November 7, 2012

We Can't Fix Higher Ed Through Public Policy

Is it true that only some recipients of student loans are getting their money's worth--those with "majors closely aligned with actual occupations" such as engineers or computer scientists? Daniel Foster of National Review Online makes that argument in The American Spectator. These students, he says, are more employable and earn more upon leaving college than Humanities majors. Based on existing economic data, the engineer can more reliably pay back the loan. The unemployed and newly indebted Humanities graduate can't realistically expect to do that. Nor can the federal government expect to collect from that graduate.

Therefore, Foster wants federal loans granted not on neediness, but on the likelihood of a student to finish college and get a good job. He quotes his colleague Jay Hallen at the National Review Online, who wants "to implement a sliding scale of loan rates that favors students committed to majoring in fields such as computer science or nursing, where the demand for new employees exceeds the supply. For fields where employment demand is weak, loans would be progressively more expensive." The outcome Foster hopes to achieve is to "push marginal college prospects into vocational schools and other career paths, reducing demand for higher education, and thus tuition inflation."

There's a problem here, however. Foster is proposing right-wing social engineering, and the problem with all social engineering is the classic inability to anticipate how individuals diverge from predicted behavior. The first hint of trouble appears when Foster denounces the "dangerous fantasy of college as 'supervised adulthood' that leads too many prospective undergraduates to choose their 'dream school' based on amenities, the social scene, or any of a hundred other variables that have nothing to do with bang for the buck."

But there's a reason why such amenities exist and how closely related they are to "supervised adulthood." Students expect a given set of attributes from their college--a bucolic campus, a fitness center, palatial dorms, and--soon enough--nap pods.  The arms race in amenities is an effort to achieve a high ranking, and students peg their station in life on the ranking their college reaches.

Once a college has admitted the most competitive students it can attract, administrators create an insulated world for them. As Mitchell Stevens explains in Creating a Class, part of what the high tuition buys, in addition to the credential, is the collection of surrogate parents housed in administrative offices.  "Parents can go to sleep at night knowing that their children's potential friends and lovers have been elaborately screened," he writes. In other words, parents want their children to buy supervised adulthood, and to get it, they are willing to pay a premium or put their children into debt.

The reason has to do with rising in social station. As Stevens explains, admissions officers obsess over admitting the right mix of students, and that mix depends on the right students applying. If all goes well, then students achieve a station that allows them to identify their place in American life, and that station enables graduates to marry a partner of equal educational background and fit into a social scene among peers with similar educational backgrounds, and--most importantly--their parents can put "Duke" or "Stanford" stickers on their SUVs.

Students use loans in higher education to join a class of people they otherwise could not. If incurring six-figure debt means graduating from Cornell, then students (and parents) anxious about their standing might attend, despite having a full ride at a state college. If the possibility of rising in station begins to shrink and, with it, the opportunities to belong to the right social class, many students and their parents will take the risk of going into debt if it gives them a better shot. Tinkering with incentives won't work. Indeed, to call such loans "investments" at all is no longer true. They are gambles, and Foster is right when he says that the odds are increasingly not in anyone's favor.

We can't underrate the importance of social status embedded in rock-climbing walls and vegan menu options. The solution is not in rejiggering Sally Mae, since economic incentives do not reach the heart of the issue. No policy can, because the solution is in the hands of the students: they can take the gamble, attend the less prestigious but more affordable college, or they can exit.

Comments (1)


I largely agree with this article, but what about the fact that the 'highest ranked schools' including all of the Ivies, and most of the top 50, have "no-loan" financial aid packages. These schools have implemented policies to attract the most competent students, but who come from a lower social standing. At this point, the situation is no longer a gamble for the least well off. A family of 4 that grosses less than $45,000 can send a child to Cornell loan-free. If that family will have 2 children in college at the same time, the figure goes up to $65,000. By creating such well-funded aid packages, the groups create two classes of people that can completely enjoy a total academic freedom: The wealthiest among us, and the poorest among us. It would be interesting to see the major breakdowns for students who come from families that gross $250k and more, and from those that gross less than $65k. I have a feeling they will have very similar make ups, and many more liberal arts and 'esoteric' majors than the middle classes, who may be gambling on their student's ability to land a job in the future.

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Published by the Manhattan Institute
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