Among places where America still reigns as the undisputed champ is in the quality of our higher education, particularly in the many schools that are elite in some way.
Where America is failing is in keeping the price of the education at anything resembling a fair price. College tuition is up 300% since 1990, which is 4X the rate of inflation. Indeed, even health care — now an example of an inflation bogeyman, familiar to all — has only risen at 2X the rate of inflation in that period. This is a problem.
This recent Barron’s piece is an amazing and frightening read. It delves into the causes of this inflation including the sticker-price arms race, which, at the top of the system but not elsewhere, could be balanced by generous financial aid from the proceeds of high endowments, the availability of student debt, and the unwillingness and inability of universities to have to control their costs, because those costs could just be passed on to student borrowers. It delves into the effect including a massive overhang of student debt, which, in aggregate, now exceeds total auto loans and total credit card debt. It delves into the serious consequences of that overhang including postponed car and home purchases, exclusion from the credit market, and most importantly in delayed family formation (marriage and children). It finally delves into the fake innovation that has taken place where for-profit schools shamefully game the availability of financial aid and the desire for education, deriving 90+% of their revenues from government money, providing laughable education to their students, and saddling these “graduates” with debt that cannot be paid off when students re-enter the work force with the dubious training that they have received.
We need more real innovation in education. The cost is no longer sustainable for many people. On non-higher ed, we have the incredible efforts of Khan Academy. On the higher-ed level, we have many universities like Stanford, MIT, and Harvard, giving access to many of their courses, usually in a non-degree context, but through which a self-directed learner can pretty much learn anything.
These are still baby steps. To deal with the scale of the problem, well-described in the Barron’s article, much bigger disruption must happen. As described in the final few paragraphs of the article, the societal cost is too severe for any other alternative:
THE STUDENT-DEBT CRISIS is emblematic of issues bedeviling the U.S. as a whole, such as income inequality and declining social mobility. For as scholarship money is increasingly diverted from the needy to achievers with high grade-point averages and test scores, boosting institutional rankings, the perhaps less-privileged applicant is thrust into the position of having to take on gobs of debt, indirectly subsidizing the education of more affluent classmates. The race to the career top is likely over long before graduation.
Student debt also helps sustain many school hierarchies that are virtually bereft of cost controls—the high-salaried tenured professorates, million-dollar-a-year presidents and provosts, huge administrative bureaucracies, and lavish physical plants.
The debt game will continue until students and their families revolt or run out of additional borrowing capacity. Don’t expect the educational establishment to rein in its spending. Things have been too cushy for too long.