Back again for more huh!
Okay so this is part two of last week’s post when we started talking about our education system and about the challenges our kids face with homework and standardized testing. I also talked about technology and outdated methods, and even religion got an (dis)honorable mention in there. No one was safe from it, parents, teachers, politicians… since we are all part of the pie, we all got a slice of it.
Today I’ll talk about the challenges college students face (provided they made it all the way to college) in the classroom, but mainly outside of it. On this post the blame will be almost completely shifted to our policy-makers, corporations, and the universities and colleges themselves so I will not go in-depth about fraternities or the “college experience”, but rather focus more on the financial aspect of higher education and the ripple effect they cause. But, while distancing myself from too much math, I’ll mainly be talking about student debt and we’ll analyze a risk-versus-reward type situation. So if you’re one of these people suffering from studentdebtitis (don’t try to pronounce that), then you will read some facts here that perhaps you didn’t know. Hopefully I can help in some way or another.
Let’s get into it!
All In the Numbers
Assuming you passed all that required testing we talked about before- SATs, college admission tests, etc.- college is a new and exciting time that is about to begin! No more lectures about being late to class, no more bullshit about cleaning your room, in fact, if you choose to live in a dorm, no more parents for a while. Man is life great! Well for you. For your parents it’s a different story.
For those putting themselves or their kids through college, it’s important to know where they are in terms of payment if they stand a chance. Forget for a second the very confusing college-application lingo, first you have to know if you can even afford it. The pressure of not knowing whether it will be possible to send your kids to college (or put yourself through college) is only part of a reality we live in today’s America where it’s becoming increasingly difficult to find a good job, and even harder without a college education, an education that while beautiful and necessary is not free.
So with that in mind, let’s check out some important numbers and see how it all ties in with this higher education I talk about.
College Tuition- Since the 1970s, college tuition has been increasing steadily over the years to an unimaginable 1120% (yikes!), and even without inflation we are paying more for higher education now than we have in the past 40 years, or ever actually.
Student debt- American students have an outstanding $1.2 trillion dollars (that’s 1,200,000,000,000) in student loan debt which is significantly more than American credit-card debt which stands at a little under $700 billion. To put it into context, our national GDP is $17 trillion, which means that student debt is roughly 7% of that. Insane!
Number of Americans with college debt- 40 million. For comparison that is roughly the entire population of Argentina.
Average debt per student- Today college graduates are entering the job market with an average of $26,000 in debt.
Interest rate for college loans– It floats between 3% and 6% depending on the type of loan you get.
National median income- As of February of this year the median income was roughly $41,000.
Now comes the hard part trying to make sense of it all.
We all pretty much know the ritual. Students go to college, they get jobs, get married, have kids, and they pay for kids’ college. Well, that’s not happening so much anymore. Less parents are now paying for their kids’ education, which means that now more than ever American students are financing their own educations. This is just a side-effect to the increasing college tuition. But it is also due to other causes one of which is the disparity between what parents make and what college tuition amounts to.
According to a report by the Washington Post from March, adjusted for inflation take-home pay only increased by a measly 0.1% in 2014 for middle-class people, and although the unemployment rate is at a little under 6%- the lowest it’s been since the middle of 2008- and 2.6% for college graduates, job outsourcing to other countries has left the middle-class worker with little or no leverage to negotiate higher wages. This leaves college students in a bind. They can either choose to pay for college themselves, take out a bank loan, try their luck with financial aid, or, if they’re not agile enough to get a scholarship, opt out of college altogether. But wait there’s more bad news.
As of last year, interest rates rose again for college students, mind you it’s not an outrageous amount, but it’s not a negligible amount either. I’m sure that there are a thousand fiscal details to work out that have endless ramifications, but the fact of the matter is that middle-class parents cannot afford inflating college costs, especially when interest rates on college loans usually float around between 3% and 6%. And I’m not even including bank loans, credit cards, or any other alternative means of paying for college, simply what the federal government loans out.
Now this is where you might get a little pissed off, the Federal Discount Rate, which is the interest rate at which the Fed loans money out to banks is .75%. True, this is only for very short-term loans, but even regular loans to huge multi-billion dollar banks are disproportionate to what the regular American student borrows. In other words if the regular American student were a corporate bank (with the current interest rate on college loans), it would’ve either dissolved a long time ago, collapsing under its own debt, or it would’ve gone overseas for a better deal. The reason for that is that a bank would never agree to such high borrowing rate as American students now graduate with. The fact is that the interest rate for students is disproportionate to what they and their parents make, and still a heck of a lot more than what the government loans out to banks. And while the whole comparison between students and banks is an apples-and-oranges scenario, it’s actually more of a gala-apples-and-golden-apples situation.
So it seems that pay-raise is not proportionate to the inflating college bubble, so just as we feared, there is no sustainability between what middle-class people make and the college debt accrued by those same people. And if I told you what investor and shareholder pay, corporate assets, and golden parachutes is, you might just go into a passive-aggressive fit of rage and throw your puppy out the window.
Ironically, for a lot of these students- younger and older- the problem is not acquiring the money they need to start their careers (although that is a problem too), rather the problem is actually getting it. And in a cruel twist of fate what many of these students end up in a “beware what you wish for” situation as soon as the first loan clears. And since a college loan is the only financial instrument that allows you to borrow more and more while your interest balloons up, it makes it a very dangerous tool to resort to.
Obviously the details are varied and extensive but this is pretty much a summary of what’s going on.But that’s still leaves us wondering why college tuition keeps going up despite a slow economic growth.
This is a difficult question to answer since it depends on more than one factor including: rising costs for room and board, slower graduation rates , budgetary limitations (whatever that means), skyrocketing costs for research institutions (which actually makes sense), government subsidies for grants and loans, and even the rate at which universities recruit can have an impact on these rising costs. There’s no way I can list all the reasons and the figures for each point, but this comprehensive article by the Washington Post from 2013 lists more exact figures for why tuition has been increasing, especially in smaller colleges and universities around the country.
What this all means is that it costs the state and the students more money and energy to pay tuition and to pay off that debt than to actually use the skills they went to school for in the first place. It’s a psychologically discouraging thing to graduate from college with upwards of $50,000 in debt without being ever comfortable in a job that you love, only to work in a job that you need. That is a debt that most likely will take someone the rest of their lives to pay. The true American dream is to accrue an insurmountable amount of debt after you start working, not before.
Some students and alumni are worse off and some are better off, but the harsh reality is that for of those who do owe, most of their financial decisions for the next few years to come (hopefully just a few) will be based around that debt.
Where Does It Go?
So where does the money go? Let me ask a simpler question, do you sit back with a beer and relax to watch college chemistry competitions; or college advanced math lectures? Unless you’re Ross from Friends, then I’m guessing the answer is no. College football, that’s the thing you watch.
Turns out that in some universities- those whose intercollegiate athletics programs are not self-supporting- a large chunk of what students pay goes to athletics programs that many of those students will never even attend. This also includes the salary for coaches and their assistants which is an obsene amount of money (in the millions) compared to what a regular college professor makes- less than 200K for the most experienced, much less for the majority. According to research by the Center for College Affordability and Productivity, not only is the cost for these athletic programs increasing- which of course has an impact in rising tuition costs- but also almost 20% of Ohio University students wish there was less funding for these programs. I can’t speak for any other colleges, but I’ll leave it to your discretion to assume what other sutdents around the country think about their own athletics programs.
In no way am I suggesting that we scrap athletics programs, but it seems that colleges are more known for how well their football teams and their glorified players performed than for how academically competent they are. Now it would make a big difference if the money the games brought in were evenly distributed across the board (meaning to cover other university costs other than the athletic departments) or even to compensate the players OR their families, but I am pretty sure that’s not the way it is.
Fortunately, most of the money a university receives from tuition, grants, government and private entities, and other sources, is efficiently utilized to pay mainly for instruction and research, and also for other services that the university provides. And a big part of that money goes towards financial aid which is mainly aimed at working-class students in an effort to get them in school.
But the less that states spend on college-level education, the more that public and private universities will need to make up the shortfall by increasing tuition and making cuts in how much it is spent per student. It’s simple economics and as much as I hate to admit it, colleges and universities are a business (even if educaiton isn’t), and as such it also governed by the same laws of economics as any other business.
Noble vs. Practical
Today everyone and their grandmothers know that going to college is part of an evolving society and by-and-large a great asset to possess if you want to make it in the real world comfortably. While in college you’ll form a relationship with blah, blah, blah.
The truth is that while there are many reasons why people go to college, they all boil down to two main ones: the noble, either because they find some discipline or art truly intriguing and they want to learn everything about it; or the practical, because they want to make money. These two people are not too different from one another, because they both know that whatever the reason, whatever the motivation, having an accredited higher education stamped on a diploma opens a lot of doors in the real world that are becoming increasingly hard to open without it.
This is a mantra that has been drilled for generations into the minds of children. Not a bad one to have drilled actually, but we’ll get to that. The point is that when people finally realize that everything we have now, from the laptop sitting on their desks to the crowns on their teeth, are the product of an incredible amount of study, perhaps a college education is not a bad thing to back you up.
But this constant reminder, like an alarm clock going off at all hours of the day, that they need to go to college right after high school, that they need to graduate and that they need to start making money right away becomes a tedious affair, one that undoubtedly bores some people. They get it from every angle, their parents, their teachers, their employers, even from banks themselves. Again, not a bad piece of wisdom to be given, but for what purpose?d
The message is clear: make money before you die!
It might sound a bit cynical to say something like that, but it’s a truth crudely reflected in numbers. In a survey taken in 2012 by the Higher Education Research Institute (HERI) in collaboration with UCLA’s Graduate School of Education and Information Studies, found that 87.9% of first year college students go to college to “get a better job.”  This pretty much translates to “because I want more money.”
That answer comes to no surprise to anyone since we are still recovering from a very nasty recession and the housing-bubble burst. And even though that survey was taken three years ago, an article by the Washington Post included data from a more recent survey by the same collaboration that echoes the data from 2012. So basically, yes, most people go to college to make money. Can you blame them?
From the 2014 survey, the second most important reason why people go to college is “to learn things that interest me” at 82.2% as opposed to 86.1% for “…a better job.”
What does this mean for college students?
In the first part of this blog-post I mentioned that schools should do away with unnecessary subjects or at least increase school-time in subjects that will be productive and necessary, like technology and the sciences. But I also mentioned that it is our responsibility to make them think and wonder, and not merely become slaves to themselves.
In this second part, it may seem as if I’m changing my views, but I’m not. The point is quite pragmatic in itself: those skills acquired in more elementary education is partly to prepare them for the college life and/or a life that is more technologically centered. I’m not suggesting we get rid of the sciences, or art, or sports, but rather that while elementary education is important in awakening the mind, college education is supposed to refine it, shape it, and prepare it to send it out productively into the world. It’s not really a change of mind, merely just an evolution of ideas.
You know how most children when asked what they want to be when they grow up choose the most selfless, most noble careers, e.g. firefighters, cops, doctors; but when they do grow up the smartest ones end up being stockbrokers and politicians? Well there’s a reason why that happens.
Every single day we read in the news words like “golden parachute”, “billion-dollar deals,” “Fortune 500 company,” and if you’re like me, you think to yourself, “man, I’m in the wrong business.”
The fact is that the rest of the arts and sciences are being out-competed by the money and the behavior that making money is more important than anything else is being reinforced in practically every aspect of American life. Fortunately, the STEM (science, technology, engineering, mathematics) sciences are on the rise, but we need to build more of that momentum and reward those who make our lives easier (scientists) instead of those who merely make life easier for themselves. That’s where college culture comes into play.
Astrophysicist Neil Degrasse Tyson said it best when he remarked:
I’m not here to convince you that money doesn’t get you happiness, believe me it does. However, I’m here to tell you that there’s no need to sacrifice something that you really like for something that makes you money. So in choosing a career, it is better to choose something that satisfies your curiosity, and a career that you’re drawn to (or a variation of it that will get you a bit more money), rather than something you hate that will leave you more money.
Case in point, when I was younger my grandfather knew the benefits of going to college and he urged me to choose a career in medicine or law. I have nothing against doctors or lawyers, but I immediately hated the idea of becoming either one, and I knew that if I ever succeeded at it, it would not only be half-assed, but I would be risking more than my own life in the process. I am now 27 and I finally have an idea of what I want to do with my life, and not one second goes by that I regret that decision. I am perfectly happy with who I am and what I do, and I know that I would have been miserable otherwise.
Life is about happiness, your happiness. Not anyone else’s. And it’s not a race, nobody wins at life, in fact the only way to win is to be the happiest that you can be without hurting anyone else or the world around you.
The issue with student debt has been an efficient political tool for both parties in “the Hill” for quite some time now, and a hot-button issue in Main Street; many even point out that student debt not only affects things here at home, but abroad as well. In this competitive world where countries like Russia, India, and China are fast risers in the global economic food-chain, it is more important than ever for America to invest in the best resource and asset it has to outcompete these nations and become once again a leading nation in education, technology, etc: an army of high-skilled and educated people. But is it possible- or have we lagged too far behind?
Today we discuss the education business in America and the next generation waiting to take the torch.
Often we read cases about graduates living frugally or doing economically-savvy things to pay off their loan so, and we rejoice when we hear one or two people did extraordinary things and got rid of their debt in a few short years. Honestly, yay for those people. But personally, I find it depressing that we have come to glorify the exceptions to the rule, as if it were a heroic thing to live on instant soup so for years on end just to not live with that debt until the day they die. That’s not how the American dream was sold to our generation. Debt wasn’t supposed to happen until later on in life.
The issue that we have is that with college debt, it’s not only the students and parents are paying the bill, but also you, the taxpayer. And it’s an expensive bill.
President Obama’s loan forgiveness program which he passed in 2013 aims at giving college graduates the opportunity to pay only 10% of what they earn towards their premiums for a period of 10 years, after which time their college debt will have been forgiven. But what happens to the rest of that money? Put simply, we pay for it, college graduate or not, we’re all paying for all 1.3 trillion dollars of student debt. As Jeffrey Dorfman of Forbes appropriately writes in this article, “If government wants to subsidize college education it could simply directly subsidize it rather than making loans that are designed to be forgiven.”
He’s completely right. Why do we keep beating around the bush when it comes to college tuition and loans that hurt financially not just the students and their parents, but also universities, financial institutions, and ultimately the government by loaning money we don’t have to people we know will have a hard time paying? A direct subsidy will save us billions in the long run.
But President Obama has his eye on two fronts, this one and also in his plan to make all two-year community colleges completely free to all students who wish to go- rich and poor. The move is not exactly a novel idea as it has already been implemented in Chicago and Tennessee for high school graduates. But his plan, formulated to cover all students regardless of previous education, is intended to be available across the nation.
By making it possible for students to go to college for free, at least for the first two years, the government would be giving those students a break to save up for their continuing education or to make it easier for them to obtain one, once already in college, basically providing a foothold.
But the program intends to do much more than that. By making it easier for all students to start college, its intent rests also in more socioeconomic integration by raising the number of minorities, and economically disadvantaged students and mixing them with students of higher means. The psychology behind it is very promising as it will undoubtedly boost campus and individual morale, something which can have a good effect in the future of those communities.
But what does that matter?
According to a report by Christina Ciocca and Thomas A. DiPrette of Columbia University- using various statistics and surveys- they found that minorities and economically disadvantaged students are at a higher risk of dropping out of public universities and two-year colleges than white students and middle-class students by several percentage points. Following is an excerpt of their findings:
“The National Center for Education Statistics (Snyder and Dillow 2012: Table 379) reports that while 63 percent of white first-time beginners in four-year institutions receive bachelor’s degrees six years after college entry, only 41 percent of Black students achieve the same. Gaps also exist at the two-year level, with 17 percent of white students and 11 percent of Black students receiving associate’s degrees, and 13 and 5 percent of each group transferring to four-year schools and achieving a bachelor’s degree, respectively.” 
The report (which I recommend you read) is very interesting and lists possible reasons as to why that happens not just for black students for also for other minorities.
So it makes sense that anything that can be done to help those drop-out rates, should be in place already. This idea (modeled after a Republican plan) has already been met with skepticism from liberals and conservatives alike, both demanding to know just how exactly are we going to pay for the $60 billion that it will cost over a decade. But fret not, my friends, there’s already a plan in motion for that as well. The government will pay for three quarters of the cost while the states chip in with the rest, obviously the tax-payer will get some of that bill.
But why the hell should we get to pay for college even if we’re not attending? Well, why pay taxes at all unless it’s for my own benefit? That’s basically what you’re saying. And since we’re on that question, why don’t you ask the same about elementary and secondary education, it is basically the same argument.
There is something fundamentally flawed about the education system in America. In my personal opinion, it has been commercialized and treated too much like a business rather than a necessity. Obviously we cannot dismiss certain businesslike aspects of it, especially when it comes to big research universities that depend on grants and also tuition money to continue important research. But if we’re admitting things, then we also have to admit that at its most basic level, higher education in the U.S. is becoming much too expensive to afford, and almost not worth the job that most students will get upon graduating- if they’re lucky enough to get one.
And although admirable, even Ivy League schools like Stanford, Princeton, Harvard, and Yale- which provide free education for students and families making less than a certain amount ($125K/yr, $120k/yr, $65k/yr, and $65-$150k/yr respectively) – are the exception, not the rule.
Which brings me to my next question. What, if anything, could take from our European neighbors?
You might have heard that in other industrialized nations, higher education is incredibly more accessible than in the U.S. and in many cases entirely subsidized by the government- I use “subsidized” to not use free, because as it happens, there really isn’t such a thing as a free lunch. These are the countries we’ll use as a model of what an outdated system should turn into and I will try- in my limited knowledge- to explain how they do it (although it’s obvious enough).
Nordic countries, as well as some historically socialist Western European nations, have taken up the noble course of lowering college tuition to- wait for it- NOTHING. I can already feel the seething anger at the mention of “socialist”. But if you can get over it for a second, I will have you know that the word “socialist” here is not strictly implying a socialist political system- at least not in the way that those European nations conduct business. What I mean by socialist rather is the implementation of social programs for the benefit of a society modeled after a socialist framework. This means that the government controls these programs and not private entities.
If you, as a red-white-and-blue blooded American, staunch opponent of Big Brother politics and faithful defender of all things free, believe that America hasn’t been touched by the evil wand of socialism (the political system now) then I’m sorry to tell you that you have not only been fooled, but you have been the recipient of this socialism.
Long story short, these socialist programs created and enforced by the government have in fact made America a better country for it. Among these that have benefited all citizens of this great nation are: emergency services, postal service, transportation, the military, some forms of health care, even ones that you wouldn’t expect like sewer systems and trash collection. And education. All of these programs and many more have been introduced to the American public administration after administration, sometimes with opposition. Can you imagine any of these in the hands of private companies? It’d be disaster. Even without the hand of privately owned enterprise, education in the United States is costing trillions of dollars and not getting much better. Surely some European countries are doing something right if they beat us in: record numbers of college graduates, higher test scores, more productivity, etc.
So where in the world is college education cheaper than in the U.S.? Trick question: everywhere!
Germany, Norway, Sweden, Finland, Slovenia, and France are among very few European countries that offer free or low-tuition college education, all in their respective populations’ dime. For the first three countries mentioned, foreign students are also welcome to enjoy the same educational benefits as their own citizens- higher education free of charge! In the case of Sweden that law has been rescinded to ban foreign students to study there completely tuition-free; but nevertheless the country has allowed many organizations to help cover the tuition of non-EU students, or other students who wish to study there, which still makes higher education in Sweden an inexpensive option.
But what about the rest of the world?
While many universities around the globe might not offer cheap or free tuition to foreign students, they do still offer those same privileges (incentives rather) to their own students. Some of the countries with the cheapest college education include: Australia, Canada, Great Britain, New Zealand, Netherlands, and Brazil.
While these are just some of the countries with low-cost college education, they are by no means the only ones. This site has an interesting composite of information about the aforementioned nations on college costs, as well as other ones around the globe that also offer low-cost higher education. It’s important to note that for some of these countries (as in the case of my native Mexico) low-cost education is only available for state universities and colleges, while private universities will be more expensive.
But where do we rank in terms of higher education in comparison to other countries?
Well, we’re drawing from a different bag there.
According to this independent research judged by top academics from all over the planet, eight of the top ten universities in the world are in the U.S. of A. In fact, the website offers information on the rankings of more than 300 academic institutions and more in-depth information about them.
So being that American universities hold the top positions for education among the most respected in the world, why is it so difficult for Americans to obtain a college education… in America?
While this question is significant, I believe the better question to ask is: why do some of these other countries allow others to come and study- sometimes for free- only to leave, taking the skills they obtained to another country?
Perhaps they believe in the real value of higher education, or maybe they understand that not everyone can afford to go to college. Maybe it just makes good economic sense to allow students to take advantage of a good thing and offer them the opportunity to stay in their country and exploit those newly acquired skills there. It’s not only ethical, it’s practical. Not to mention that making education free makes good political sense.
Let’s form a comparison. In Germany, the state pays for college education for everyone who wants it, even for foreign students. Parents and students do not need to worry about tuition debts and high interest rates that will slow down their education and therefore increase drop-out rates. The snowball effect of leaving college in the middle of a degree is detrimental in large numbers. Therefore, by using pure mathematical logic, we can see that the cost of sending a whole generation of students to acquire high-level skills is minimal compared to the debt accrued if they don’t pay. The latter is essentially betting on the failure of students. And a debt that governments and financial institutions will be forever trying to collect.
On the other hand, if the education budget can be restructured properly, the gain from creating generations of high-skilled workers is nothing compared to the subsidizing of education in large scales.
We could bring up monopolistic sentiments about why the American education system is fairly inadequate in comparison to the mysticism that the United States has in the world: a powerful country unrivaled in mostly everything. But the simplest answer is usually the right one- our politicians simply prioritize other things over education.
In this day and age there are still plenty of people- even here in America- who still don’t have access to education in their own countries and communities. For that reason, charitable organizations and public and private universities, who believe in the power of education have decided to get together and collaborate on massive projects that aim to change just that.
MOOCs- or Massive Open Online Courses- are exactly that, online courses available to anyone with a computer and internet connection in virtually any part of the world, and completely free or of very low cost to those who wish to take them. These courses, or rather crash-courses, vary in length and can last anywhere from a few days to a few weeks and some can even last for months at a time, like a regular college class would. They are taught in many languages and you can find just about any subject you want, anything from cooking, to advanced trig, to film critique, to computer programming. Not only are these courses taught by accredited professors from some of the best universities in the world, but they also follow the rigorous online-college course model.
Most universities though do not certify credits accrued from MOOCs however, although there are some that do. But at least those interested in learning something new or in using MOOC services as aid to their actual schoolwork can have the opportunity to do so free and with virtually no restrictions.
MOOCs and other alternative forms of education are a great way to get started on a path for higher education. I, myself, have taken several MOOC courses and am a very big fan of them and I recommend them. So if you’re interested, here‘s a list of several MOOC providers that are for-profit and non-profit. Honestly, I have only used Coursera, but I can tell you that all the courses I’ve ever taken have been free. So feel free to sign up for something interesting to get your mind tickling.
To conclude this, let me tell you that although I believe in the immense power of education, college is not for everyone. Don’t mistake that for “education is not for everyone”, because that would ring false and counter to my beliefs, not to mention detrimental to our society. But employers, teachers, parents, and most of all you, need to understand that true education, true knowledge can only be the product of true curiosity, unhindered by rules and social norms, by restrictions and roadblocks. Forced desire to learn will always yield negative, or at least lukewarm, results. We have to encourage our kids and ourselves to learn, but we also have to provide them with the means to do so.