that their children will take care of them.

    Tuesday, May 27, 2014 at 10:33 pm | Permalink
  8. Michael wrote:

    Cross-country comparisons of education are really problematic for a wide variety of reasons. Here are a couple of anecdotes to illustrate why all that glitters might not be gold.

    My PhD advisor had come from Italy, one of the countries with free college tuition. There were also no admission standards. Her classes in Italy worked like this: She would go into a lecture hall and lecture to about 700 students. The students were given no assignments or projects, and almost no guidance. There was no midterm. Professors had no office hours and were generally not available. The students were responsible for learning everything on their own and were evaluated on one and only one thing: how they did on the final exam. I have a colleague from Germany, and he described their model as being fairly similar.

    This isn’t how courses are here. Sure, some intro courses may be similar (though not to that extreme), but that model is generally restricted to 100-level courses. And I certainly don’t want to see that model expanded here, because it is pedagogically ATROCIOUS. The scholarly literature shows that there tends to be a small group of highly motivated and talented individuals that can succeed in those environments, but they are a tiny minority. Furthermore, those individuals actually end up doing even better (slightly) in active learning environments. For the majority of students, incorporating opportunities for feedback and formative assessment dramatically increases their chance of success. So, yeah, those countries are finding ways to make it work, but it involves sacrificing teaching quality considerably.

    Here’s another undesirable aspect of the German model: Second chances are absurdly hard to come by. A friend of my wife was working in an animal rescue center, and discovered that she really had a passion for this work. She dreamed about what it would be like to be a veterinarian, but she stated that it could never happen. I don’t remember which, but she had gone to either a Realschule (graduate at grade 10) or Fachoberschule (graduate after grade 12). To qualify for a university, you must attend Gymnasium. While there are (on paper) opportunities to attend Abendgymnasium and earn the equivalent diploma, these are not treated as the same level of qualification. She was 25 and resigned to the fact that she most likely would never qualify for admittance to a university.

    Wednesday, May 28, 2014 at 10:38 am | Permalink
  9. Michael wrote:

    Of course, all of this avoids the central question: WHY should everyone go to college? Do you actually need a degree to qualify as a receptionist? Does a business degree that completely avoids calculus in economic discussions really need to be a Bachelor’s instead of an Associate’s?

    In my view, before we make college free for everyone, we should address the inequality issues that are making a college degree mandatory for decent employment.

    Wednesday, May 28, 2014 at 10:42 am | Permalink
  10. ebdoug wrote:

    Michael: Everyone going to college was never discussed here. And never with free college would the person be funded while flunking unless like baby Bush and me, we were family funded.

    One of my favorite bridge partners, a professor at Alfred University, was designing the on-line courses 20 years ago. All through these discussions, I keep seeing “on-line courses” designed by these very competent people. Then we pay attention to raises for the professors, not the fiscal grounds of a University. The professors are available for “hours” by e-mail.

    Wednesday, May 28, 2014 at 2:50 pm | Permalink
  11. Michael wrote:

    “Everyone going to college was never discussed here.” True, but the goal of free tuition is to increase the opportunities for people to go to college. As it is, there are already on-going debates over whether or not there are already too many people going to college. Removing cost as a barrier WILL increase the number of people. That is simple supply and demand.

    “…never with free college would the person be funded while flunking…” And therein lies one of my concerns. Adding such high stakes to passing will incur many, many side effects, including increased occurrences of bribery, pleading, and lowering of standards. The incentive structures would be very problematic. There is already a problem with private for-profit colleges exploiting the system. For instance, there was a for-profit nursing program that got in trouble because their graduates never got practical experience and were unqualified for employment. Crafting policies for proper accountability is horribly tricky.

    While I cannot speak for your friend, there is a lot of data starting to come in from MOOCs (massive open, online courses), and it’s not good. (Disclaimer: Not all online courses are MOOCs; some are done VERY well. My comments here don’t apply to those.) The completion rates are absurdly low (far below 10% that enroll complete the course), the demographics are horrible (the vast majority that complete courses are affluent white males…the poor and underrepresented minorities do considerably worse in the MOOC model than traditional classrooms), and the learning objectives are mostly aimed only at the lowest levels of Bloom’s taxonomy. In short, MOOCs are abject failures as teaching models.

    As for the claim that they are created by “very competent people,” that’s not necessarily true. The creators of MOOCs tend to be experts in their subject, but that doesn’t mean they have ever learned even the basics of educational psychology or teaching methodology. That is, they may be very competent researchers and practitioners, but that does not imply that they know how to convey their material in a way that induces long-term retention among students.

    Wednesday, May 28, 2014 at 7:16 pm | Permalink
  12. PATRIOTSGT wrote:

    Michael, I agree with almost all of your reasoning.

    “we should address the inequality issues that are making a college degree mandatory for decent employment.”

    I don’t think its as much an inequality issue as a perception issue. Universities and politicians have been pushing the idea that college is necessary. Colleges have benefitted the most with fees rising while professor salaries stay flat and the schools get fat off federal and state aid programs. The aid was supposed to make college more affordable, but it actually made it more costly.
    There’s almost nobody in academia or politics saying we need more trade schools and tradesmen. I have a buddy who was a master plumber 10+ years ago making 80k with no college. What’s wrong with that, nothing.

    The other problem I have with colleges is when an athlete with a 2.5 HS average and a 1200 SAT gets a full ride while the kid with a 3.5 and a 1800+ SAT score pays full price. Who do they value more? If they want to be the NBA and NFL minor leagues then forget the college and just run a sports program.

    If the country feels they don’t have enough engineers, or computer scientist or healthcare workers then perhaps we should just offer scholarships for those majors and a bonus for successfully completing them. I think we have plenty of lawyers and political scientists for now.

    Wednesday, May 28, 2014 at 7:19 pm | Permalink
  13. Michael wrote:

    “I don’t think its as much an inequality issue as a perception issue.” I somewhat agree. The reason so many people advocate universal college education is because of historical data concerning lifetime earnings. See here for instance: “[T]he true cost of a college degree is about negative $500,000. That’s right: Over the long run, college is cheaper than free. Not going to college will cost you about half a million dollars.” So, yes, it is a (faulty) perception that everyone should go because of the AVERAGE return on investment. What goes missing is the fact that the standard deviation from that average is HUGE.

    “There’s almost nobody in academia […] saying we need more trade schools and tradesmen.” This is flat out false. Most faculty feel this way, and there are frequently articles and editorials to that effect in the Chronicle of Higher Education and other media that are aimed at academics. We faculty would LOVE to see more support for trade schools, community colleges, apprenticeships, etc. It is partially for selfish benefit: It is a horrible experience trying to teach students that have no interest in being there, but mommy and daddy insist they get a degree. It would be much better for everyone if they pursued other paths to employment that would be more meaningful or lucrative for them.

    “The other problem I have with colleges is when an athlete with a 2.5 HS average and a 1200 SAT gets a full ride while the kid with a 3.5 and a 1800+ SAT score pays full price.” This is a bit of a red herring. I don’t remember the exact number, but there are something like 4800 colleges and universities in the U.S. The proportion that fund student athletes like that is very, very small. Furthermore, it’s not entirely accurate. The schools that tend to be big enough to fund athletes like that play a lot of tricks with their tuition rates. The 3.5/1800+ student would NOT pay full tuition. Instead, they would be given a discounted rate. At schools like that, the students who pay full tuition are generally average students from affluent families: 3.0 GPA with 1300 SAT, but both parents earn 6-figure salaries.

    “If the country feels they don’t have enough engineers, or computer scientist or healthcare workers then perhaps we should just offer scholarships for those majors and a bonus for successfully completing them.” This ignores one critical factor: Who will teach them? Nursing programs are absurdly competitive because they cannot hire enough faculty (they make more as nurses!). In CS and engineering, it’s somewhat the same problem. My students will graduate and will quickly start earning salaries close to mine. It takes a special kind of warped mind to drop that in order to go back to living on peanuts for 6-8 years of grad school. At the same time, our enrollment of declared majors just jumped by 20% in a year. But we have no new faculty to teach it. Offer scholarships for these fields, and you’re going to have even more people.

    In STEM fields, it’s not that we don’t have enough graduates. It’s that we don’t have enough QUALIFIED graduates, and we don’t have enough faculty support to teach them adequately. And we also have far too many faculty that think being experts in their sub-specialization makes them experts in teaching methodology…

    Friday, May 30, 2014 at 8:27 am | Permalink