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Many have said that there is a crisis in higher education. In fact, if you Google that phrase you get over 65,000,000 results. I tend to agree, but what is the crisis and how should we as a nation respond to it?
The tuition cost (adjusted for inflation) for a 4 year private college has gone up from $15,306 in 1982 to $33,716 in 2012. For a public college the percentage increase is even worse from $6,942 to $16,789. Remember this is adjusted for inflation.
What is going on here? Has the education gotten that much better? I tend to doubt it. College is a very labor intensive endeavor with the biggest cost being professors salaries. During this time the average student to faculty ratio (often a proxy for quality of education) has stayed steady at about 15 students per faculty member. While the number of faculty didn’t increase, the cost of instruction (faculty salaries) went up by 22%. This is in spite of the rise of lower cost alternatives to tenure tract professors like adjuncts and teachers assistants. Additionally the administrative costs at colleges and universities went up by 36%.
Does tuition go up because costs are rising or do colleges spend more because they have more revenue? I don’t know which causes the other but according to everyone it has led to a crisis.
7 out of 10 students graduate with an average of $29,400 in debt, with the total amount of outstanding student loans being $1.2 trillion. To put the $29,400 into perspective, someone repaying that amount over a 10 year period would have a monthly payment of about $345. Thinking about my daughter who graduated last month, I am thankful that she doesn’t have any loans because I don’t know where that payment would fit into her budget.
So, there is a crisis in Higher Education. But what is the response? Are fewer people going because it’s too expensive? Applications and enrollments are at or near historical highs. So the crisis has not affected demand. And if there is a crisis, what should we do about it? Whose responsibility is it? The student? The parents? The college? The government?
As expected, there has been a response from our leaders.
Many on the left have said that the crisis is not in the cost of college but in how we pay for it. And naturally that requires the federal government to play a bigger role.
Elizabeth Warren, the Senior Senator from the Commonwealth of Massachusetts (I am so sorry about that) has called for the refinancing of all student loan holders. Basically a give away to twenty somethings. They have already selected their major, consumed their education, and are now trying to pay it back without the ability to get a well paying job. Frankly, they made bad choices and are unhappy with the outcome. They should be saying “Why didn’t someone tell us!” and they should be warning today’s high school graduate. But instead, we can’t influence their choices in the past, so we just throw money at them to get them to shut up.
On the other hand, even though college is so expensive, Obama thinks that more people should go to 4 year residential colleges and be able to study whatever they want. It doesn’t matter that they can’t get a job. They have the right to smoke a little weed and skip classes just like he did. So he is out across the country promoting the traditional 4 year education.
And to make matters worse he is also trying to tear down those institutions that are trying to find new and better ways to deliver an education… the for profit institutions. For him it seems like a knee jerk reaction. He hears “For Profit” and knows in his heart that it has to be bad.
So what should our leaders do.
As an Adjunct Professor of Entrepreneurship at Bentley University and a member of Union College’s President’s Council, I have a vested interest in the state of higher education. I have studied it and I have participated in it for many years.
The best thing that our leaders could do is to unleash the free enterprise system. Support and encourage those with ideas about how to deliver a valuable education. Let them test their ideas in the marketplace and see which work.
If President Obama spoke at Grand Canyon University or if Secretary Duncan showed up at the University of Phoenix’s graduation it would send a powerful message.
They also need to change their messaging to the students. College is not appropriate for everyone (and it is not racist to say that). It also isn’t always appropriate for an 18 year old. And a full time residential experience is not always the answer. There are many paths to getting the education a person needs.
Additionally, you can’t just study whatever you want without consequences. Studying 18th Century Asian Art might be interesting to you, and it might be following your passion but spending $120,000 on it is probably not the best investment. And if you are doing it via loans you might think about doing something else. Responsible adults, from the President to Parents to college administrators should be delivering that message.
The other part of that message is that education should be a lifelong pursuit. In fact you can follow your passion for 18th Century Asian Art online through Massive Open Online Courses (MOOCs) all for free. And you should do that if that is your passion. Education is fundamentally not just about the diploma it’s about the journey and increasing your understanding and gaining new insights.
Additionally, the free market should be injected back into the marketplace. Only in the college loan market can you borrow money without a plan on how you are going to use it or how you are going to pay it back. A disciplined underwriter would gladly loan money to an engineering student at MIT while leaving the Philosophy Major at Florida State scrambling to pay tuition. That actually is a good thing. It will force us to make “Education Investments” in the right places. And force high school graduates to take a more realistic approach to planning their future.
The last thing for the government to do is to encourage things like what Starbucks just announced. They are going to provide tuition reimbursement for online courses at Arizona State University. Online education is not appropriate for every student and every class but as someone who has both taken and taught online courses, it is a great solution for many situations.
Yes there may be a crisis in Higher Education just like the crisis in Health Care. But the answer isn’t more government action it is less. The answer is more personal responsibility and freedom. Personal responsibility to allow individuals to decide what education investments are right for them to build their lives and the personal freedom to make those decisions.
Search funds are a new and interesting way to find a new business. Basically a group of investors will sponsor an entrepreneur as they go and look for a new opportunity. When the opportunity is found the investors own a piece of it and have the right to invest in future fundings.
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