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More about student loans and the value of a college education

My post on student loans has received the attention of blogger Stephen Karlson, an associate professor of Economics at Northern Illinois University (a university I can't say that I've ever heard of until today).

In a response to my suggestion that the private sector should be responsible college financing, Stephen writes:

This is the standard argument one would expect from a university faculty member who is defending his job's very existence. While there is nothing wrong with loving learning, most taxpayers would probably prefer doing something else than their current job, so it doesn't seem fair that their tax dollars should be spent to enable other people to do something they love.

I have had the opportunity to attend both an Ivy League school and a state school, and I can report that there is a huge difference between the attitudes towards learning exhibited by the students at the two types of schools. At the Ivy League school, most people claimed they were at school because they enjoyed learning. At the state school, nearly everyone was there to get a certification that they thought would somehow help their career.

I don't wish to assign a higher value to one motive or the other, but the differing motives reflect the economic circumstances of the students. Most of the students at the Ivy League school are from affluent families, and their more privileged family circumstances seem to make them less worried about how they are going to earn a living after they graduate from college. At the state school, the students come from mostly middle class families, and with the middle class shrinking (as I blogged about a few days ago), they are naturally mostly concerned with their future careers. Also, to be frank here, the typical state school student just isn't as academically capable as the typical Ivy League student. It is mostly the brightest students who enjoy learning. For mediocre students, the learning part is usually seen as an annoying hurdle they must get past in order to achieve the real goal, which is a college degree.

Having had the opportunity to interview job applicants, I often can't resist the urge to ask recent college graduates a basic question about a college course they listed on their resume. For example, a candidate indicates on his resume that he took a course in Finance. I ask him the most basic finance question, "could you explain net present value", and inevitably the candidate is unable to answer the question.

So I ask, why do we make students waste their time and money on college when they are so obviously not learning very much? It is often cited that people with college degrees have higher average earnings than people without college degrees, but the reasons for why that's the case are seldom explored. Compared to the typical non-college graduate, the typical college graduate (1) did better academically in high school and demonstrated better reading and math skills on the SAT; (2) is more motivated to obtain a higher paying career; and (3) comes from an economically better off family and is more likely to have family connections that lead to better jobs.

From the above paragraph, we see that comparing college graduates to non-college graduates is not a valid comparison, so no conclusion can be drawn about whether college education is truly providing a pecuniary benefit that exceeds the cost of the college education. Furthermore, part of the benefit has to do with credentialism. Employers value the college degree even though the college education hasn't made the person with the degree a better employee. To the extent that credentialism helps college graduates obtain better employment, this benefits the individual with the degree who obtains the better job, but it doesn't benefit society as a whole.

To clarify my views on college education and student loans: (1) I strongly believe that students who are intelligent and who are college material should have the opportunity to attend college, even if they come from a family that doesn't have enough money to afford the tuition; (2) marginal students who won't learn much in college should not be encouraged by society to attend college; and (3) students should certainly be allowed to borrow money to attend college if someone will lend it to them, but the government shouldn't encourage it via student loan programs.

posted Tuesday, October 28, 2003