No one disputes that college has gotten a lot more expensive. A recent Money magazine report notes, “After adjusting for financial aid, the amount families pay for college has skyrocketed 439 percent since 1982.… Normal supply and demand can’t begin to explain cost increases of this magnitude.”
Consumers would balk, except for two things.
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.
Second, there’s a belief that college is an essential entry ticket to the middle class, regardless of whatever actual value it might provide.
A 2010 New York Times profile described Cortney Munna, then a 26-year old graduate of New York University with nearly $100,000 in student-loan debt—debt that her degree in religious and women’s studies did not equip her to repay. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer’s assistant earning an hourly wage.
Tuition costs have grown to the point at which future income often isn’t enough to pay off the debt—when there’s a job available at all. When this phenomenon affects bartenders or beauticians, it generates a distant sympathy, but when it affects people of the same general social class as, say, most media folks, it gets more attention.
The phenomenon—and the risk of downward mobility, made worse by the millstone weight of student-loan debt—is indeed real, and not limited to members of the “helping professions” and public/private bureaucracy.
Bubbles burst when people catch on, and there’s some evidence that people are beginning to catch on. So what happens if the bubble collapses? Will it be a tragedy, with millions of Americans losing their path to higher-paying jobs? Maybe not. College is often described as a path to prosperity, but is it?
A college education can help people make more money in three ways:
- It may actually make them more economically productive by teaching them skills valued in the workplace: computer programming, nursing or engineering, say.
- It may provide a credential that employers want. 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.
- 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.
While an individuals 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; they’re about who gets the goodies, not about making more of them.
Post-bubble, perhaps students—and employers, not to mention parents and lenders—will focus instead on education that fosters economic value. And that is likely to press colleges to focus more on providing useful majors.
My question is whether traditional academic institutions will be able to keep up with the times, or whether—as Anya Kamenetz suggests in her book, DIY U—the real pioneering will be in online education and the work of “edupunks” who are more interested in finding new ways of teaching and learning than in protecting existing interests.
I’m betting on the latter. Industries seldom reform themselves, and real competition usually comes from the outside. But if we’re lucky, I’ll be wrong about that, and the higher education sector will play a big role in its own reinvention.
This article is adapted from The New School: How the Information Age Will Save American Education from Itself. Glenn Harlan Reynolds is the Beauchamp Brogan Distinguished Professor of Law at the University of Tennessee. He blogs at InstaPundit.com.