Student Loan Indebtedness Tradeoffs
Another Bloomberg article on the education bubble. This one by Richard Vedder, director of the Center for College Affordability and Productivity, and an economics professor at Ohio University. Vedder points out an incongruity about the economy and educational situation in the United States that has bothered me for years.
U.S. employers complain that they can’t find enough skilled employees. Then how do we explain why almost 54 percent of recent college graduates are underemployed or unemployed, even in scientific and technical fields, according to a study conducted for the Associated Press by Northeastern University researchers?
The cause is more fundamental than the cycles of the economy: The country is turning out far more college graduates than jobs exist in the areas traditionally reserved for them: the managerial, technical and professional occupations.
This is partly due to firms outsourcing their training to other firms, and to the educational institutions themselves who are apparently too busy offering classes on the History of Surfing, Happiness, and the HBO series The Wire. Companies used to hire competent people and then train them. Today they expect them to come to the job not only trained, but able to integrate into an existing project with minimal learning curve.
As an intellectual, college educated adult and the parent of a teen, I’m concerned about the split between the job market and the educational system. Like every parent I want to provide the best start to my kid as possible. But when I look at the academic world, its cost in terms of time as well as money, I’m wondering if the path that I followed still makes sense. Vedder estimates that students spend 30 weeks a year in school and less than 30 hours a week on academics. In the best quote I’ve seen on the expense of higher education he echoes Churchill when he concludes “never have so many dollars gone to teach so many students for so little vocational gain.” With the average cost of a year of public college at $22,000 and of a private one at $43,000 a quick bit of (high school) math nets the per-hour cost of the education using Vedder’s hours spent at $24.50/hour (public) and $47.77/hour (private).
Is there a better way? For many parents and potential students there must be, but if so what?
At those rates one could realistically hire a full-time private tutor – and good ones at $48/hour. But if you do would you demand him or her teach your child about Happiness or watch HBO? If not, why would you as a parent allow your child to waste his time on such fluff – especially when he is bearing more of that cost by becoming indebted?
Indebtedness is one of the worst possible burdens one can put on one’s child. It limits options at a time when a young person should be exploring them. A trip to Europe to visit friends becomes impossible when time off means missing student loan payments. It’s much more difficult to pursue a once-in-a-lifetime career opportunity while an existing job makes the student loan payments. Parents might argue that college offers other experiences that aren’t quantified by the degree such as personal growth and enrichment, but they fail to appreciate that this is a tradeoff between the limited opportunities of college life with the broader and more lasting opportunities in the broader world. Some have commented that it is their duty to provide the best of both worlds to their children by paying for their educations, thereby freeing their children of the consequences of indebtedness. As a parent who believes in the importance of personal sacrifice for the sake of children, it is difficult for me to argue against that point except to state that the skyrocketing cost of education has pushed the cost of education beyond the means of all but a minority of parents, and that for most of that minority the dollars spent on education will have to come from somewhere such as retirement savings. This means that such parents are actually shifting the burdens from their children’s college age to their middle age when they will be relied upon to care for them in their retirement.
Is the tradeoff worth it?
Attending college can offer worthwhile experiences to the developing young adult, but the indebtedness and time spent pursuing a degree have reached a point where other opportunities and experiences have to be sacrificed. For some the sacrifice may be worth it, but parents and college hopefuls have to weigh the lost opportunities in their decisions.
Cross-posted at TheRazor.