For higher education, the solution is more value for less money. Student loans, if they are to continue, should be made dischargeable in bankruptcy after five years -- but with the school that received the money on the hook for all or part of the unpaid balance.
Up until now, the loan guarantees have meant that colleges, like the writers of subprime mortgages a few years ago, got their money up front, with any problems in payment falling on someone else.
Make defaults expensive to colleges, and they'll become much more careful about how much they lend and what kinds of programs they offer.
Such a reform would make colleges extremely focused on imparting useful skills to students. Even if the colleges were on the hook to refund 5% of the default they'd become selective in who they admitted, what majors they steered students toward, how they responded to poor student performance, and what career advice they gave students. I would do this: use both carrots and sticks. Provide colleges bonus money if students pay back their loans. At the same time, make colleges pay when students default. Use part of that payment to use as rewards to colleges when the students don't default.
One of the greatest changes is that a college degree is no longer the guarantor of a middle-class existence. Until the early 1970s, less than 11 percent of the adult population graduated from college, and most of them could get a decent job.
Hey, get less choosy on who gets into college and quality drops.
Today nearly a third have college degrees, and a higher percentage of them graduated from nonelite schools. A bachelorís degree on its own no longer conveys intelligence and capability. To get a good job, you have to have some special skill ó charm, by the way, counts ó that employers value. But thereís also a pretty good chance that by some point in the next few years, your boss will find that some new technology or some worker overseas can replace you.
You need skills to make more money. Who knew?
Though itís no guarantee, a B.A. or some kind of technical training is at least a prerequisite for a decent salary.
The future looks grim for most of those who can't handle college-level material. Surely an argument for building up a big border wall and deporting illegal aliens:
Itís hard to see any great future for high-school dropouts or high-school graduates with no technical skills.
But you can make lots of money without a college degree if you are very smart, self starting, self teaching, and willing to spend long hours learning what is valuable and working your way up. I've seen it happen. Unfortunately, few people have all those attributes. Even most of the people capable of learning technically useful skills in college don't have the sense or the patience to do so. Unfortunately, we live in an era of declining incomes with a 7% drop since 2000. The lower ranks aren't getting much of income growth when income grows and even future economic growth is in question. People need much more competitive skills to succeed in today's labor market.
Alex Tabarrok pointed out something extremely important about college education in America: In the last 25 years colleges have increased overall enrollments by 50% while increasing STEM (science, technology, engineering, math) enrollments by 0. If colleges were held financially responsible for producing useful graduates that sort of wasteful nonsense would stop in a hurry. Less would be spent on education and the money spent would be spent in far more constructive ways.
|Share |||By Randall Parker at 2011 December 04 06:31 PM Education Incentives|