College Isn’t For Everyone

I’ve been spending a lot of cog cycles processing ways to make money doing education. It’s apparently quite difficult. With statements like There is No Profit in Education, No Competitive Advantage to Better Learning. and posts about Why Education Startups Do Not Succeed, as well as a (conspiratorialist) video about the College Conspiracy.

From these discussions, I’ve learned some interesting things:

1. The well-to-do view education as an investment, while the ‘poor’ see it as a cost. Those who view it as an investment are relatively price-insensitive, so pushing for quality increases costs and disenfranchises those who would benefit the most (if only their viewpoint could be changed.)
2. Student loan debt has exceeded 1 Trillion. I’m not sure if this is fully represented in the US. debt clock. If graduating students exit college into a recession, and are unable to find a job, this puts additional strain on government finances (because they guarantee student loans).
3. One factor in the rising cost of education is the availability of low interest student loans. It’s a case of too much money chasing too few goods.
4. Our educational standards are slacking. We have a feel-good assesment system that’s been suffering grade inflation for some decades. Unfortunately for the future of society, education majors are the worst offenders. I’ve lamented the lack of talent in my students before, this data only corroborates my feelings.

Basically, we’re doomed. I think the only way to solve this issue is with marketing education, and finding a way to commoditize it, so you can make high-volume sales to the lower economic class. Perhaps, the way out isn’t education, but trade schools.

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I really wanted to stop above, but I’m just compelled to bring a somewhat harsh viewpoint into the mix. Some of the issues above deal with the economics of education. I’d love for everyone in society to be brilliant and creative; but it’s not going to happen.

Let’s go back to first principles and look at the costs: For a person to be educated now takes the first 20-30 years of their life. We know, from history, that people can be economically productive starting at early age. For arguments sake, let’s say we all have manual labor value starting at 10 years old. So, beyond just the child rearing investment (borne by the parents) that individual is actually a social drain for an additional 10-20 years. These years happen to coincide with what’s usually the most productive in the person’s life. That is, when they’d focus on building a career. So, for any of this to be economically sustainable, we’d have to expect (on average) that the educational investment increases productivity from 30 thru retirement enough to pay for the lost years of work.

Given that, we have to admit that education is incredibly costly. Just in terms of the years sacrificed, not necessarily in terms of money or productivity. This represents an intrinsic cost, that we cannot shuffle away with creative accounting. Because it’s a high cost, we should immediately see that education is not a right. It is a privilege; if not for the individuals, then for society as a whole. We have to be rich enough to afford the investment. This remains true, even if the investment is socialized (i.e. the economics are amortized across everyone, even those that only indirectly benefit).

Because it’s a privilege, it’s not for everyone. Now, I don’t mean to disenfranchise any class of people; but I will go on record as saying that I think education is only for those that can afford it. So, let’s examine what I mean by that. I don’t mean that education is for those already wealthy. I do mean that education, as an investment, is something that should be available to as many as possible. That is, we should seek a financial system that gives us a good return. Those currently in a lower economic class should also have opportunities to raise themselves up. Our goal here should be to lower the cost of this privilege as much as possible to reach as many people as possible. If it’s only for those that can afford it, it should be made more affordable (lowering the cost is not the same as granting an entitlement or right).

One of the best ways to make an investment available is of course by offering a loan. This way people without current means can speculate on the investment return, purchasing their education with the expectation on future earnings. That comes with a strong caveat though, which is not factored into our current system. We should not set people up to fail or default. We should not offer loans for study programs that have low future earnings. Banks would have done this naturally (because they don’t want a client to default on the loan anymore than the client likes to go bankrupt) if not for government incentives to offer more leniently. This malinvestment was perpetrated by government guarantee of all student loans, which eliminates the financial risk to the bank, resulting in more loans to more clients for a wider class of study programs to people with lower expectations of return than would be normally approved by any fiscally responsible institution. This situation of course hurts most those that take the loans. And is only one example of poor government finance decisions that drastically harm the very people that government is supposed to be helping.

Actually, coming from the science background. I see no problem with banks that choose to only issue loans to those which have (a) a promising track record of good grades and (b) declare an interest majoring in a STEM program. Because these are the people and skills that we desire in our society, they have a good rate of return on the investment. I know an undesired side-effect is that the humanities and liberal arts will struggle, but unless they can demonstrate a return, so be it. I know they won’t completely disappear, because they retain good cultural value.