Tag Archives: student loan crisis

Is college a big waste of time and money? It depends

Interesting article: Everything Wrong with College

And that’s how you end up with doctors being forced to endure 14 years of schooling. Hard to open a little family practice and provide cheap care when you’re 160 thousand dollars in debt.

It’s become pretty fashionable these days , both for the ‘left’ and the ‘right’ to bash college. For the ‘left’, college burdens students with too much debt; for the ‘right’, there is too much political indoctrination and brainwashing. Both sides have valid points. My take is: although the higher-ed system is broken, the alternatives often aren’t much better. Due to economic factors, becoming an entrepreneur has never been harder, and a degree, despite the debt and indoctrination, may still be the past path out of poverty.

Doctors get into a lot of debt–but they make a lot of money and have long careers, which makes it worthwhile in the end. Often, the debt can be paid in small installments. The problem is when someone gets into $150k debt to major in liberal arts and instead of making $400k a year, makes only $40k a year. Doctors don’t need to open a private practice; hospitals recruit them .

Even $30k for a college degree may seem like a a lot, but it’s about the same price as a new car, and unlike a car it doesn’t lose half its value after you drive it off the lot, and college grads still have better job prospects than dropouts, yet no one is protesting car ownership. Considering that since 2008, especially, inflation-adjusted wages for non-graduates have stagnated behind graduates, a college degree is also a good hedge against stagnant inflation-adjusted wages. And graduates in STEM (especially computer science, math, physics, and finance) do well. So it’s not all bad.

I think the tuition ‘crisis’ and bubble is exaggerated–the debt is real, but often the figures cited are incorrect (some sources cite $200k/debt per student, when the actual figure is closer to $20-30k). Also, after adjusting for generous scholarships, federal aid, deferments, and other programs, the rate of growth of tuition as measured by the amount actually paid by the student (not the sticker price) is much closer to inflation.

A common argument is that college self-selects for high-IQ, thus people who graduate succeed because they are smart, not because of the degree. This is some truth to this, from Much Needed IQ Realism in the Anti and Pro College Movements:

Being qualified to get into an elite school signifies high-intelligence; such high intelligence carries benefits throughout life regardless if one actually attends the school. Those in the top 1% of IQ, such as Bill Gates, James Altucher and Steve Jobs, for example, have the capacity to excel regardless if they chose to go to college or not. Ultimately, we believe that independent of higher education, IQ is the ultimate determinant of success or failure, especially in the post-2008 economy.

Success may have more to do with IQ than the degree itself, but all else being equal, someone with a degree will be hired over one who doesn’t. For some jobs, human resource departments will automatically filter out resumes that don’t list degrees. A common argument is that skipping college allows one to ‘build experience’ during those four years. But the problem is, even for internships, due to the competitiveness of the labor market, non-grads will still be competing with grads for non-paid positions–yes, that’s how bad things have gotten, and degree holders still have an edge, all else being equal. Even if the job for a degree holder pays poorly, some employment is better than none, and this is factored into the lifetime earnings of grads vs. non-grads. I don’t think the opportunity cost is that high considering the degree only takes 3-4 years to attain and the potential payoff lasts for decades.

But, yes, in an ideal world there would be no need for young people to go thousands of dollars into debt and allot four years of their most productive years for a piece of paper that signals to employers ‘baseline competence’, which is why this blog for years has recommended replacing costly, time-consuming college diplomas with simple IQ-like tests. But a certain political party is opposed to this, citing, as usual, ‘racism’ and ‘discrimination’ because some groups score higher than others on these tests, but I guess the left’s ‘logic’ is that it’s better for everyone to suffer equally with crushing student loan debt than to have to admit reality that not everyone is not equal.

Solving the Student Loan/Debt Crisis: A Plan That Can Work

On sites like Reddit, 4chan, and College Confidential, stories of college graduates saddled with piles of debt and poor job prospects, are becoming commonplace:

Many on the ‘left’ (and I say ‘left’ because it’s mainly democrats who raise this issue) complain about student loan debt being too high, as well as poor job prospects for new graduates, who are either unable to find a job, or if they get a job, the job isn’t commensurate with their credentials (for example, anthropology majors waiting tables).

But what if there were a way to break the student loan debt cycle, or at least put a dent in it.

As I said before, the higher education system is broken, due to ‘good intentions’ gone wrong, and many entities shoulder the blame: students, politicians, guidance counselors, culture and society, and parents.

In the case of high school graduates, they have one of three options:

- skip college and enter the workforce
- go to college and major in a liberal arts subject
- major in STEM

The first choice results in no debt but also the worst job prospects of all. The second may result in a lot of debt and mediocre job prospects. The third choice may also result in debt but also has the best job prospects. As a caveat, those who graduate from elite colleges can typically major in anything and still have decent job prospects, but they are of the minority. Most students are aware that STEM pays more and has better job opportunities, but they choose the liberal arts anyway. That’s their choice, but they should not be surprised if they are unable to find good job afterwards – they were warned.

Most graduates (such as the example from Reddit above) are reasonably intelligent. According to research by Charles Murray, the typical college graduate has an IQ of around 115, which is one standard deviation above average. Thus to some extent a college degree (even for non-STEM majors) signals above-average intelligence, which could explain why many employers, particularly for higher-paying jobs, require a college degree, or ceteris paribus will choose a candidate who has a degree over one who doesn’t. Studies have shown that IQ and job performance are correlated, probably because smarter employees learn faster and are better able to anticipate the needs of customers and their employers.

Another issue is debt. Working as a barista for Starbucks may suck, but it’s even worse if you have a lot of debt. There’s no reason why anyone should have to spend tens of thousands of dollars (or even hundreds of thousands), and four to seven years of their life, to get a piece of paper that signals ‘merely above-average intelligence’. Worse yet, most jobs are completely unrelated to the degree. Very few literature, anthropology, and history majors actually get jobs pertaining to literature, anthropology, or history.

Grade inflation and credentalism are related. Because of grade inflation, increasingly advanced degrees are required signal competence and ‘stand out’:

This means more debt and more years of college to acquire these advanced degrees, including but not limited to PHDs and Masters Degrees – money and time that could otherwise be spent on ‘life’, not education. High school degrees don’t get much mileage as they did decades ago, because if everyone is getting a 4.0 GPA and ‘honors’ due to dumbed-down courses, what good is it. Another cause of credentalism is that the labor pool has swelled, which is not just limited to the United States but also includes many emerging economies. The problem is the skills that are taught in collage and high school have become commoditized and are no longer ‘special’. Employers can easily outsource workers, filling jobs that decades ago would have gone to high school or even college graduates, because basic skills (like reading and writing) have become so common. And then there is also technology, which may result in low-skill jobs being automated. Either the courses are dumbed-down or too many people are completing school – it’s probably both.

Although some students go to college for the ‘experience’ and the ‘pursuit of knowledge’, many attend in the hope of landing a good-paying job when they graduate. If making money is goal, and for most students it is, there is an alternative to the current dysfunctional system. Because in the eyes of employers a college degree signals above-average intellect and competence, the obvious solution is to give employers carte blanche to screen prospective employees for intelligence using cheap, easy-to-administer IQ-type tests. This would help both employers and students. It helps employers because IQ tests (as well as related tests like the SAT and the Wonderlic) may provide a cheaper, more reliable means of assessing the intelligence and competence of potential employees than college degrees, which have been devalued by grade inflation. For students and job seekers the benefits are even more obvious: no more debt and years spent acquiring increasingly advanced degrees in the hope merely of being qualified, let alone getting a job. Even if high-scoring students are unable to find good-paying jobs (due to the economy and other factors), not accumulating a bunch of debt for that same crummy job would be a success for the program.

For this solution to be implemented, disparate impact laws (Griggs v. Duke Power) would need to be overturned. Although some large companies (like Proctor and Gamble) use these tests, they also have the financial resources and case study data to fend off litigation, which small business cannot. Not to make this too political, if the ‘left’ cared about students a much as Sanders or Hillary say they do, they would make a push to overturn disparate impact laws.

In the unlikely event Griggs is annulled, private (or maybe publicly run) mass testing centers can be established, independent from employers. Anyone can register to have their intelligence tested on one of multiple tests, in order of increasing complexity and administrative costs: Wonderlic, SAT, or Wais. The Wonderlic is a 50-question multiple choice test of general competence (basic numeracy, vocab, etc.), and takes 12 minutes to complete. The SAT is more comprehensive and takes much longer to administer, and like the Wonderlic only tests mostly math and verbal skills. The Wais the most comprehensive of all, and tests a wide range of abilities, such as spatial intelligence, which the other two tests don’t. Upon registering an account (req. govt. ID) and obtaining scores on one or multiple tests, this information can be provided who employers, who will have the ability to enter a code to verify the score on an online database.

Some may be surprised to learn that anyone who wants to enlist in the US military must score in the 33rd percentile or better on the AFQT, a test administered to all enlistees that measures ‘general skills, which is related to IQ (although in times when cannon fodder is needed the bar may be lowered), so why can’t such a testing system be adopted for the general public, for use by employers?

A common criticism is that the less intelligent would be discriminated by such a system, but the unintelligent often drop out of college (the result being debt and no degree) at a very high rate, so by not going to college and instead being tested, they would save money, which is especially helpful considering the lifetime incomes of the less intelligent isn’t very high, so they are hurt the most by having student loan debt. It’s not like the unintelligent are being deprived of their opportunity to work for NASA by being tested. Second, the likely economic tailwind from reducing student loan debt, getting young people into the workforce earlier, and boosting employer productivity would create more total jobs, benefiting job seekers of all intelligence levels.

Fixing the Student Loan Debt Crisis and Reforming Edcuation

From Demos: Why Education Does Not Fix Poverty

The author lists some reasons why poverty has not fallen in spite of the US population becoming more educated:

First, handing out more high school and college diplomas doesn’t magically create more good-paying jobs. When more credentials are chasing the same number of decent jobs, what you get is credential inflation: jobs that used to require a high school degree now require a college degree; jobs that used to require an Associate degee now require a Bachelor’s degreee; and so on. Obviously the supply of good-paying jobs is not a fixed constant of nature, but there is no reason to think that the supply will automatically go up to match the number of people with the necessary credentials. The types of jobs available in a society, and their level of compensation, is determined by many factors (demand, worker power, technology, global competition, natural resources, etc.) that have little to do with the number of degrees that society is minting.

This is compounded by the fact that even after adjusting for inflation, student loan debt is surging:

Student loan debt exceeds credit card debt:

And to add insult to injury, the rate of debt exceeds gains in wages. Debt is up 35% and median annual wages are flat:

Too much debt compounded by poor job prospects – a bad combination. Regarding debt, the system is broken, and the very people who are trying to ‘save’ the poor with ‘good intentions’ are making things worse, by continuing the college/debt cycle in perpetuity. A better solution is to replace costly, time-consuming diplomas with cheap, easy to administer IQ-like tests like the Wonderlic, as well as the SAT, which is also a good proxy for IQ and signaling competence and learning ability. Yeah, there is disparate impact, I know, but these tests would save a lot of time and money, sparing millions of students, particularly low-income students, of decades of debt. Employers want employees who can learn quickly, make inferences, adjust to changes, and anticipate needs – all skills linked to IQ.

Regarding the mismatch of skills and unemployment, another problem is that we’re perhaps in an era of ‘peak school‘, and instead of more education for the sake of education, we need ‘targeted education’ to teach young people the skills employers are directly seeking, sorta like vocational schools. More intelligent students can either undergo a comprehensive formal, liberal arts education or learn high-paying skills like coding while in high school instead of spending tens of thousands of dollars or more to learn it in college and frittering many valuable years. Britain has a program similar to this, Eleven-Plus exam, as I explain in an earlier post Birth ‘Lottery’ Does Not Preclude Meritocracy:

The politically correct approach to education of trying to bring everyone to the same level is flawed; we need to use cognitive screening to ascertain individuals’ strengths and weaknesses, and then create curriculum optimized around this. Beyond the basics like reading and math, higher IQ kids, for example, should be encouraged to learn high-paying skills like STEM at an early age, as well as pursuing other cognitive creative endeavors; lower-IQ kids should learn service work since that’s where the most opportunities, if there any, will be. Britain had a system similar to this, the Eleven Plus exam, which tested kids at the age of 10 for future educational placement, with lower-IQ kids learning vocational work, average-IQ kids continuing with their education, and high-IQ kids going to special schools.

And from Scott Adams How to Get a Real Education:

I understand why the top students in America study physics, chemistry, calculus and classic literature. The kids in this brainy group are the future professors, scientists, thinkers and engineers who will propel civilization forward. But why do we make B students sit through these same classes? That’s like trying to train your cat to do your taxes—a waste of time and money. Wouldn’t it make more sense to teach B students something useful, like entrepreneurship?

He’s right. What we have is a misapplication of resources and ability. Rather then a cold dose of reality that, no, Jimmy with an IQ of 90 should not go to college, teachers would rather (or at least they are forced to) lie to parents and students, sending them down a path of debt that is worsened by a high college dropout rate.


IQ and SAT Scores as a Solution to the Student Loan Crisis
Breaking the Tuition Feedback Loop
Disparate Impact Litigation Hurts Job Seekers, Students, and Employers
Some Ideas to Reform Higher Education
The Student Loan Charade
An Indebted Generation