“You dropped a hundred and fifty grand on a fuckin education you coulda got for a dollah fifty in late chahges at the public library.” From the movie Good Will Hunting.
Among the lessons we are still learning from the housing bust is the role played by well intentioned but counterproductive government housing policies. It became an important political objective to have lower income people own homes, even if in doing so we created a financial risk not only for the recipients of our largesse, but for the entire housing market. We suspended prudent lending standards and created implicit government guarantees that allowed auditors and ratings agencies to abandon any semblance of the due diligence we used to trust to them.
Behind this noble destructive effort was a policy that almost anyone should be able to own a home. Today we realize that ignoring stable income and credit worthiness causes problems. Some people, we now realize, are just better off renting.
By throwing money into this policy we upset the normal market, creating a boom and a bust. This destroyed the wealth of a lot of homeowners who were qualified to own a home.
Are we experiencing the same flawed thinking in higher education?
We believe that everyone should be entitled to a college education, and we encouraged debt to fund it. The Obamacare bill had a provision that privatized education loans. There used to be private companies that made loans for higher education. Now that the government has usurped that market they can use it as they please. Obama once referred to forgiving college loans for those who went into government service. There is a nascent movement afoot to forgive college loans, vocalized by some of the Wall Street occupation crowd.
But just as we have learned to question the necessity of everyone owning a home we should question the necessity and the wisdom of everyone having a college diploma. Education is a great thing not just for the higher income that it used to provide but for the greater understanding that it should strive to provide. But education is not limited to the institutions that charge enormous tuitions.
Professions such as medicine, law, law, accounting and architecture requires some sort of documented credentialism. Studies of history, philosophy and the sciences are meaningful contributions worth pursuing in an organized fashion. But this does not mean that everyone needs to have a college diploma. Trades provide valuable and necessary and often lucrative alternatives.
This does not even address the quality issue. We used to graduate from high school with the skills to take on a lot of jobs that now require college credentials.
As in housing, by reducing the standards to attend college and by funding it generously we reduce the value and increase the cost for those who do not qualify for government largesse. Graduates are now saddled with debt in a poor employment market.
Government’s intrusion into higher education has increased demand for the service and the funding to pay for it. This is the same formula that has driven up health care costs and housing costs. If we do not learn this single lesson from the housing boom and bust we are likely to repeat it in higher education.