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Just how bad a deal a college education has become was evident in data released by the government. NY Times has the story.
Colleges give prospective students very little information about how much money they can expect to earn in the job market. In part that’s because colleges may not want people to know, and in part it’s because such information is difficult and expensive to gather. Colleges are good at tracking down rich alumni to hit up for donations, but people who make little or no money are harder and less lucrative to find.
On Saturday, the federal government solved that problem by releasing a huge new set of data in a website called College Scorecard, detailing the earnings of people who attended nearly every college and university in America. Although it abandoned efforts to rate the quality of colleges, the federal government matched data from the federal student financial aid system to federal tax returns. The Department of Education was thus able to calculate how much money people who enrolled in individual colleges in 2001 and 2002 were earning 10 years later.
On the surface, the trends aren’t surprising — students who enroll in wealthy, elite colleges earn more than those who do not. But the deeper that you delve into the data, the more clear it becomes how perilous the higher education market can be for students making expensive, important choices that don’t always pay off. …
… The Department of Education calculated the percentage of students at each college who earned more than $25,000 per year, which is about what high school graduates earn. At hundreds of colleges, less than half of students met this threshold 10 years after enrolling. The list includes a raft of barber academies, cosmetology schools and for-profit colleges that often leave students with few job prospects and mountains of debt.
But some more well-known institutions weren’t far behind. At BenningtonCollege in Vermont, over 48 percent of former students were earning less than $25,000 per year. A quarter were earning less than $10,600 per year. At BardCollege in Annandale-on-Hudson, the median annual earnings were only $35,700. Results at the University of New Mexico were almost exactly the same. …
We’ve been flogging the increase of student debt for years. Now, even some house organs of the left see the danger. Here’s The New Republic.
… An infamous study on student debt by Jesse Rothstein of the University of California, Berkeley, and Cecilia Elena Rouse of Princeton looked at the results of a highly selective university replacing loans with grants. It concluded “that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs.”
Let’s imagine two scenarios. In the first you have high student loans, so you work for a corporation in the private sector for high wages. And in the second you have virtually no student loans, and you work for less wages in a job focused on the public interest, say as an educator or at a nonprofit. In both cases your student loan payment would be the same as a percentage of your income. The Brookings result would hold. However your lifetime choices will have radically changed as a result.
We see this with other lifetime measures, such as how entrepreneurial people are. A recent study by Brent W. Ambrose of Pennsylvania State University, and Larry Cordell and Shuwei Ma of the Federal Reserve Bank of Philadelphia, found “a significant and economically meaningful negative correlation between changes in student loan debt and net business formation for the smallest group of small businesses.” This makes sense. You can keep your high student loan burdens low if you stay with an established employer. But if you strike out on your own, you’ll have less and more volatile income when you start. This is harder to manage with student loans, which also impacts your credit rating. Again, we can see the short-term student loan burdens staying the same, even though lifetime choices are much more limited as a result. …
… This has major consequences for people’s ability to build wealth. Indeed, much of the current energy in analyzing student loan burdens are looking at this longer dynamic, and how it interplays with the ability for people to amass savings. As Richard Fry of Pew found, using the same data set as Brookings, “households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700).” Fry also finds that those who took out loans are less satisfied with their financial situation compared to people without loans. Similar results have been investigated and found by the Federal Reserve Bank of St. Louis.
This, in turn, has major consequences for how young people will ultimately transition into adulthood. According to Dora Gicheva of the University of North Carolina at Greensboro, student debt decreases the long-term probability of marriage by a significant amount. In a result that should make social conservatives gasp, Gicheva found that an additional $10,000 in loans decreases the probability of marriage by at least 7 percentage points. Meanwhile, the Federal Reserve Bank of New York found that young student debtors are retreating from those traditional markers of adulthood, homeownership and owning a car. These effects reflect the long-term consequences of student debt on a young person’s economic security just as much, if not more, than their monthly bill. …
And Kevin Williamson gives his views on the student loan scandal.
… As usual, the policy-making class worries most about the people who most closely resemble it socially and economically. But the report finds that the people coming out of selective schools have an average loan debt at graduation of only $23,000, while their degrees provide an average annual wage premium of $20,000. “For most people who graduate from top-tier schools,” Dynarski writes, “debt is easily managed.”
We have been having a very strange debate about income inequality in the United States for the past several years, one focused almost exclusively on the status of the hated “1 percent” or super-rich segments within it. From an economic point of view, this is deeply stupid: If Lloyd Blankfein takes a $100,000-a-year pay cut next year, that isn’t going to translate into two $50,000-a-year jobs for dropouts from P.S. 154 in the Bronx. But from a political point of view, concentrating on the 1 percent makes a great deal of sense to progressives: It is not, after all, conservative-dominated institutions run by Republican-affiliated unions that have failed the poor, the black, and the brown in practically every city in the United States.
The Left’s answer to the challenge of targeting our expenditures toward those Americans who most need them is to subsidize another round of loans, which will pass through Little Moonbeam on their way to her $150,000-a-year women’s-studies professor and the university’s $800,000-a-year president. That’ll show those rich people!
The M.F.A.s (Master in Fine Arts) can take care of themselves. So can those six-figure administrators and millionaire teachers’-union bosses. Meanwhile, the people who actually need our help get nothing.
To top off our week Andrew Malcolm is here with late night humor.
Fallon: President Obama will appear on “Running Wild With Bear Grylls” later this year. The episode features Obama roughing it on a golf course that hasn’t been mowed for a couple of days.
Meyers: In an interview Trump says he’s not crossed the line of appropriateness. You can read Trump’s entire interview in this month’s issue of ‘Juggs’ magazine.
Conan: A new study claims first grade students get nearly three times more homework than they should. This is according to the study’s lead researcher, Timmy.