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Defaulting Into Education | | | The Creed Does Not Apply To All | |
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< | Graduate education can quickly become a default choice in a slumping economy, rationalized as a sound investment when for many it actually serves as a credible excuse for delaying entry into the workforce (For an honest introspective see Joshua Divine's essay here). These “default students” may benefit by foregoing additional schooling. There are at least two groups for whom a graduate school investment is unsound: one fails to realize any financial benefit from her degree and the other sacrifices life goals in response to financial pressure accompanying the degree. First, assuming financial motives only, some degrees just don’t pay off. Doing the same work without the degree is possible, and the augmented salary does not make up for the opportunity cost of formal education. Second, some students enter graduate school with the intention of pursuing a low-paying field to satisfy non-pecuniary desires (here, think about general practitioners or human rights activists). After feeling pressure from the magnitude of loans, they abandon their goals and pursue an unwanted career that can fund their degrees (here, think orthopedic surgeons and Wall Street lawyers or read Nithin Kumar's piece on burdensome law school debt). Although these degrees have great fiscal returns, it can come at a great personal cost. These default students fall victim to the education creed. | >
> | Graduate education can quickly become a default choice in a slumping economy, rationalized as a sound investment when for many it actually serves as a credible excuse for delaying entry into the workforce (for an honest introspective see Joshua Divine's essay). These “default students” may benefit by foregoing additional schooling. There are at least two groups for whom a graduate school investment is unsound: one fails to realize any financial benefit from her degree and the other sacrifices life goals in response to financial pressure accompanying the degree. First, assuming financial motives only, some degrees just don’t pay off. Doing the same work without the degree is possible, and the augmented salary does not make up for the opportunity cost of formal education. Second, some students enter graduate school with the intention of pursuing a low-paying field to satisfy non-pecuniary desires. After feeling pressure from the magnitude of loans, they abandon their goals and pursue an unwanted career that can fund their degrees (see Nithin Kumar's piece on burdensome law school debt). Although these degrees have great fiscal returns, it can come at a great personal cost. These default students fall victim to the education creed. | | | Student Loan Debt Matters | |
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< | Putting the student’s decision into context, a graduate school education is a significant financial investment. Student loan debt in America has surpassed credit card debt in magnitude and now totals over one trillion dollars. The enormity of debt should not be surprising; government education loans are easily accessed, conditional upon little more than admission to an accredited school. Such easy access to funds allows borrowers to invest without much critical thought in the value of their degree. Specifically, this practice acts as an enabler for students who attend graduate school by default. Degrees that serve neither financial nor social interests are the most concerning in relation to the ballooning educational debt figures. Encouraging consideration of alternatives before investing will encourage default students to identify the risk of their investments and help avoid regrettable results. | >
> | Graduate school education is a significant financial investment. Student loan debt in America has surpassed credit card debt in magnitude and now totals over one trillion dollars. This size should not be surprising; government education loans are easily accessed, conditional upon little more than admission to an accredited school. Such easy access to funds allows borrowers to invest without much critical thought in the value of their degree. Specifically, this practice acts as an enabler for students who attend graduate school by default. Degrees that serve neither financial nor social interests are the most concerning in relation to the ballooning educational debt figures. Encouraging consideration of alternatives before investing will encourage default students to identify the risk of their investments and help avoid regrettable results. | | | Nudging and Setting Defaults | |
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< | Cass Sunstein and Richard Thaler introduced the concept of libertarian paternalism to a wide American audience with their book Nudge. Taking lessons from this concept, there are several way schools and the government may help default students self-identify as an at-risk group. First, an education in basic financial literacy may go a long way alone. Some states already require such a course in high school, and these requirements should be expanded. Second, some graduate schools should place a larger emphasis on post-undergraduate employment in their admissions practices. For example, nearly 80% of Northwestern Law School’s entering class has two or more years of work experience. Among other benefits, this requirement would encourage the default student to explore other opportunities and consider the value of graduate education in context of her life. Additionally, defaulting into employment instead of school would reduce applications motivated by intimidation of the working world. It would encourage more careful consideration of the degree’s value by requiring students to make an active instead of default decision. Third, most school borrowers are funded at least partially through the national government’s Stafford loan program. Today, borrowers are required to sign a promissory note and take an accompanying quiz prior to loan disbursement. I suggest the government add a portion to that requirement that roughly illustrates the expected financial impact of the individual’s graduate education. With the applicant’s previous level of education, major or specialty, prospective graduate program, and prospective career, the quiz could show the expected financial value of the degree. Although this information may come too late in the decision process, requiring this level of introspection alone would be beneficial. Some combination of nudges like these may help overcome the power of the education creed. | >
> | Cass Sunstein and Richard Thaler introduced the concept of libertarian paternalism to a wide audience with their book Nudge. Applying this concept, there are several way schools and the government may help default students self-identify as an at-risk group. First, an education in basic financial literacy may go a long way alone. Some states already require such a course in high school, and these requirements should be expanded. Second, some graduate schools should place a larger emphasis on post-undergraduate employment in their admissions practices. For example, nearly 80% of Northwestern Law School’s entering class has two or more years of work experience. Among other benefits, this requirement would encourage the default student to explore other opportunities and consider the value of graduate education in context of her life. Additionally, defaulting into employment instead of school would reduce applications motivated by intimidation of the working world. It would encourage more careful consideration of the degree’s value by requiring students to make an active instead of default decision. Third, most school borrowers are funded at least partially through the national government’s Stafford loan program. Today, borrowers are required to sign a promissory note and take an accompanying quiz prior to loan disbursement. I suggest the government add a portion that roughly illustrates the expected financial impact of the individual’s graduate education. With the applicant’s previous level of education, major, prospective graduate program and career, it could show the expected financial value of the degree. Although this information may come too late in the decision process, requiring this level of introspection alone would be beneficial. Some combination of nudges like these may help overcome the power of the education creed. | | | Conclusion | | |
(I remain interested in working on the paper and topic)
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