OPINION:
America has imposed a cruel hoax on its children — the notion that college is essential for prosperous life. The results are $1.6 trillion in student debt and younger adults delaying marriage, children and homeownership — all terribly drags on economic growth.
The latter half of the 20th century witnessed a great transformation. Farm consolidation, factory automation, globalization and the digital revolution freed American workers from manual labor and created vast opportunities to boost productivity and incomes if more folks went to college.
In the 1950s, bucolic campuses were still mostly occupied by White males who were the offspring of the well-to-do. For the working class, college tuition and living expenses required herculean sacrifices in an era of larger families and rising expectations that daughters should have the same educational opportunities as sons.
The premise behind the 1958 National Defense Education Act and expansive policies last modified by President Obama was to make the system fairer and create wealth with a better educated workforce. Adults with a college diploma quadrupled to 34%.
College graduates have always enjoyed higher incomes. Since the lion’s share of benefits of this national effort accrued to individuals with diplomas, it seemed perfectly reasonable for young people to borrow for college in the expectation of higher lifetime earnings.
The whole system, unfortunately, was premised on the notion that 18-year-olds — aided by parents and college admissions officers — make intelligent choices. But ask yourself, would you encourage your child to borrow $50,000 to invest on whatever stock tips you and a retail broker could provide.
Parents don’t want to admit their child should not choose college if his aptitude and interest in schoolwork indicate he is better suited to be a skilled technician or chef. Admissions officers are paid to recruit students and aided by professors who want to keep their classrooms full, tell yarns about social science and humanities graduates who have great careers.
More than 67% of high school graduates enroll in a four-year college but judging by math and reading scores only about 37% are adequately prepared. It’s no surprise that nearly 40% don’t graduate, and 40% of those that do lack the analytical skills required for managerial and professional positions. Too many end up at Starbucks, selling cellphones or in other low-paying white collar jobs that hardly require a genuine college education to perform.
Young people who enroll in a Department of Labor-sponsored apprenticeship earn about $15 an hour and can avoid debt. Upon completion, 94% obtain positions that pay an average of $70,000 a year. That’s greater than the $51,000 average salary for new college graduates, but when was the last time you encountered a high school senior with a brochure for one of those programs as opposed to a college catalogue.
Knowing students come with subsidized loans, colleges have jacked up tuition. Over the last two decades, college tuition has risen 137% more than health care and 177% faster than the consumer price index.
Whether they dropped out, graduated but ended up in a low-paying job or became a doctor or hedge fund millionaire, former students were swindled into overpaying and saddled with too much debt — courtesy of starry-eyed parents, crooked academics and dimwitted public officials.
Forgiving student debt tax free would permit those earning poorly to live more decently and those in the professions and entrepreneurs to direct more capital into buying homes, having more children and improving their businesses. All would boost aggregate demand, investment and productivity.
Going forward, colleges and universities should be compelled to underwrite half of all student loans directly by mortgaging their assets and banks offered the opportunity to underwrite the rest. Both would become a lot more careful about the aptitudes of those who were financed and the majors students selected. Borrowing for an engineering or finance program would be easier than for French literature or economics.
Tuition would have to come down to make the math work and for loans to get repaid.
Critiques argue forgiving debt up to $50,000 for each former student, as Sens. Chuck Schumer and Elizabeth Warren have suggested, would unfairly benefit successful professionals and mostly Democratic voters.
The whole purpose of federally-sponsored loan programs was to empower young people to make smart choices and earn well, but like a businessman who has been hoodwinked into paying too much for a computer or fraudulent advice they deserve redress too. And we shouldn’t be discriminating against liberals any more than NPR and Twitter should be silencing conservatives.
• Peter Morici, @pmorici1, is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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