2011 December 10 Saturday
Higher Ed Increasingly Portrayed As Con Game

As this Bloomberg piece by Janet Lorin demonstrates in its title, "Trapped by $50,000 Degree in Low-Paying Job", people who spend a lot of money on higher education are increasingly portrayed as foolish marks in educational con games. Love this one:

Ellis, 28, took about $160,000 in federal loans to attend Fordham Law School. Because his student debt is so high compared to his salary, Ellis said he expects to qualify for a plan that would let him pay 15 percent of his salary for 25 years, and whatever debt is left after that is forgiven.

Think about. He's going to be paying for college for 25 years! The ROI on education is dropping and students increasingly major in low ROI subjects even while paying much higher prices.

Virginia Postrel says government loans have driven up the costs of higher education by increasing demand.

As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay: “There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.”

It’s a phenomenon familiar to economists. If you offer people a subsidy to pursue some activity requiring an input that’s in more-or-less fixed supply, the price of that input goes up. Much of the value of the subsidy will go not to the intended recipients but to whoever owns the input. The classic example is farm subsidies, which increase the price of farmland.

So the US government subsidizes con artists who lure young Americans into debt peonage. Parasitism is such a pervasive and growing problem. Even America's most revered institutions practice it. If the Occupy Wall Street movement wanted to do something constructive it would push for the end of this subsidy. To get an appreciation for just how thoroughly prospective college students get conned read the Voldemort View: the View That Must Not Be Named.

People who want a more cost effective education should look online and aim to get skills useful in the marketplace. That does not get skills that are marginally useful but appealing. Don't delude yourself just so you can study what's fun and easy.

Share |      By Randall Parker at 2011 December 10 04:53 PM  Education Returns On Investment


Comments
Kaz said at December 10, 2011 5:21 PM:

People who want a more cost effective education can just go to their state universities which run at about ~5k/semester (drive/public transportation, don't dorm, 1-2hr commutes are worth it). The costs could be heavily mitigated by scholarships, or a part time job. Work a few years and save up if you have to, there are ways to make this work.

Although the costs shouldn't be this high in the first place, you're just subsidizing the crap of other students and programs that employ useless eaters.

Shawn said at December 10, 2011 5:46 PM:

The reason why people go to college to major in useless majors is for the more intangible benefits. You get to say you have a degree so people don't think your dumb -- even if you majored in, say, journalism. Also, outside of perhaps family members how many people do you hang out with who don't have a college degree? Do people second guess marrying someone who does not have a 4-year degree? I think so. These considerations might make it worthwhile (IMHO) to get in debt upwards of around $50,000 for a college degree. I majored in communication studies and had (have?) terrible job prospects (wrapping up MBA the MBA now) although I wished I majored in business administration as an undergrad I would rather be $50,000 in debt then be stuck associating with proles and being thought of as one.

bob sykes said at December 11, 2011 4:30 AM:

Online courses that cost nothing have no value. No one learns from them. They are a fraud.

Professors do not actually teach. I know, I was one for 37 years. They provide structure and motivation via deadlines, homework, required readings and grades. Every student needs these things to learn. (A substantial majority of people can't learn even with these aids.) And since faculties need food and shelter, too, this gets costly.

Of course, the "knowledge" many professors offer up is fatuous, and most degrees do not lead to gainful employment. So, caveat emptor.

The principal, if not only, beneficiaries of student loan monies are the professors and administrators. The loan monies pay for their salaries and benefits and perks. The students may or may not be beneficiaries of learning, depending on their major. Engineering is always a good bet. The banks are holding pieces of paper, of the same character as subprime mortgages, and they might benefit if they win their bet and the loans are repaid or go bankrupt if not.

At some point, I expect a backlash against the professors and administrators.

Bootlegger said at December 11, 2011 9:22 AM:

No one's bigger on the view that Higher Ed has shit in its sandbox too many times and the day will soon come when the poop must be scooped or else perish in a nasty, disease-infested miasma.

But at some point these kinds of critiques start to sound like the rest of the whining from The Next Generation, "where is my guaranteed pot of gold? Mommy said I was the best!"

Bootlegger said at December 11, 2011 9:28 AM:

"At some point, I expect a backlash against the professors and administrators."

The administrators are driving the bus, the faculty just ride and as long as the bus keeps moving they don't interfere with the driver. The backlash will be misdirected at faculty IMO, because they don't have any Real Power. I would agree, though, that the faculty can be blamed for not navigating the bus better, preferring their cushy seats and headphones. If anything will save Higher Ed it will have to come from the faculty, the remaining few who actually still care.

Wolf-Dog said at December 11, 2011 1:16 PM:

> Online courses that cost nothing have no value. No one learns from them. They are a fraud.
>Professors do not actually teach.
> They provide structure and motivation via deadlines, homework, required readings and grades.
>Every student needs these things to learn.

As online technology improves, this gap will close. The online courses can and will also provide the same motivations with grades, deadlines, required readings, homework, etc. (It was Napoleon who said that mankind is united by only two forces: fear and interest.) In fact, online (or CD based) courses will gradually become so interactive that these will be better than taking notes from the blackboard in many cases. The main problem now is that the screen resolutions of most laptops and desktop computers are inadequate, and the screens and keyboards are uncomfortable. But there is progress and screens are getting better and easier to read. Also programmers are developing increasingly accurate speech recognition software so that instead of only using the keyboard you can also speak to type what you are writing.

Wolf-Dog said at December 11, 2011 1:24 PM:

But the greatest threat to the US is the low percentage of science and engineering students. As mentioned in one of the articles here, it turns out that during the second half of the 20th century years the college enrolment increased by 50 % but the number of science and engineering students stayed the same. And recall that many of the science and engineering students in American universities are foreigners who are planning to return to their countries because the job market in their countries have been improving.

The salaries of college teachers have gone up substantially also, much faster than inflation. This might be due to the lack of qualified professors also. Professors in many countries have very low salaries, but they still do a good job because they like their work.

Chilly Willy said at December 11, 2011 2:10 PM:

I think I'll just print as many real-looking fake deplomas, certificates and degrees to my name as I possibly can. Let the employers find out whether they are real or fake. As long as I get a job somewhere.

Sorry, I'm still in high school and see not much of a future around.

Randall Parker said at December 11, 2011 4:05 PM:

bob sykes,

To make online learning work well what's needed is a decoupling between course presentation and testing. Online tests will enable people to monitor their own progress to know when to show up for proctored tests taken for certification of mastery of some subject.

The University of Colorado, Colorado Springs Department of Mathematics videos for many math courses provide an example of useful lectures. If we can get online tests for math courses to test knowledge then people could separately pay for proctored course taking in person.

Bootlegger,

My guaranteed pot of gold: colleges and universities are overselling the advantage of their degrees. The articles that I link to on this topic are providing information that teenagers (and their parents) really need to hear.

Young people are getting out of college with much higher debts than previous generations used to accumulate.

The job market sees their usefulness as pretty limited.

Half Sigma said at December 11, 2011 4:26 PM:

I agreed with you 100% UNTIL... the end when you said that people can get skills online that are valued in the marketplace. Employers do NOT value actual skills in entry-level employees, they value credentials. The system is rigged so that most people are dooming their financial future unless they play the credentials game.

bbartlog said at December 11, 2011 4:56 PM:

Some employers value actual skills. They administer skill tests. I've had to take tests for skill in AutoCAD (16 years ago when I did CAD work) and later perl. Both were quite tough and I thought I had done poorly, but in both cases it looks like I was at least better than other applicants. Not to mention a none-too-legal thinly disguised IQ test...
Of course, one issue with this is that you still need a good enough resume or reference or what have you in order to get to the point where they'll test you. But I haven't found lack of a degree to be an insuperable obstacle. On the third hand... it's not like I made six figures in management... but that has more to do with temperament than with my lack of a college degree.

Brendon Carr said at December 11, 2011 5:52 PM:

Skills tests are for drones and the hired help, credentials are for the overlords.

Wolf-Dog said at December 11, 2011 10:03 PM:

Randall Parker, the website of the University of Colorado that you have listed above is certainly very nice, but note that these videos are still old fashioned lectures where a teacher is just writing on the blackboard and speaking in person. This is still not a lesson that uses computer graphics and imagery to illustrate the ideas. This will still take time to develop, but ultimately it will become even better than classical courses. I claim that computerised teaching can actually be made not just equal, but actually _SUPERIOR_ to taking the course in a college. So the best is yet to come. Obviously the top universities will object to making their entire curriculum available (for materialistic reasons), but gradually many good professors from all over the world will contribute to designing great courses for electronic (or photonic in the future!) learning. At least for undergraduate education, 90 % of the courses can be made electronic, while there will be more research projects with real human mentors (junior and senior thesis courses, etc.)

In fact, these days many college textbooks are so well written that chapters are structured to look like real lectures, where each chapter has an introduction, examples, theory, applications, homework problems ranging from easy to difficult exercises, answers to even numbered problems, etc, so that each chapter of a college book often looks like a lecture, except that it is actually better than the lecture itself. In the past many books were very badly written.

So writing a good curriculum is also part of the electronic teaching. A clear list of homework, deadlines, etc, and self-tests that will give the student a clear idea about what grade they would get if they take the real exam at that moment.

dbjudd said at December 12, 2011 9:10 AM:

If Fordham Law falls into the fun and easy category then all bets are off.

Randall Parker said at December 12, 2011 7:29 PM:

HS,

I think I understand your perspective. But I suspect you are not looking at most of the jobs in the economy. Very few have any chance to become investment bankers for example. For the majority of readers I think my advice is more useful than you seem to think.

Credentials versus skills: It very much depends on the job. If you want to get a job in investment banking then credentials from the top of the Ivy League absolutely are key. Of course, you have to have a high IQ to get into those top Ivies in the first place. If you want a job in the federal government then credentials are essential.

Many professions and other occupations have managed to get legal barriers erected so you absolutely must get credentials. But not all these occupations have college degree credential requirements. For example, pass the top certification tests offered by Cisco and you can make over $100k in some markets. I've got a friend who basically has a incentive schedule for each cert he gets. If he wants another 5% a year he needs to pass another cert or two. Many other occupations have state-level credential requirements.

Also, there are occupations where skills are far more important than credentials. There's a sliding scale between jobs where credentials are most important to jobs where credentials and skills are both important to jobs where only skills are important.

When I tell people to go study online I'm really saying go study for skills and credentials that are valuable. So, for example, things worth studying for (online or otherwise) include:

- CPA
- IT certifications from MSFT, Cisco, and several others.
- Software app tests. As bbartlog says above, many employers test for skills using specific apps.
- Assorted state-level licensing requirements such as for construction contracting or real estate.

Granted, these are not skills for jobs which put you on the pathway to wealth. But for most people these are skills that could raise their income.

Half Sigma said at December 13, 2011 4:52 AM:

The CPA is a useful credential for people who work in accounting. It also now requires 5 years of education in addition to passing the test, so you need a Masters degree with that,and the more prestigious the Masters degree the more useful the CPA credential that goes with it. But given that I took the CPA exam once, I don't believe it demonstrates genuine skills; it's a lot of memorization.

Bootlegger said at December 13, 2011 6:50 AM:

"My guaranteed pot of gold: colleges and universities are overselling the advantage of their degrees. The articles that I link to on this topic are providing information that teenagers (and their parents) really need to hear.

Young people are getting out of college with much higher debts than previous generations used to accumulate.

The job market sees their usefulness as pretty limited."

They aren't "overselling", the best jobs still require a college degree. What Higher Ed is doing, and why I agree with much of what you say, is overestimating the proportion of people who actually NEED to go to college to get a decent job. Employers still want the higher ed degree, but mostly because its an indicator of a person's work ethic and IQ (caveat: the correlation is not strong between the two).

The higher tuition costs and debt are, a you say, the biggest farce.

Bootlegger said at December 13, 2011 6:55 AM:

"The salaries of college teachers have gone up substantially also, much faster than inflation. This might be due to the lack of qualified professors also. Professors in many countries have very low salaries, but they still do a good job because they like their work. "

Umm, no they haven't. http://chronicle.com/article/Faculty-Salaries-Remain-Flat/126588/

Faculty wages are rising at less than 1.5% while the rest of the country is about 3%.

http://jobs.aol.com/articles/2011/08/01/wage-increases-for-u-s-workers-not-keeping-up-with-inflation/

WJ said at December 13, 2011 10:29 AM:

"Online courses that cost nothing have no value. No one learns from them. They are a fraud."

Who the frack creates a fraud that costs you nothing? If online courses have a way of testing for competence, then they are just as good as a real classroom.

The biggest problem with college is that it's all waste piled onto waste - wasted money and wasted years of life, piled onto the years we waste warehousing kids in high schools that teach them nothing. Kids should be finishing high school with useful and worthwhile skills - accounting, drafting, lab, programming and software skills, and vo-tech of all kinds. The fraud is that you should have to go to college to get a useful skill, or that somehow you will be enlightened by a degree in English, history, or psych - a higher level of human being for having taken Western Civ 101.

Well, the enlightenment part ended when colleges did away with core curricula in literature, history, art, and philosophy. Nowadays, outside of their majors, students at most schools take whatever courses they want. Unless you major in engineering or a select few other fields that's an incredibly broad and random selection.

Today college is used as substitute for what the law does not allow - intellegence tests. It's likely that intelligence tests will NEVER be allowed, thanks to the courts and the Congressional Black & Hispanic Caucuses. But the least we can do is move the substitute for those tests back into high school where it always belonged. Create different tiers of high school diplomas. Let the dumb students earn the basic diplomas and let the smarter kids with better work ethics earn the more meaningful ones. You could have Basic Diploma (to satisfy the minority lobbies, who will not countenace higher graduation standards), Diploma with Honors, Diploma with High Honors, and Diploma with Credential A, B and/or C. Then bar student loans or admission to public 4 years for students lacking an honors diploma.

The payoff is that kids waste less of their lives pursuing a college degree that is useless or that they aren't qualified for, they have some tangible goal to achieve while still in high school, and they get into the workforce sooner. We need young Americans on the tax rolls sooner, paying into the system longer. We can do that by tacking years onto the end of their expected working lives, when they're old and worn out, or tacking them onto the beginning, by getting them in the real workforce a year or two earlier.

Half Sigma said at December 13, 2011 2:06 PM:

"Today college is used as substitute for what the law does not allow - intellegence tests. "

The law certainly does allow tests of skills needed for a particular job. They do it all the time for .NET programmers.

If companies don't give objective tests, its because the people who CONTROL those companies don't believe in them. And remember, the same people who control the companies control the government as well. Like Jon Corzine, who goes from CEO to governor. This is pretty typical.

Randall Parker said at December 13, 2011 7:04 PM:

HS,

A lot of companies use subject matter tests and algorithm tests as proxies for IQ tests. But these tests are inefficient as proxies. If they were able to deliver both IQ and assorted other tests to some subset of hires they could calibrate and improve their other tests. But they mostly can't do that.

Though now that I think about it, they could test out the tests in India and deliver them along with IQ tests as a way to calibrate and select tests. They probably haven't thought about it though (being well trained in CrimeStop). US hiring practices (or German hiring practices) end up setting the standard for what they do abroad.

ANSWER ONE said at December 16, 2011 10:46 AM:

"loyers do NOT value actual skills in entry-level employees, they value credentials. The system is rigged so that most people are dooming their financial future unless they play the credentials game."

You said it babe. I fully agree.

Shawn said at December 17, 2011 7:54 PM:

"A lot of companies use subject matter tests and algorithm tests as proxies for IQ tests. But these tests are inefficient as proxies. If they were able to deliver both IQ and assorted other tests to some subset of hires they could calibrate and improve their other tests. But they mostly can't do that."

I have seen some hedge fund job postings on Monster where they say that want a certain ACT score. It seems like it would be a good proxy for IQ.


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