Friday, May 31, 2019

The Case Against Free College

The calls for "free college" are ramping up, with media stories about Americans having to leave the country because they can't pay their student loans back. What the stories do not tell us is the choices that people make to end up in that situation. What their majors are, for example...


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I know, from having been a college professor, that tuition is expensive. I also know it from my own kids having gone to and planning on going to college. I understand those who struggle under heavy student-loan burdens. I, too, had to borrow money to go to college.

However, I do not accept the constant background noise about more government help to those who take on big debt. It is often said that tuition-free college would eliminate the need for students to go into debt. It doesn't. I went to college in Sweden, where I grew up, and - again - I had to borrow money to do it. 

Why?

Because tuition-free only means you don't pay tuitions. You still need to pay for a place to live, your food, your other regular living expenses. You still have to buy books for your classes, and in this day and age when everyone has a computer, you need both hardware and software that are up to date over the course of your college years. 

Of course, you could bake all that in to the "free" college experience, but then the cost to taxpayers would rise accordingly. Suppose we have 20 million college students in this country, including all kinds of colleges and all kinds of study plans (full time, part time, night classes, graduate school). Suppose the average cost is $24,000 per year including room and board. The cost at a full-time traditional liberal arts college is of course much higher, but let us be generous toward the "free college" pundits and use this across-the-board average figure. 

The annual cost to taxpayers would be $480 billion per year. 

However, this assumes that there is no change in college preferences based on the removal of personal financial commitment. To keep the free-college number at this level we have to assume that nobody who attends night school or part-time college on line do so because they cannot afford a full time, four-year experience at Middlebury or Oberlin. 

This, of course, is a nonsensical assumption. Ask a random sample of a hundred 20-somethings what they would choose if cars were free: a Toyota Corolla or a Porsche Macan. Plainly, all-free college would rapidly increase demand for the full time four-year experience. Consequently, the average cost per student will rise dramatically; if it went up to only $36,000 per year - and remember that this is tuition-free college including room and board - the free-college program would be the second costliest item in the federal budget. It would exceed Medicare, Medicaid, Defense... it would even be bigger than the interest on the federal deficit. 

Only Social Security would cost more money.

No, it is actually good that college means a personal financial commitment. It means that people have the opportunity to make responsible choices before they decide to pursue an academic education as opposed to a trade. There is an impressive list of careers you can build based on only a high school diploma, from aircraft mechanics to welders, where you can make $50-$60,000 per year. And not have a dime in student loans to worry about. 

How about earning $87,000 plus benefits in your first year as a truck driver?

There are some college-degree careers that can beat these earnings, but not many - and certainly not enough to motivate why 20 million people should go to college for free. Rather than raising taxes by hundreds of billions of dollars or more to pay for free college, we should get the federal government out of the student loan business (tax subsidies give colleges incentives to raise tuitions) and reinforce people's personal responsibility for their own career choices. Or else, we will end up with more people with useless degrees and dim-at-best career outlooks. Behold a sample provided by CNBC:
Chad Haag considered living in a cave to escape his student debt. He had a friend doing it. But after some plotting, he settled on what he considered a less risky plan. This year, he relocated to a jungle in India. “I’ve put America behind me,” Haag, 29, said. Today he lives in a concrete house in the village of Uchakkada for $50 a month. His backyard is filled with coconut trees and chickens. “I saw four elephants just yesterday,” he said, adding that he hopes never to set foot in a Walmart again.
Instead of making a sarcastic comment about Walmart, he could have considered driving for them. If he had, as the link above suggests he could have pulled in enough money to pay off his student loans in no time. 

As we will see in a moment, it was not that much money. CNBC again:
Some student loan borrowers are packing their bags and fleeing from the U.S. to other countries, where the cost of living is often lower and debt collectors wield less power over them. Although there is no national data on how many people have left the United States because of student debt, borrowers tell their stories of doing so in Facebook groups and Reddit channels and how-to advice is offered on personal finance websites. “It may be an issue we see an uptick in if the trends keep up,” said Barmak Nassirian, director of federal relations at the American Association of State Colleges and Universities.
Ah, so they are involved in this. Of course, colleges and universities would love for taxpayers to foot their entire bills. That way they could jack up tuitions, send the bills to Congress and have them taken care of as "investment in our nation's human capital" and other bursts of hot air. 
Outstanding student debt in the U.S. has tripled over the last decade and is projected to swell to $2 trillion by 2022. Average debt at graduation is currently around $30,000, up from an inflation-adjusted $16,000 in the early 1990s. Meanwhile, salaries for new bachelor degree recipients, also accounting for inflation, have remained almost flat over the last few decades.
Of course those salaries have not increased on par with tuitions. Three mechanisms are at work to make sure that never happens:

a) More tax money into higher education, directly in the form of appropriations for state colleges and research grants for graduate schools, or indirectly via government-guaranteed loans; all this allows colleges to raise costs and be sloppier with efficiency and quality control than if they relied entirely on their own ability to attract students and benefactors;
b) More kids being given the stupidly inaccurate advice that the only way to a life is to go to college; and
c) A big, costly government that has brought our GDP growth rate down to almost-stagnant levels; Obama was the first president on record to not preside over a single year of 3+ percent GDP growth.

If you lure millions of kids into going to college, and if you tell them that it doesn't matter if your degree is in engineering or art history, then if you send them out into an economy that can barely keep people's standard of living afloat; then of course those college kids are going to see their student loans balloon into a major cos item. 

With that said, though, it might be worth noting that the expatriated American now living in a jungle in India did not drown himself in debt. CNBC again:
Haag’s student loan balance of around $20,000 isn’t as large as the burden shouldered by many other borrowers, but, he said, his difficultly finding a college-level job in the U.S. has made that debt oppressive nonetheless. “If you’re not making a living wage,” he said, ”$20,000 in debt is devastating.” He struggled to come up with the $300 a month he owed upon graduation. The first work he found after he left the University of Northern Colorado in 2011 — when the recession’s effects were still palpable — was on-again, off-again hours at a factory, unloading trucks and constructing toy rockets on an assembly line. He then went back to school to pursue a master’s degree in comparative literature at the University of Colorado Boulder. After that, he tried to make it as an adjunct professor, but still he could barely scrape a living together with the one class a semester he was assigned.
Of course. The guy graduates college, with a major in God-knows-what, can't find a "college level" job - whatever that means is shrouded in secrecy since we don't know his major - and then actually makes a good call. Go back and get a graduate degree.

Then what decision does he make? To get a degree in comparative literature. 

He is living in the midst of a serious recession. Instead of looking at what graduate degrees might boost his chances to earn a good living, he crawls as deep as he can into academic sophistry. Of course, a degree in comparative literature is probably a bit easier to use than a degree in Pre-Euclidean geometry, but that's about it. He made the worst call he could have made, choosing his masters degree, and therefore he is paying the consequences. 

If, instead of spending two years getting a master's degree, he had invested in a CDL, he would have been part of one of the most booming industries in the country. If he had gotten a welding certificate he would have beaten the annual earnings of most college professors by working up on Alaska's north slope. Had he done that, paid off his loans and set some money aside, he could then have come back to Colorado and moved himself closer to his dream career.
Adjusting to a new country, he admitted, has not been entirely easy. “Some toilets here are holes in the ground you squat over,” Haag said. Recently, he ate spoiled goat meat at a local restaurant and landed in the emergency room. Still, he said, “I have a higher standard of living in a Third World country than I would in America, because of my student loans.”
No, he has adjusted his living conditions to his career choices.

Here is the next career-choice expat in the CNBC story:
Chad Albright attended Millersville University, in Pennsylvania, where he studied communications and history. He graduated as the Great Recession was beginning in December 2007, and couldn’t find anyone to hire him in his chosen field. “I went to interview after interview after interview,” Albright, 39, said. Still, he had $30,000 in student loans and was soon faced with a monthly bill of around $400. Unable to support himself, he moved in with his parents in Lancaster and worked as a pizza deliveryman. “There was anger,” Albright said. “I couldn’t believe I couldn’t find a job in America.”
This is the kind of comment that people make when they have a sense of entitlement. Again, we encounter the false notion that if you just go to college and get a whatever degree, you will, as Frank Zappa once ironicized, "get a good job and be real rich". 

No. You have to work for it. You have to sacrifice, sharpen your skills, carve out your own path and set attainable, gradual career goals. America gives you all the opportunities in the world to do so - that is why millions of immigrants like me come here - but it is up to you to get off the entitlement couch and do the work.
Albright’s credit score tanked as a result of his repayment troubles, making it difficult for him to buy a car and to land certain jobs, since some employers now pull credit reports. “I feel that college ruined my life,” Albright said.
I will give this guy credit for his bad luck graduating a year before the Great Recession broke out. I was done with my second college major right when the Swedish economy was hurled into a deep depression. Unemployment skyrocketed. The American equivalent would be 30,000 people losing their jobs every day for 18 months. It was a nightmare of a labor market, even for someone with a major in economics. 

That said, in a tough spot like that it is up to you, and only you, what decisions you make. If you don't get a degree that is immediately marketable, then you get whatever jobs you can. You work one, two, three jobs to pay your bills and pay down your debt. 

Or, you make drastic changes to your life. This guy actually did:
Seeing no future for himself in the United States, he decided to move to China in 2011. In the city of Zhongshan, he discovered he loved teaching students English. Unlike when he was delivering greasy boxes of pizza, he found his work meaningful and fulfilling. Though he earned just around $1,000 a month in China, the school where he was teaching covered most of his rent and the cost of living was much lower than in Pennsylvania. A few years later, Albright moved to Ukraine, where he is now a permanent resident. He first taught in Kiev and now does so in Odessa, a port city on the Black Sea. He has no plans to return to the United States. “I am much happier in Ukraine,” he said, adding that he hasn’t checked his student loan account in nearly eight years.
Good for him. Not that he is running away from his loans, but that he has found a path forward in life. 

And then, of course, we get to the programmatic part of the CNBC article:
[The] fact that people are taking this drastic measure should bring scrutiny to the larger student loan system, said Alan Collinge, founder of Student Loan Justice. “Any rational person who learns that people are fleeing the country as a result of their student loan debt will conclude that something has gone horribly awry with this lending system,” Collinge said.
But wait - wasn't the very purpose of Obama socializing the student-loan system to make it work? Is it actually possible that Obama screwed up the student loan system, much like he screwed up our health insurance market?

Again: don't go to college unless you are determined to make it work no matter what. If you are scared of the debt burden, don't go to college. Get into a trade. Work hard, learn the skills, be productive and show that you can add value.

And those are the real key words here: add value. Define what difference you make, a difference people are willing to pay for, and you will get there. But you have to do the work.

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