16 Apr

How to Fix the Spiraling Costs of College Education [Reader Post]

                                       

One topic that has been getting lost in the discussions about our economy is higher education. We hear a few sidebars about it when attached to larger stories, such as the Occupy Wall Street Crowd asking for forgiveness of their student loans, or discussions about the housing bubble dovetailing into a discussion about growing student loan debt in our country. A few people have offered up piecemeal solutions, but nobody has connected all of the dots to propose a sweeping reform change – until now.

One of my favorite things about being a weekend tour guide for groups made up of mostly young people from abroad is that when I get to chat with them I have the chance to hear some interesting views I might not otherwise be exposed to. For example, earlier this year over lunch after the tour one gentleman at the table was a student from Germany, and he explained how their education system differs from the American model. Under the German system students will receive an education similar to the K-12 model that we have in the US, but as they approach their final years the focus shifts. Students will select an area of concentration and most of their classes will focus in that direction, and if appropriate will lead to paid apprenticeships. Since students are moving toward an area that interests them and no longer have to study classes that do not, Germany enjoys a dropout rate far lower than ours here in the US. Ironically, just a few weeks after I had this conversation Cafe Hayekposted a link that discussed this point in greater detail if you’d like to learn more.

Rick Perry’s short campaign sadly died out before the public could get any meaningful exposure to his seven points on improving higher education.

His first four ideas focus on improving the quality of teaching and rewarding high performance. Ideas 5-7 address accountability from the schools, giving students greater control over their tuition funding, and exploring lower cost solutions for accreditation. Unfortunately Perry’s debate performances were highlighted by a combination of not remembering which agencies he wished he could abolish and a strange obsession with Mitt Romney’s lawn care preferences, which led him to an early exit. Sadly, these ideas never got the national traction that they deserved. But they should have then and they should now.

I’m also the rare conservative who actually likes to read leftist sites – however flawed their ideas may be it’s always useful to learn more about the opposing viewpoints. One article in The Nation (For anyone unfamiliar imagine a leftist version of National Review) cited a few sources that talked about issues with for-profit colleges and issues with the standards for reporting their job placement rates:

The methodologies that schools use to calculate these rates vary state by state and accreditor by accreditor, making them impossible to compare. And because neither accreditors nor state regulators put much of an effort into verifying these rates, the schools don’t seem to have any qualms about inflating them.

The Obama administration took aim at these problems in June 2010 when it proposed, as part of a package of draft regulations designed to improve the integrity of the federal student aid programs, requiring for-profit colleges to use a single standardized methodology when calculating these rates. Under the plan, the administration would have extended the standards the government requires short-term programs to follow in calculating their rates to all for-profit college and vocational programs that are subject to the Gainful Employment rules.

I actually agree with the author’s point of of calculating job placement rates, and it should be applied across the board to all colleges, both public and private. And we need to take this a bit further… Recently National Review’s cover story addressed higher education and offered its own two part solution. In a nutshell, the first proposal is to basically prevent states from insulating schools from competition, such as preventing competing schools from opening campuses on “the other school’s turf.” Personally I don’t agree with this one, as online learning is quickly tearing down the ivy-covered protected walls. Their second was to level the playing field between public and private schools by allowing private colleges to develop partnerships (like a charter school) with the state to remove the state college’s advantage of public subsidies. While I like the idea of leveling the playing field, I don’t agree with the methodology. Rather than get the government more involved, I’m thinking that we should move in the opposite direction. And I have a plan…

Before we get to the solution, first let’s look at some basic economics to identify the problem. Let’s say I run the shop that sells the best fresh lemonade in Washington, DC. I am of course, referring to the dessert stand named “Just Desserts” located at the food court in The Old Post Office at 12th & Pennsylvania Ave.* Despite the superior quality of their beverage a pint of their fresh squeezed lemonade only costs $2, with a large costing around $3. The word gets out that in addition to being refreshing, this lemonade is a great way for visiting students to cap off a morning of touring the monuments. Demand increases, and sales take off. Naturally with any finite good when demand increases so does price. We soon find ourselves at a point where not every student who visits us can afford our now $6 pint and $8 large lemonades. Since we as a society feel that every child should have the right to sample our fine lemonade, we set up government programs to assist them. We set up cash grants that they can use to redeem at various lemonade stands, or even outright subsidies to my stand to assist some of the needier lemonade customers. Now as I see more sources of revenue coming in I raise lemonade prices to $8 and $10 per cup. Granted, the extra money is not going toward improving the quality of the lemonade, but I can instead use the extra funds to build a world class Diversity Outreach department. Who cares where I spend the extra money as long as the students get their lemonade?

OK, that may not be a perfect comparison to higher education, but you get the idea. The point I’m trying to make is that we have a product that is becoming more expensive and we are taking no steps to bring down its cost, and instead are bloating the supply side. Sadly college costs become this chicken and egg upward spiral with no end in sight. Isn’t there something we can do? I’m glad you asked!

First off, we should start to look at the German model. Rick Santorum actually made an excellent point that college is not for everyone and that intellectual elites should not sneer down their noses at those who don’t have advanced degrees. When Sister Babe woke me up one Sunday morning to tell me that our kitchen sink was leaking you can bet I was quite thankful that the man who showed up in 20 minutes to fix our sink chose to learn plumbing and not Anti-Western Studies.

Next, let’s get the government out of the student loan business. Don’t we have budget crisis and exponentially growing federal debt? Something that the private sector has already proven it can handle might be a good start for shifting a government program out of the public sector. Put student loans back in the hands of private lenders and let them compete for students’ money. Don’t allow the government to subsidize the loans, either. So far to any leftist this sounds like a wonderfully predatory system for the banks to plunder students seeking loans. Hang on, I’m not finished.

When I say to let the banks compete for loans I mean it. Let them base their interest rates on whatever factors they choose – school placement rates, choice of major, and GPA. Think of this as if you were loaning this money yourself. Who is more likely to pay back a loan – the student who graduated from Stanford with a 4.0 in chemical engineering, or the Marymount student with the 2.1 in Transgender Studies? My money is on the engineer. If students need to transfer or change majors, that’s fine too – let the rate be dependent on whatever their final data is upon graduation. Needless to say, dropping out or failing out would have their own penalties, but it would give students better incentive to choose carefully and be diligent in their studies. If this means the Engineering major can shop around until he finds a place that will offer him a 3% rate while the best that the Transgender Studies major can get is 7% so be it. As an added bonus, this will discourage people from wasting money on these various navel-gazing degrees whose only career path would be college campuses or the permanent victimhood cottage industry run by the left.

As an added bonus, as we get fewer graduates with these worthless degrees we get fewer graduates marching in protest because they actually have useful skills that can get them employed. Better still, with fewer people seeking employment in useless roles like Consultant for Gender Equality in Education ** these parasitic professions will begin to die out.

So now we have the banks with extra information to help them decide how their money will get loaned, but what about the students? I’m glad you asked! Let’s arm them with information as well. We’ve started by revamping their High School education to help them find a direction to help them after graduation that may or may not involve college. By reducing the pool of high school applicants we’re already forcing colleges to compete from the supply side of the equation (Fewer applicants means colleges must improve their product, price, or both). We’re also having schools report on what their placement rates are on graduation. Let’s break it down further by degree so that students can manage what to expect at graduation. More specifically, let’s get the students involved in tracking this data. Offer a small discount for loan paybacks for any student who provides their employment data at the end of each year. Have them report not only on if they’re employed, but if they’re employed in their field, their salary for the year and if they’re working second jobs. Suddenly a Transgender Studies degree might not seem so desirable when one sees how many recent grads are employed, but at Bennigan’s or via a temp agency.

Let’s have the schools give more information about where their students’ tuition is going. How much is going toward teaching, toward research, and toward various overhead programs? Include explanations for changes to any categories. For example, did your school just combine two of its science departments to cut costs but found the money to hire five Diversity outreach employees? Thanks, but no thanks.

Let’s not stop there. When applying for these student loans each applicant should also be given recent data to show what kind of salary they can expect to make both upon graduation and later in their careers – like here. Let’s also provide them with a worksheet so they know what kind of burden they’re assuming, say in a grid showing length of loan, how much they will pay over the life of the loan, and how much they will be paying each month, like what UC – Denver does.

Unfortunately I don’t have a solution to offer everyone out there who is already carrying loan debt and is underemployed or unemployed, but at least what I’ve given you here is a plan to stop the bleeding and help the next generation. We owe it to the children – after all, they’re the ones who will be choosing our nursing homes someday.

* For the record I have no financial stake in Just Desserts, nor do I receive any compensation for plugging their lemonade. Trust me, if you go there you’ll be glad you did.

** Yes, I actually came across an individual online who listed this under the category of Job Title.

Crossposted from Brother Bobs Blog

This entry was posted in Economy, Education. Bookmark the permalink. Monday, April 16th, 2012 at 10:45 am
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13 Responses to How to Fix the Spiraling Costs of College Education [Reader Post]

  1. Nan G says: 1

    I don’t normally think of China as a model for anything, but our education system is so unionized and backward that even commie reforms seem like moves in the ”right” direction.
    1. China is cutting out college majors that don’t pay.
    You can still take a few of the classes, just not major in them.
    The cutoff point is 60% job placement or above for 2 years or it goes.

    2. Believe it or not, our DOE and teacher bureaucracy is bigger than China’s!
    We squander 5.7% GDP to education compared with China’s 2.5%.

    3. China rewards good teachers rather than tenured ones.
    You get better students with better teachers.
    The union has got to go!

    4. Non-attentive, or worse, disruptive, students are not tolerated.
    Classes move forward on their class programs on a schedule.
    Fall behind or try to stall that pace and you are out!

    5. Frills are looked upon as frills.
    Sports, the arts and crafts are diversions to be kept at the edges.
    In China they are actually called ”extracurricular activities.”

    6. The Chinese government has people on its payroll whose sole purpose is to actively find and recruit educators from all over the world, including the US, to bring to China to help prepare their students for the global market.
    This not only puts China at an advantage with great talent, it creates a “brain drain” in the US and other countries as we lose valuable talent to China.
    America would do well not only to recognize key educators, but to reward them for their value, and even do some of its own international recruiting that can attract top educational talent to the US.
    Instead the old union tenure situation protects jobs of terrible teachers while letting go the brand new teacher who was named ”teacher of the year!”

    ReplyReply
  2. Liberal1 (objectivity) says: 2

    Slightly trite. I’ve been aware of the “German” model for fifty years. But we couldn’t use it here because it’s socialist—and as every good conservative knows, everything socialist is bad. As for everything else you mention, it’s already the case in the financial/educational system in one manifestation or another. So, what else is new?

    Personally, I believe that during times of high unemployment and recession—which are now becoming the new norm (full employment from the time forward will be 7%)—more government funding and job-sharing (also German ideas) should be considered. And keep in mind, Germany, with one-quarter of the population of the US, is third in production in the world http://en.wikipedia.org/wiki/List_of_countries_by_exports —and gaining on the current runner-up, America. (I would go on to list other ways it exceeds us, but it would fall on the deaf ears of this ultra-conservative audience, and would only evoke the age-old conservative response: Love it or leave it.)

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  3. Randy says: 3

    You are exactly right. When I got an increase in my GI Bill, the cost of tuition automatically went up. Fortunately, I studied hard sciences and had opportunities because I had a base that would qualify me for many jobs!

    ReplyReply
  4. Pingback: Too Simple For the Simple Minded | Daily Pundit

  5. Brother Bob says: 4

    @libtroll: Welcome back again! So we should keep spending more like we’re doing now? How’s that working? As always, thanks for your silly drive-bys!

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  6. Nan G says: 5

    Bob Gale (you know him. He wrote all of the Back to the Future movies, also comic books including Spider-Man and Batman.) had an original idea for both ”fairness” and cutting the spiraling costs of college education:

    simply rename every college and university in America “Harvard.”

    Think of it.

    The president went to Harvard. That’s a very elite school. A degree from Harvard opens a lot of doors that aren’t available to people who haven’t gone there. Is that fair? I don’t think so. A lot of perfectly intelligent people would like to go there, but either they can’t afford it, or they can’t get in, so they become very disappointed when they’re rejected.

    By renaming all schools ”Harvard,” (kind of like how all restaurants in the future are ”Taco Bell” in Demolition Man) everyone can go to the Harvard they can afford!
    Everyone who finished is a Harvard graduate!
    I love it!

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  7. Nan G.
    hi, funny that I landed here, at this time, when I heard from my sister of MONTREAL
    specially among other university towns in the PROVINCE OF QUEBEC, there has been riots by students
    at a level never encountered, because the leader decide to raise their price of 300 dollar per year, and it trigger a massive destructive riot, they are breaking everything on their path since they began 64 days ,
    and they are join by the local thugs trouble makers, they enter banks break all and ocuupy it, they fight with the police trowing bricks at window business, on and on,
    bye

    ReplyReply
  8. THE SOOTHSAYER says: 7

    Bonfire of the Sheepskins
    Let’s start with Kid Carney, Lawrence Academy (f: 1812) then tracked into Princton, this is Grande Olo Ivie chummieism to the max. In depth there is nothing there-there except for the whole prep school swish. Then there happens Stephen Chu, Nobel Prize “Theoretical Physics” from Stamford who is driven around, at taxpayers expense, by government limousines when not at Palo Alta doing his toodle doos on his mega-pricy bicycle. There is nothing practical about “theoretical physics” other than theoretically invading private home ownership with higher energy expenses imposed by some superfluous egghead impervious to a lifestyle that pays home mortgages plus fuel costs for heating, AC, and electrical power. The apex of this pyramid of perfidy there is Barack “Barry-BabyCakes” Husinsane O’BeanBag whose whole life documentation has been a fraud wrapped in an enigma mystifying the actual value of liberal thought education at schools like Columbia and Harvard. Personal times interviewing fresh sparks from the Yard was that the bulk were immature misanthropes looking for a slide into some flush job function without measurement of actual true productive value. Good friend, met him at Dale Carnegie training, went from 3.65 from Harvard to McDonalds Hamburger University because the trust fund stopped and he needed real work. If someone arrived with two years at Occidental then I would give that guy minimum wage and a mop.

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  9. THESOOTHSAYER
    HI,
    IT’S FUNNY HOW I can follow visualy your comment all the time,
    it’s like a walk into the world of those who like the inflated frog, gathered among us
    to let their air deflate just a bit to give us a chance to breed it and collapse from the
    poisonous intoxication of our nose,
    I like the way you put it for us to see.
    bye

    ReplyReply
  10. razaemtts
    there are more, that you would enjoy also, just take your pick, you will be with us
    so long that we will adopt you in the group. welcome

    ReplyReply
  11. RW - Lefty, first time reader... maybe last time says: 10

    While I sympathize with your points on job placement for certain types of degrees, I feel that your scenario would reinforce an economy of the present day, rather than help anticipate an economy of tomorrow. Economies shift… we wouldn’t want banks fighting the early trend for computer programmers, now would we? Do you think the banks would have the foresight to see IBM, Mac, and Intel coming and to support the intellectual capital it took to make those companies successful in their beginnings? Probably not. Would the bank interest-based incentives hurt that shift? Probably so. But this is just theory.

    Another problem about basing interest rates for a college freshman for what degree they choose: do you want to push students that are passionate about the arts into microbiology only to flunk out because their heart wasn’t in it? I would be curious what would happen to the drop out rate.

    I support the use of technology and competition. However, such competition without government involvement might not help. Universities need to prioritization teaching, and research institutions to get back to research. Cramming everything under one roof has hurt the undergraduate experience. All a college degree means today is that you MIGHT know something. There is little assurance to what a graduate knows… this is because student approval means more to college revenue than does holding students accountable for learning, thinking, or producing anything of value.

    Also, your lemonade scenario really stinks – although I will give you partial credit for the fact that easy financing does inflate prices. However, I don’t care what some free marketers, neo-liberals, or market-oriented types claim…. education is NOT a consumer good. Why? Because you don’t pick a college education out to suit only your taste or to get better gas mileage. Education attainment is still viewed as a competitive achievement that shows you might know something more than someone else applying for the same job you are. Person ‘A’ has a BA, Person ‘B’ has a MBA… ‘B’ has the edge. In education, rarely do you benefit from finding a “good deal” where you find a BA that performs better than a more expensive MBA. It doesn’t quite work like that. You don’t get better gas mileage from a smaller degree.

    ReplyReply
  12. RW – Lefty, first time reader…maybe last time
    welcome, yes on the fact that the highest marks doesn’t mean the best to elect on a high risk and high important job, it could if he or she have more baggage to present, I’M TALKING OF NOW. in theses time
    of more stress and entitlements imposed toward the work force and businesses, by a governmenwith the wrong agenda which is not appropriate for this COUNTRY.
    THE CANDIDATE need a lot more of insight gifts and could be needed only the B letter and excel way above the superior MBA KNOWLEDGE, AND ALSO THE B COULD PURSUE HIS KNOWLEDGE WHILE ON THE JOB AND ACQUIRE HIS MBA JUST THE SAME IF HE SEES A NEED TO ADD IT.
    THE CONSERVATIVES ARE PROVING IT BY EXPANDING THEIR KNOWLEDGE BEYONG THAT AND ALSO TEND TO BE DEVELOPING THEIR GIFTED GOD GIVEN INNER ALTRUITISME AMONG OTHER GIFTS TO PUSH FURTHER THEIR ABILITY TO COMPETE AND UNDERSTAND THE MARKET AND OBSTACLE IMPOSE TO THEM,
    I completely agree on this important thesis you came to bring about the today needs of this new generation, they have to excel on many fronts, inner and outer to be capturing the best positions and compete with the MBA’S DOT, if they come in as a B PLUS. LIKE THE CONSERVATIVES ARE DEMONSTRATING TO BE PLUS ADDING IT WITH THEIR WELL KNOWN TOLERANCE, THEY ARE A WINNING ASSURANCE FOR ANY DIVERSE BUSINESSES THEY DECIDE TO GET IN.
    BEST TO YOU

    ReplyReply
  13. Brother Bob says: 12

    @RW: Always good having some new blood here – welcome! I appreciate your arguments, and let me help clarify why my system is still superior to the current status quo.

    You are correct in that banks don’t know what the fields of tomorrow will be, but it’s a safe bet that a math or engineering degree will make more than an (angry persons)’s studies major will. Let them decide who the best risk is. Will it discourage students from majors with higher interest rates? Yes. And the market will respond – seeing fewer applicants will force universities to lower costs for these majors that pay less. To turn the argument around, is it fair that an art student who might make $20K at graduation should shoulder the same $200K student loan as an engineering major who might make $60K at graduation?

    And you’re right – a student who is passionate about the arts shouldn’t pursue a science degree that they’ll hate or most likely fail out of. In the Obama economy though they’re almost as well off going straight into retail or waiting tables – at least they won’t start out with a crushing debt on their shoulder.

    I also agree with you on the universities stressing teaching, and we should let the markets decide. Give the students information about how much the university stresses teaching vs. research, average class sizes, etc. Let the students choose.

    And my lemonade stand analogy holds true here as well. The continued subsidies have allowed universities to not pay attention to markets and keep pushing tuition upward. And prices to make a difference. When you’re comparing MBA to BA you’re comparing apples to oranges given the differences in levels of education and mastery. To illustrate with a real life example, when I pursued my own MBA back in the 90s I did some looking around at the value of said degree. And unless you had your MBA from a top school (Wharton, Harvard, Duke, etc) there wasn’t a huge difference. So I looked for the best program near where I was living and what the cost would be. Would I have gotten a better education from a top school? Almost definitely, but I wasn’t in a position to attend any of those schools and I got the best value for what I was seeking at that time. All that I’m asking is that we let students have the information to make an informed choice. As it is right now we are forcing them to make huge decisions without as much information as we could in a horribly distorted market.

    ReplyReply

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