The past few decades have witnessed crises of confidence in one American institution after another. Yet even as our financial system crashed and our legislature descended into opportunistic obstructionism, one American institution sailed onward, serene in its global supremacy: the university. Year after year, American universities continue to obliterate all rivals in the international rankings, snatch top researchers and graduate students from every corner of the globe, and produce an uninterrupted stream of groundbreaking scientific and technological innovations. An outsider might be surprised that so much ink is spilled fretting over a crisis in American higher education. But this is where we find ourselves.
The chief object of handwringing is the exploding cost of an undergraduate education. Tuition has risen by a factor of more than ten since 1980. To those on the political Left, this is a story about inequality. Students from disadvantaged backgrounds, it is said, are being shut out from the best path to a better future, freezing our class structure in place over generations. To those on the Right, rising costs are a sign of waste. College, we are told, is about “signaling”, or jumping through hoops rather than gaining useful knowledge or skills. Both sides worry that the increase in tuition is causing an explosion in student loans, trapping graduates into decades of indentured servitude. Much like the housing bubble of the 2000s or the tech bubble of the 1990s, the “higher ed bubble” is supposedly nearing a bursting point.
In College: What It Is, Was, and Should Be, Columbia American Studies professor and National Humanities Medal recipient Andrew Delbanco touches on all of these issues, but his true focus lies elsewhere. To Delbanco, the most dire threat to higher education springs from a deeper tectonic shift—the slow metamorphosis of the American college from a locus of teaching, mentorship and personal growth into a factory pumping out hard-science applied researchers and trained engineers.
Delbanco evinces a passion for his subject few historians can match. He lovingly traces the development of America’s colleges from their Puritan religious roots through their difficult adolescence as impoverished boarding schools to their emergence as centers of scientific research and technical training along the German model in the early 20th century. College faithfully recounts the many debates over the purpose of the institution, many of which revolved around the question of how exclusive colleges should be and how much guidance students should receive. Anyone who imagines America’s universities as stodgy and unchanging bastions of social conservatism will find this part of the book particularly eye-opening.
The true emotional punch, however, comes when Delbanco answers his titular question of what college should be. Although sentimental in style and organized in a somewhat scattershot manner, his argument is an old one that somehow feels fresh coming from his pen. College, Delbanco believes, is a place where young people learn to be democratic citizens.
The years before and after age twenty, Delbanco argues, are where people learn to be people. This pivotal time in life—what the Japanese call the “blue spring”—is where most of us escape our parents, discover our interests, form our political beliefs, experience our first love, make our best friends and choose our (first) careers. It’s a time when the deepest elements of our individuality are all in play. It is natural to wonder: Wouldn’t our potential be maximized if we could go through this change under the gentle guiding hand of the wisest members of the older generation?
Such is the halcyon vision of college in which Andrew Delbanco believes. He envisions young men and women spending hours “loafing”, reflecting on what it all means and who they want to become. College professors, in this vision, are mentors and guides, and course material—the classics of philosophy, history and literature—are lamps lighting the way to a better and well-rounded self. A broad-based liberal arts education, Delbanco claims, is infinitely more important than technical training for the creation of democratic citizens.
Thus, Delbanco doesn’t really take sides in the “human capital vs. signaling” argument that has become so familiar to economists and pundits. Indeed, he sidesteps it completely. Although he never uses the term, he clearly thinks that there is a far more important form of human capital than the ability to code an app or work a spreadsheet, and it is this form of human capital, Delbanco tells us, that is under threat from the transformation of colleges into universities. Today, most senior professors are more interested in research than undergraduate teaching or mentorship. Undergraduates, who don’t understand what college really should be about, are only interested in grabbing their credentials and getting out, and there’s no one to tell them otherwise. Meanwhile, the run up in college costs has made it harder for America’s lower classes to become proper democratic citizens. This, in a nutshell, is Delbanco’s warning.
College serves as an important reminder, in this age of statistics, of the value of things too complex and intangible to be identified by a regression analysis. Human motivation is the eternal X-factor; talent and ability and connections are nothing without the motivation to put them to use. Sometimes our species stumbles on an institution, like college, that seems to provide certain kinds of complex motivation that are devilishly difficult to acquire elsewhere. Delbanco calls these things “character” and “democratic citizenship.”
That said, Delbanco underestimates the continuing effectiveness of college in building character. He focuses on professor-student mentorship, but touches only briefly on the effects of peers. “College” is a word that means “gathering.” However important professors are, the chance to meet, debate, collaborate with, befriend and fall in love with other talented members of one’s generation from different places and temperaments seems far more crucial. In this respect, America’s universities are more effective than ever. Dormitories and college towns, two things conspicuously lacking in most other countries, are great for facilitating exchange and forging relationships among students. Pioneered by Stanford and Princeton, a new community-oriented kind of on-campus housing called “residential education” has attempted to bring college students into closer contact not only with each other, but with older students, professors and non-academic role models such as entrepreneurs. The visible hand of professors might have been lost, but the invisible hand of community lives on. Indeed, this is the main reason why online education may replace classes, but not college itself.
Meanwhile, right as he is about the importance of undergraduate life for human development, Delbanco gives short shrift to universities’ function as centers for research. From nuclear power to genetics to the internet, many of the ideas and inventions that make America the world’s technological leader have emerged from America’s university research. Undergraduate tuition, state and Federal government funds and alumni contributions provide much of the money to fund that research. It’s a strange system, but it continues to deliver the goods.
What about the idea that higher education is in a bubble? Certainly, we should be concerned about the huge increases in tuition over the past three decades. But college is still a worthwhile investment. For one thing, the “college premium”, the expected increase in lifetime earnings associated with going to college, remains large. According to the U.S. Census Bureau, a bachelor’s degree-holder can expect to earn almost a million dollars more over his career than someone with only a high school diploma. A million dollars is a lot more than the total opportunity cost of college, including not just tuition but also foregone earnings, even at the most expensive schools.
Not only do college graduates make more, but they also run far less risk of unemployment. A recent study by Georgetown University finds that the unemployment rate of college graduates is 6.8 percent, while the rate for those with only a high school diploma is 24 percent—more than three times as high. In other words, by the averages, college is still well worth the price. Thus there is no “college bubble” in the same sense that there was a housing bubble.
Of course, skeptics often argue that the “college premium” is an illusion. They point out that simply going to college isn’t enough to earn the premium; it depends on what major you choose and whether you graduate. The salaries of graduates with humanities majors, they point out, are not nearly as high as those of graduates in business or engineering. And this is true. But without data on what humanities-oriented people would have earned if they didn’t go to college, we can’t break down the “college premium” by major, because we don’t know the counterfactual. So while higher education skeptics might be right that college isn’t worth it for everyone, it’s very hard to tell. Nor is money the only reason to go to college; college is fun, and the personal growth it promotes is intrinsically valuable to many people. College is valuable as a consumption good as well as an investment.
As for those exploding college costs, they are not as big a deal as the hand-wringers claim. Even now, the biggest cost of college is foregone earnings, which (sadly) have actually declined in the past decade. Meanwhile, there are hopeful signs that the rise in tuition is finally coming to an end. A recent study by the College Board found that while headline tuition at four-year private universities has continued to rise at a steady clip, actual tuition paid (after scholarships and need-based financial aid are taken into account) was no higher in 2011 than it was in 2003 (although it has risen again in the past year). In other words, headline tuition is becoming just a form of price discrimination. Private schools are using headline tuition increases to make rich students pay more, while letting poorer students pay less. This is a development that should please liberals (and even Andrew Delbanco).
Four-year state schools have seen a bigger increase in average tuition, but much of this is due to their accepting more out-of-state students (who pay much more). In-state net tuition, while it has gone up substantially in the past decade, is still only about a fifth of the private school equivalent; state schools remain a huge bargain for local residents. And two-year public schools have seen net costs decline to the point where it is now negative; junior college students, on average, are now getting paid to go to school. In other words, even if there is a “higher education bubble”, it is now inflating only slowly, if at all.
But the idea of a higher education bubble is different from the idea of a bubble in student loans. Here there is clearly a problem. Although the rise in tuition has slowed (and the college premium has grown), students are funding much more of their educations with debt. They are taking fewer part-time jobs during college, and their parents are shelling out less cash for their educations in favor of loans for the kids. In other words, debt is replacing parents. The Federal Reserve Bank of New York recently found that about 15 percent of Americans have student loan debt, with the average debt being more than $23,000 per borrower. Americans’ total student loan debt passed credit card debt back in 2010.
This could be bad news. As any economist knows, the interesting thing about debt is that you can choose not to pay it back. Student loans are currently not subject to bankruptcy laws, making them nearly impossible to discharge, but this will inevitably change if a lot of graduates suddenly become unable to make their payments. Already, there are signs that this is happening. More than a fifth of student loan accounts have overdue payments. Meanwhile, Federal student loan interest rates recently doubled. This is like a teaser rate expiring on a subprime mortgage.
If student loans start to go delinquent in large numbers, it could cause all of the problems that we’ve come to expect from debt crashes. The institutions that fell all over themselves to lend students money, or to buy bonds backed by bundles of securitized student loans, will be in big trouble. Banks’ balance sheets will take a hit. Bailouts will ensue, and lending to businesses will dry up. In the worst-case scenario, workers saddled with unpayable student debt will stop consuming, leading to the same sort of economic spiral we saw after the housing bust. In the end, the government may have to step in and take student debt onto its balance sheets, further exacerbating the national debt situation.
The only real solution may be prevention by intervention. Free markets can work wonders, but college freshmen are hardly the perfectly rational, far-sighted decision-makers of economists’ models. Caps on student loans may be the only way to prevent a damaging debt crash. Forcing students to limit their borrowing would have the added benefit of putting downward pressure on tuition, further allaying the fears that college is becoming unaffordable. To prevent existing loans from damaging the financial system, the rates on government loans should be held at their previous low values until the total amount of debt is reduced to a more manageable level.
Still, the student debt problem should not obscure the fact that college remains one of America’s strongest, most resilient institutions. When it’s not ignoring the crisis on its doorstep, America has a long history of tearing its hair out about disasters well before they happen, and Andrew Delbanco’s book definitely fits into this latter tradition. This penchant for pre-emptive alarmism is probably one of our cultural strengths. But outside observers should not be losing sleep about the future of higher education. More Americans than ever are going to college and reaping large economic benefits. Costs are growing more slowly and may even be shrinking for the less affluent; they will shrink more if the loan bubble is deflated and, in time, if technology plays a role in reducing the costs of quality education.
Meanwhile, college communities and innovative living arrangements are continuing to build the character of future generations of citizens. At the same time, our universities continue to produce research that lets America maintain its position as the global technology leader. This bastion of democracy, at least, is safe for now.