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< | You Know You Only Used To Get Juiced In It | >
> | Education Is An Active Choice, Not A Default | | | -- By AlexKonik - 03 Jun 2012
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< | When In Doubt, Get a Degree
There are few things that remain unquestionably true in American life. One, Americans are special in the world. Two, your kids will have a higher standard of living than you. Three, number two is only true if they have more educational credentials than you. | >
> | Intro | | | | |
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< | Without doubt, K-12 education is very important. It certainly benefits students. In 13 short years nearly all Americans are transformed from walking and talking little monsters into actual citizens. They can read, do basic math, dissect a frog, and have a basic contextual knowledge of human history and how government functions. The benefits to society likely even overshadow the benefits to the individual. When everyone can read a stop sign, goods can flow by truck. | >
> | America is captured with a creed that education is your ticket up. Investment in education, no matter the school, your area of study, whether you are truly interested, or how hard you will work, is worth the cost. You should not consider whether to go to school; you should consider where to go. This creed, combined with easy access to money through education loans, leads many people into graduate degree programs funded on debt. A debt-driven graduate education is an excellent decision for many people; however, for many it is not. This fact is illustrated by the massive size of student loan debt in America and students’ increasing inability to pay it off. The education was not worth the cost for many, and America faces a new ominous cloud of debt as a result. Using principles of libertarian paternalism, schools and the government May be able to nudge the most vulnerable potential students away from a misinformed investment in education. | | | | |
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< | This type of good calls for government provision or subsidy. Like ubiquitous road, mail, and internet access, the total societal gain is not captured by the price offered for these items. | >
> | The Creed and Its Foundation | | | | |
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< | The Creed
This reasoning can extend beyond its support. America is captured with a creed that education is your ticket up. Investment in education, no matter the school, your area of study, whether you are truly interested, or how hard you will work, is worth the cost. You should not consider whether to go to school; you should consider where to go. This belief may have been true, ironically, when attending college was a signal of luxury and truly privileged status; attendance promised unique status and opportunities. Today it is just as true but for another reason. The signal has been diluted: lacking a degree serves instead to bar one from a large segment of the most gainful employment. This is not because of the skills one learns. It is because "colleges are part of the American institution; everybody respects them. They're very rich and influential, but they have nothing to do with survival. Everybody knows that." (Bob Dylan, responding to questions about dropping out of college). The assumption of college attendance is the product of an accreditation arms race that has exceeded its functional purpose. It has become a creed that blurs the line between luxury and investment in human capital, and it cheapens both. | >
> | The creed Is based in reality, and it is not altogether wrong. Higher levels of education are correlated with higher levels of income. Gaining a specific skill or education may be the best way to break through an income or career ceiling. A doctor set on dermatology, a young woman looking to make partner at Cravath, and a studious literature academic are all well served by their requisite graduate programs. These are considered investments that lend support to a creed that extends too far. Graduate education can quickly become the default in a slumping economy, rationalized as a sound investment when for many it serves mostly as a credible excuse for delaying entry into the workforce. This group of default students would be better served by foregoing additional schooling, and nudges may help them self-identify. | | | | |
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< | The Alternative
Advanced education does serve some functions that are important. First, it is a great way of investing in human capital. Learning a skill or profession may be a wise investment decision, depending on the value of the knowledge and the cost of tuition and foregone opportunities. Second, it can be a luxury good for the academically interested or a summer camp for the rich. Third, like primary education, it socializes and informs citizens, providing externalities for which the cost is not discounted. This third function warrants government subsidy, but it is as successfully achieved in other ways. Many European countries promote service in a program like AmeriCorps. A young person could actually contribute to society and earn rather than spend money while acquiring the same socialization (any many of the knowledge) benefits. When asked to name a better use of four years than college, Dylan replied: "Well, you could hang around in Italy; you could go to Mexico; you could become a dishwasher; you could even go to Arkansas . . . Everybody thinks that you have to bang your head against the wall, but it's silly when you really think about it." After all, "out of all the people who just lay around and ask 'Why?', how many do you figure really want to know?" | >
> | The Creed Is Not Right For All | | | | |
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< | The luxury angle is certainly legitimate. The wealthy may want to read Heidegger or drink at fraternity parties. This is not an investment; it is a vacation. As Dylan said, “I certainly wouldn't advise somebody not to go to college; I just wouldn't pay his way through college.” | >
> | For whom is graduate school ill advised? It could be evaluated by asking whether the student is regret-free sometime after graduation, compared to the counterfactual of non-attendance. Did graduate school advance achievement of your goals? 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 makeup for the opportunity cost of education. Second, there is a group of students for whom financial comparison clearly supports enrollment. Comparative literature majors in law school provide a good example. With this group, one must ask whether the opportunity cost is truly overcome in another way. Many students enter medical or law school with the intention of pursuing a low-paying field to satisfy a non-pecuniary desire (here, think about general practitioners or human rights activists). After feeling pressure from the magnitude of loans, though, they pursue employment that makes their degree financially superior compared to non-enrollment. It is not clear that the degree overcomes its opportunity cost here when one considers less tangible factors like the shift of employment type – the shift in what goals one is pursuing with her career. These two groups of graduate students who I call “default borrowers” – the financially motivated who are misinformed about salaries and the lifestyle motivated who underestimated loans – fall victim to the education creed and would benefit from a nudge. The dedicated dermatologist or devoted LRAP public defender are not this paper’s targets; the creed is true enough for them. | | | | |
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< | The Sliver of Truth
Education as an investment, though, is the sliver of truth shouldering the American creed. In a world of the economist’s assumptions this purpose would not warrant subsidy. Unsurprisingly, the assumptions fail and there are consequently many good reasons for the government to subsidize undergraduate educations. Foremost is that college has, as lamented above, become a prerequisite for most gainful employment for cultural reasons. Facing a total bar, people must go. The poor are at a particular disadvantage because education is not collaterizable the way a house is. Without assurance of repayment, the poor will face rates that will keep promising investments from capitalizing. A government loan program can spread risk and write off defaults as the cost of operating a system that provides net social gain. | >
> | Student Loan Debt Is Significant | | | | |
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< | If It Isn't a Luxury, You May Be the Commodity
This justification for subsidy is lost once one reaches graduate or professional school. By then both the student and investor have (or have no excuse to lack) adequate information about future prospects to make an informed investment. Subsidies here are pure market distortion, and we should not lament the recent abandonment of Stafford Loan subsidies to graduate students. The loans disguised the price of advanced education and incentivized over-investment in training that was not worth its actual cost. | >
> | Student loan debt has surpassed credit card debt in magnitude and now totals over one trillion dollars. The large 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 enables our default borrowers’ decisions to attend graduate school. We should be concerned with funding these degrees that serve neither financial nor social interests and add to the ballooning educational debt figures. Adding some trivial barriers to borrowing and encouraging consideration of alternatives before investing in further education will encourage default borrows to self-identify and help some avoid poor investment decisions. | | | | |
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< | The Reconciliation
Appreciating the abandonment of government subsidy for education is a violation of our creed. Because it discourages contemplation on whether one’s education is a luxury or an investment, the creed disguises the legitimate reasons for education in a shroud of false reverence and necessity. Hopefully, your J.D. is both an investment and a luxury. Thinking of it in these terms, and not the unquestioned next step after a B.A. in a bad economy, should focus your decision on whether to go to school and what to do with your degree. | >
> | Nudging and Setting Defaults | | | | |
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< | When we are happy that the subsidy is cut, we must collide head-on with those "Who despise their jobs, their destinies / Speak jealously of them that are free / Cultivate their flowers to be / Nothing more than something they invest in." | >
> | 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, schools and the government may help default borrowers self-identify. First, providing an education in basic financial literacy may go a long way alone. Some states already require a “consumer economics” course in high school or college, and these requirements should be expanded. Second, 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. The government should add a portion to that quiz that roughly demonstrates the expected financial impact the individual’s graduate education. A form should ask the applicant to enter her highest previous level of education, her major or specialty, her prospective graduate program, and the career she hopes to peruse after. Requiring this level of introspection alone is beneficial, but the form could easily output a rough calculation of the expected value of the degree measured against the applicant’s opportunity cost. Coupled with monthly salary and loan repayment amounts, this could at least provide a wakeup call for those least informed investors. Third, graduate schools should place a larger emphasis on post-undergraduate employment in their admissions practices. Nearly 80% of Northwestern Law School’s entering class as two or more years of work experience; 95% have at least one year. Among many other benefits, this requirement would eliminate the default non-choice of remaining in school as an aversion tactic against employment. The opportunity cost of education could actually be known. | | | | |
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> | Conclusion | | | | |
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< | (I would like to continue working on this paper, but please prioritize my first paper ahead of this for edits.)
Comments
I think this great Alex. Their is a clear trunk of an argument with many branches coming out which you explore nicely. I like the way you wove Bob Dylan into each section of the paper. I suggest deleting the word 'college' from your articulation of the creed. I think the creed of our society is that education (all possible levels of education, not just college education) is the ticket up. The more degrees one can amass the better. Especially because later your argument seems to be more focused on graduate school loans, stating the creed in terms of education (without the restriction of college) would be clearer.
-- SkylarPolansky 05 Jun 2012
Thanks for the comment Skylar. I think your suggestion is spot on, and I noticed that this is a point where I lose some clarity while I was outlining. I went through a few iterations trying to fix it but haven't arrived quite there yet. The very first iteration had me launching the same attack against undergrad subsidies, but it was hard to take that as seriously. I made a few language tweeks based on your suggestion; I wonder whether I need to make a more structural change? Thanks for reading!
I do think it could use some structural changes. I suppose my main complaint is that the thesis is a bit lost in the forest. From my interpretation, it seems that your thesis is: Government subsidies are alright for undergraduate education, but they're stupid for graduate school. Is this right? I think my confusion comes from the fact that you don't really talk about graduate school until your 5th section, and you seem to go off into tangents about AmeriCorps? , education as a luxury, etc. I think these points, while interesting, could either be worked into the essay in a better fashion or, in some cases, deleted. A clearer thesis and a devotion to ensuring that every word written relates back to that thesis in some way could prove helpful.
Personally, I'm not sure if I agree with you that government subsidies for graduate school are automatically a bad idea. Yes, removing government subsidies for graduate school disincentivizes those from going to grad school who shouldn't be going in the first place. But it ends up being a much larger disincentive to poor people, mostly minorities, who will bear the brunt of a subsidy cut. People in graduate school - lawyers, doctors, businessmen - end up being the leaders and upper class of society, and by shutting poor minorities out of those paths, we continue to perpetuate a world run by white people for white people. Perhaps subsidies could be given more effectively, but I think helping poor minorities break into the upper echelon of society is just the kind of social good for which government subsidies are appropriate.
-- JaredMiller - 27 Jun 2012 | | | \ No newline at end of file | |
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> | Graduate education has obvious benefits to individuals and society, and for many legitimate reasons our government has decided to fund it virtually indiscriminately. Given this policy choice, many people are enticed into graduate school who later regret attending. In order to control the growing debt and encourage efficient loan distribution, schools and the government should implement methods for inefficient lenders to self-identify and avoid burdensome, wasteful loans. | | | \ No newline at end of file |
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