mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
More Air in the Education Bubble

For all the talk of de-leveraging in the economic and financial media these days, it looks like at least one group of borrowers is bucking the trend–students. According to the New York Fed’s latest Quarterly Report, released late in the week, while all other forms of debt in the US have fallen by $1.53 trillion since the outbreak of the financial crisis, student loan debt has gone up by $293 billion.

The report contains much more. It notes, for example, that outstanding student debt increased by another $30 billion last quarter to reach a dizzying total of $904 billion. Add to that the fact that delinquency rates have been rising steadily and are now higher than those of auto loans and even mortgages, and this makes for pretty depressing reading.

These figures point to the spiraling costs of higher education that such loans are being used to meet, as well as the dubious contribution our colleges and universities are making to their students’ ability to pay off their obligations. Like the pre-2008 housing market, this is a broken system. How much longer can it go on?

A report in the [paywall protected but excellent] Financial Times adds more details to the picture of growing problems in the educational system. Studies of recent grads find that many students did not get much useful counseling in college about what they should study.

A survey from Rutgers University found two-thirds of graduates who finished college between 2006 and 2011 would have made different choices, such as majoring in another field, taking on more internships or part-time jobs, started looking for work sooner, choosing a different institution or even skipped higher education altogether. […]

About a quarter of the employed graduates said their position was below their level of education, a quarter said they were earning less than they expected, and a quarter said they had to accept a job outside their field in order to find work.The median starting salary for those who finished school between 2009 and 2011 fell to $27,000 from $30,000 in 2006 and 2007.

Falling wages, bad guidance and rising debt: these are the signs of a system that is failing students on a massive and unsustainable scale.

But students share responsibility for the debacle. Students — and their parents — have had plenty of warning these days that college is something to be approached with caution and care. Nobody makes students sign up for worthless courses; nobody makes students pick majors that do not lead to good jobs.

Colleges and universities need to learn how to cut costs — generally by figuring out new and cheaper ways of doing things, by getting rid of bloated administrative layers and by focusing on the activities that support their core mission.  Students, with help from their parents, need to stop thinking of college as a four year entitlement program and start thinking more seriously about how to use this time to prepare themselves for challenges ahead. And we professors need to understand and honor the financial sacrifices that many students are taking to be in our classes — and do our level best to teach them what they really need to know.


Features Icon
show comments
  • Exile

    This raises a highly, highly relevant fact of modern American college life: the utter predominance of moral relativism in every aspect of college life — from politics to lifestyle choices to what one should study — has led to a demoralized and rudderless studentry (to quote Strunk and White).

    I graduated from a top liberal arts college a few years back. I entered college wanting to study Physics and Literature, and accepted the admissions offer of my now-alma mater over my No. 2 (Bowdoin) pick because the alma mater’s English Dept still had lots of the canon (aka “dead white males”) in its course catalog, while Bowdoin’s literature classes had been commandeered by the trendy, non-canonical and, to my mind, frivolous and unimportant works that some especially relativist contemporary literature professors prefer (“Late 20th-Century Caribbean Women’s Romantic Fiction” and the like).

    Nonetheless, I had NO guidance on selecting courses before my first semester. As a result, outside my Physics and Math courses, I ended up taking a range of absolutely worthless poetry and history classes poorly taught by professors who rejected “traditional” teaching methods (e.g., reading entire books rather than a few paragraphs they thought were relevant from Book X). It didn’t help that my academic advisor was such a professor.

    Only after my aimless and unsatisfying first year did I realize I needed to fix things or I would probably lack the motivation to graduate. I sought out the most “dead-white male”-centric courses. I found out who the most difficult and rigorous profs were in the humanities departments. And, though I was tempted to major in a humanities subject, I doubled down on Physics and Math because I thought I might want employment at some point and pay off the huge amounts of loans I had (hint: my family is not rich).

    What happened? I graduated Summa Cum Laude and am currently employed by a top financial services firm, a challenging, rewarding and impactful job.

    But the point to be made here is that NOBODY being paid by your college will offer decent guidance. Instead, you might get advice about “following your heart” or doing what is “interesting” or being told that all departments are equally good. If I didn’t have a natural predilection toward the hard sciences and a desire to know the Western Canon and force myself to take the bitter medicine of studying with the toughest (and most traditional) profs, I would have wasted my 4 years, $200K, and who knows where I’d be working now.

    It also helped, I should note, that I read “The Closing of the American Mind” at a friend’s urging in my freshman spring semester. I often wished that the pre-60s curriculum still existed at schools outside U. Chicago and Columbia, that despite my own efforts to get a good Western Canon grounding, no classes available actually offered me a comprehensive overview.

    Meanwhile, don’t expect anyone to tell you, “Son, if you want a decent job, you had better study something difficult and quantitative. And if you want to gain a decent perspective on life, know the Canon.” Nothing. Today’s universities are, to the contrary, dominated by moral relativists who tell you that there is “no right or wrong class to take,” and save a few crusty old types most profs are pushover namby-pambies these days.

    It’s sad that there is nobody willing to push students in the right direction at most colleges these days. It results in so much wasted human capital, time, and energy … and, more importantly, in legions of graduates who pay hundreds of thousands of dollars to be effectively unemployable save for a few academic commonplaces about the evils of capitalism they may recall from their class on “Fast Food Nation” or “The Lexus and the Olive Tree.”

    And all because universities are afraid to take a stand and tell students what is important, just as more and more non-important classes, departments and college administration-sanctioned clubs proliferate. The university has gone from being an unabashed, and worthwhile, shaper of students’ moral compass to being a wishy-washy bucket of thin gruel of interdisciplinary studies, soft subjects, and ethnic-identity indulgences, serving up a counterproductive dessert of “we’re all snowflakes.”

  • Anthony

    “Add to that the fact that delinquency rates have been rising steadily and are higher than those of auto loans and even mortgages….” Is present model sustainable? Ought majors lead to jobs in post industrial economy? As Charles Murray asked, are too many people going to college? These are questions to include as we further assess post secondary education mission going forward – as we seek to do our level best (regarding public policy).

  • NC

    Nothing will change until the University views the student as a customer. Demanding customers will force change from outside in.

    Administrators and Professors are not the customer. Consumers are customers, not producers.

  • Kansas Scott

    I find your ongoing posts about the need for reform in higher education in general and student loan debt in particular to be among the most compelling posts you offer.

    The New York Fed’s report provides important numbers to a general policy discussion. I found the March 5th blog “Grading Student Loans” from that fed ( to be particularly revealing.

    Crushing debt is clearly a growing problem. Of the 37 million holding student debt (as of the third quarter of 2011) “only” around 10 million have more than $25,000 in total debt. That may or may not be manageable as $25,000 repaid over 10 years at 6.8% interest would be about $300 a month. However, that kind of payment would certainly have kicked me in the shorts.

    The scary part is how rapidly the debt is growing and how high it already is for those under age 30. Almost 40% of debtors are under 30, the average is already $20,000 and we can assume many of those are continuing to add to their debt.

    Please continue your calls for change in higher education. Change should not be viewed as a threat to those in higher ed but rather a saving lifeline to a sustainable economic model. Change isn’t fun but it is better than becoming an unaffordable mud pot.

  • Anthony Esolen

    I have been a professor of English literature for 22 years, and I second everything the first commenter has said.

    There are two reasons to go to college: one, to receive the sort of education you will need to perform the sort of work you wish to do; two, to study the best that has been thought and written, in the history of mankind. In other words, college is either a form of advanced training in a technical or scientific career, or it is an education in the classical liberal arts. It may be both at once; it never should be neither.

    Most schools for most students deliver on neither. Students themselves are much to blame, too; that sybaritic life they demand costs a LOT of money.

  • Kuze

    Government: “It seems people who own homes are better off. Let’s take measures to encourage home ownership!”


    Government: “It seems people with a college degree earn a higher income. Let’s encourage people to get college degrees!”

    Tick Tick Tick

    Maybe Gemany’s vocational approach to education is worth taking a look at as opposed to just pushing kids to go 100k in debt getting degrees in Greek poetry and Eco-Feminism.

  • thibaud

    What subject does Via Meadia’s author teach?

    Does it prepare students well for the jobs that actually offer decent compensation, security and professional growth?

    Isn’t it time we moved toward a two-track system whereby only a restricted few high achievers go on to four year colleges, and everyone else gets an outstanding technical education that combines focused, rigorous scientific grounding with internship- and co-op based technical training?

    We really need to get out of this USA! USA! cocoon and study how other advanced nations do it – especially the Germans. The Germans are, on average, far better educated than our people are, they have lower unemployment, greater job security, and very competitive world-class enterprises.

    Certainly their two-track educational system that puts heavy emphasis on vocational training at the secondary level is a big factor in their success.

  • Recent Grad

    Thibaud, I’m not sure we need to “separate out” those at a young age who are “not good enough” to go on to college. This seems like a particularly, well, German way of doing things.

    I think that we can allow anyone who wants to do so to go to college; getting a higher education, if done properly, is good for anyone — and besides, at age 18 students are still unclear on who and what they want to be, so it’s better to allow them to grow and gain some further schooling until age 22 than to force them to be an air-conditioner repairman if they haven’t shown potential for being the next Shakespeare by age 17.

    The issue is that we need to stop viewing a college diploma, regardless of how, where and in what subject it was obtained, as a path to a great job. I would guess that recent years have seen the higher-ed market expand a lot more in the lower tiers of US universities than in the higher tiers. That’s because too many poor students go to poor colleges expecting an income boost. To some degree, they will probably get that boost; but is it equal to the amount they spend on the diploma? That hinges on the student, the college, and how well they do there.

    Like any bubble, this is a question of perception. If the rewards one gets from going to a second-rate college are seen to be diminishing, then students (and their parents) on their own will realign their perceptions and start veering away from the college path if it seems unlikely to benefit them (case in point: a friend of mine who had been intent on going to law school decided not to do so after his LSAT scores suggested he would not get into a top-10 school. Seeing the law-school bubble in action, he decided against law school, and now he’s making $150K per year as an HR specialist at a biotech).

    In other words, the market will take care of these things without us deciding, German-style, what 17- (or 16- or 15-year-old) is “good” and which “bad” and therefore that they need to take Path A or Path B for the rest of their life. Incidentally, Germany’s higher-ed system is seen as second-rate compared to the US or UK’s and attracts relatively few international students. The government there is currently pushing forward a plan to overhaul certain universities as a “German Ivy League” to push them closer to their American counterparts. Also, until a few years ago, Germany’s unemployment rate was very high compared to the First World, and its recent successes are more attributable to labor reforms under Schoeder than to its higher-ed system.

    At the end of the day, the market will — and likely has already begun — push students to make decisions about what will give them return on their time and money. If that means that poor students will be less likely to go to college if they can only go to poor schools, those schools will start to wither away. If it means that prices have to come down, that will happen (and it already would have happened if the government weren’t so hellbent on throwing federal loan dollars at every student studying every subject at every college). If it means that colleges will have to offer more challenging and clearly relevant classes to students (as opposed to offering majors in “Sexology” or “21st-Century Latino Gender Studies”), they will, over time, do this.

    In short, changes are coming, but we will all be better off if we let students make the decisions that seem good for them rather than have the government try to follow Germany’s approach to slotting students by expected future profession at a young age (shudder). The best thing the government can do is pull back — and that means ending its overly generous subsidies both of tuition as well as grants that fund useless social-sciences research done by academics.

  • Brendan Doran

    The German public sector and Germany’s elites don’t hate Germany as much as ours hate USA! USA! They also aren’t an ongoing and ever expanding exercise in racketeering and organized crime, our elites are committed to both.

    Study that.

  • bob

    On average, the Germans have higher IQs, greater honesty, a much greater work ethic and greater social cooperation than Americans. Some of this is genetic, and some is deeply cultural. So good luck on emulating the Germans.

  • Alex Scipio

    Given that an undergraduate degree fulfills the same basic function filled by a high school diploma only a generation or two ago, perhaps undergraduate education ought to be similarly modeled today: core required courses (more than the current GenEd), real coursework, profs paid to teach and not for research (ie dump “publish or perish”) and EDUCATE the students, leaving research, publishing, TAs & victimology classes for grad school for those with more money than brains – the kind who take those courses to begin with. This would both increase the level of education AND lower the costs of delivery while acknowledging the fundamental filtering system a Bachelors has become. And the worthless courses – and professors of same – all would be offered only to those who preferred being layabouts to becoming productive citizens, parents, voters & taxpayers. Just a thought.

  • Otiose

    The higher education system has access to unlimited credit via their student borrowers and no penalty for poor results. After the students graduate and fail they the students are left with all the repercussions. Students that succeed pay into endowments. It’s no wonder that the system has seen ever growing costs and numbers of admin types with ever declining standards.

    If some proportion of student loans that fall into default were tied directly back to the institutions that graduated the students that took out the loans, or in other words the lenders have some financial recourse to the universities that generated the bad loans, then the universities would change their behavior radically.

    We would see much more care taken in admitting students. Fluffy majors and the professors that teach them would become liabilities that could no longer be afforded since their output would tend to fail more often.

    Schools that disproportionately generate failing graduates would quickly go out of business thereby removing the worst of the supply providers. With a more limited supply the quality of teaching would go up as would the quality of graduates. A college education would mean something again. Paradoxically the overall costs would likely decrease as credit’s true cost was allocated properly.

    Poor, but worthy candidates would still be able to get aid and loans, but schools would no longer be motivated to take low merit students.

    As adults took over the management of surviving schools they would be motivated to ensure that what professors publish have some quality to it vs all the garbage that is published without be read or cited by anyone.

    The children of the rich would still find schools to accept them, but with the rising quality of the student body and professors, any such children of low merit would stand out more than they do today. Today they get lost in the tide of low standards.

    Minority students of merit would have no problem gaining acceptance, but affirmative action as done now by the majority of schools would disappear as taking in large numbers of students with high probabilities of failure and funding them with loans will no longer be viable. It would a quick road to bankruptcy and would lead to a rapid change in the public pontificated views of the surviving academics, who would find Sowell’s opinions suddenly more worthy of serious consideration.

    With the simple shift of financial responsibility back to the universities, we would not only see the changes listed above, but the lifting of quality would reverberate back down into the system – in particular we would see the quality of high school instruction improve.

    Studying for real results would become relatively more important. One result would be that the stranglehold that the blue education teachers’ unions have would be broken very quickly as tolerating their continued protection of low quality teachers and methods would be too costly (failure to get into a real college or university).

    The key to solving much of our education system’s problems lies in removing the systems access to unlimited cost free credit/loans. It’s this access that’s become a cancerous growth destroying standards not only in our higher educational institutions, but down into our K-12 systems. Remove free no recourse credit and the healing process can begin, and the healing will happen very quickly.

    The primary difficulty in a democracy is getting a great many parents to accept that their child may not be as gifted as they may believe or hoped.

  • Marc

    Why are we arguing about interest when we should be arguing about principal? We could solve this bubble overnight by making the schools co-sign for the loans. That would very quickly risk- adjust majors and provide important signals to parents, teachers, and students.

  • thibaud

    Germans who do not go to college are on average as well educated as most Americans who’ve been to college. This is because the cultural/humanities grounding provided in the German secondary educational system is equivalent to the first two years of humanities/soc sciences at American four-year universities.

    There is absolutely no reason that we cannot provide EVERY American the same kind of humanities and cultural/Great Books-style grounding in high school – instead of fobbing this off to the college system.

    All we’re doing is prolonging the amount of time that American young people spend not studying, not learning, not mastering subjects, with the result that instead of coming out of school at age 19 or 20 ready for a job and with a solid grounding in our cultural heritage, they go to college (or not), where they spend 5 or 6 years messing around and maybe, possibly learning by age 25 a smattering of what they should have learned at age 16 or 17.

    This is extraordinarily wasteful, in every sense of the word. It is a foolish misallocation of trillions of dollars in educational spending, it is creating a massive household debt overhang, it does not meet employers’ needs.

    The correct solution is not, as so many here think, more “consumer” choice, better “service” etc. The reality is that most young people are simply not capable of taking charge of their education and forgoing the many opportunities our society offers them to mess around and underachieve. We need to guide people toward appropriate career paths at an early age, and offer them both a better, more rigorous education and greater employment security – even at the cost of less individual choice and less individual freedom.

    We cannot afford, as a society, to keep throwing away trillions on people who cannot hack college work, do not belong in college, will never gain anything useful from the extraordinary drain on communal resources that results from our worshipping at the altar of their choice and freedom.

  • thibaud

    @ Recent Grad – “it’s better to allow them to grow and gain some further schooling until age 22 than to force them to be an air-conditioner repairman if they haven’t shown potential for being the next Shakespeare by age 17.”

    Not sure if your studies included arts of rhetoric, RG, but you might want to pay attention to those rather nasty habits of ludicrous exaggeration for effect and setting up straw men.

    The training imparted by German vocational ed is in most cases on a par with what most American four-year COLLEGE GRADS receive. Funny you mention Shakespeare: again, the average German 19 year-old is far better grounded in the great works of western literature than most US college grads are. They study Shakespeare, and Schiller and Goethe and Mann and the rest, at the secondary level.

    We used to as well, until we began the current practice of progressively kicking the educational can further and further down the road, to the point where today’s college upperclassmen are, on average, less literate, less culturally aware, than HS grads of 100 years ago.

  • stan

    The University of California at San Diego, for example, is creating a new full-time “vice chancellor for equity, diversity, and inclusion.” This position would augment UC San Diego’s already massive diversity apparatus, which includes the Chancellor’s Diversity Office, the associate vice chancellor for faculty equity, the assistant vice chancellor for diversity, the faculty equity advisors, the graduate diversity coordinators, the staff diversity liaison, the undergraduate student diversity liaison, the graduate student diversity liaison, the chief diversity officer, the director of development for diversity initiatives, the Office of Academic Diversity and Equal Opportunity, the Committee on Gender Identity and Sexual Orientation Issues, the Committee on the Status of Women, the Campus Council on Climate, Culture and Inclusion, the Diversity Council, and the directors of the Cross-Cultural Center, the Lesbian Gay Bisexual Transgender Resource Center, and the Women’s Center.

    Less Academics, More Narcissism by Heather Mac Donald – City Journal

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service