Deflating the Higher Education Bubble

It's been refreshing to see higher education given some real scrutiny and focus lately.  For my wife and me, something like "focus" happened when we met with a financial advisor before we had our first child, Evan.  Or was it blind panic?  I don't remember.  The conversation was something along the lines that college will cost us about $500,000 per kid, we'd be working till we die, and we should increase our savings by approximately 673% (assuming an annual ROR of about 8.5%).  Or just jump into the housing market, and then cash out those stupendous, easy money gains as needed, which was part of Plan A.

Since then we've adjusted a bit, and now the plan is, more or less, to hope really hard that the projections are all wrong, or that my kids' impossibly cute mugs get noticed by Gerber, or they pick up a bassoon scholarship, invent The Face Book, or whatever.

I'm just kidding, kids.  Your mother and I have a real plan, but for posterity's sake, here are a few meandering thoughts about why I don't think we really need to have $500,000 in the bank (per kid and net of a few retirement nickels) by the year 2024 (although a few prayers to Saint Jude for good measure may be worthwhile).

First, now that everyone thinks everyone has a God-given right to a college degree, and many folks not fit for higher education are nonetheless taking home college degrees, a lot of these degrees are worthless.  (Forget basic knowledge; that's not the point.  If it were, we would just fix basic public education.  Let's be practical!)  Sure, that French Literature degree from Colgate may come with a side of panache, and I understand it cost your parents a pretty dime and a hell of a lot of late nights at the office, but does the Front Desk Attendant position at the Westchester Marriott really call for your skills?  Does anyone care that you spent a semester studying Comparative Guitar in Florence?

College doesn't pay off for everyone.  Even if you're one of the smart, motivated ones, there's a good chance that your college degree was a lousy investment.  These days, the good-paying jobs that are available are usually the ones in which the employer can use the graduate's skills to add value, and make money.  It's an old-fashioned concept; what it means that you have to have a useful skill that sets you apart, which is to say, make you different from the rest of those faceless chumps in the 4½ inch pile of resumes.  A good number of employers who rely upon public funding or charity are, like us responsible homeowners, basically broke.

One upshot of all of this is that young parents like me are taking a much harder look at higher education, and thinking about other ways to spend this kind of money.  Let's say my kids are 18 and we've saved $500,000 each for secondary education.  Great.  Once upon a time, we might've said "Go for it, kids.  Your mom and I are so proud; and America needs more creative writing majors!  Now let's go for a ride on our boat!" with the faint hope that they'd actually end up working for McKinsey, rather than living in the attic.  Such majors were perfectly fine years back, because there were also teaching jobs and profitable media outlets and such things awaiting at graduation.  Now, I think I'll look at other ways to spend the money, like starting a small business almost anywhere other than in New York State, or, say, investing it for 10 years and heading to trade school en route to the IBEW.

There are some externalities, as the smart kids say, that affect economic choices on college education.  One of them is that college isn't there just to teach skills and provide return on investment; it's a place for bratty and listless kids to marinate for a while and, with any luck, grow up.  There's also a reflexive, generations-old attachment to a college education as intrinsically a solid investment of time and money.  Whatever.  Prediction: Both of these will seem anachronistic, even ridiculous in the face of that cool half million per kid.  To me, they already do.

Here's some more rank speculation: People will start looking at other options pretty soon.  A good friend of mine is a teacher, former administrator, and a Ph.D. student in education.  For plenty of good reasons, he doesn't want to be associated with my meanderings and drivel, but he believes that the pressure on expenses will help sprout something useful, like a marketable, no-frills secondary education that delivers far more value, and costs much less.  Given the numbers of people like me who have been bruised and battered by the housing market -- ye auld reliable investment vehicle -- any newfangled alternative will have plenty of attention if it can deliver value at a lower cost.  That's the thing about my generation of parents and spenders: we won't be throwing money around like our forbears, just because that's what our forbears did. 

It's Morning in America, or something.

Higher education might get the message and look for ways to cut costs.  One example of a fine institution that hasn't gotten the message is the Pennsylvania State University.  Last October, I was sulking at the campus HUB building after the PSU football team dropped a game, sitting on a sweet leather sofa sucking down a tall $2 Pike Place from the local Starbucks, watching college football highlights on ESPN.  The HUB has been renovated since the old days and it's very metropolitan, but even to this pampered 1980's kid from the suburbs, it was over the top.  In fact, it was nicer than my living room, no offense to Raymour & Flanagan.  All of this was swell but then, where did PSU get the money for this?  Me?  About a month prior, I had received a fundraising mailer from PSU's law school.  They'd finally rolled out a hideous-looking and ridiculously expensive new facility on the main PSU campus after deciding about 10 years ago that the relic 100 miles down Route 322 wasn't shiny enough.  According to the $2, 8½ X 11"  glossy mailer, it was all wireless this and marble that and technology and mahogany blah blah blah.  Well, none of this was free, tuition at the law school has about doubled in those 10 years (salaries haven't), and needless to say they wanted my money.  And needless to say, we threw the fancy mailer in the trash and sent a check to the marching band.

Parenthetically, we don't need an economist to tell us that easy money federal education loans are not helping.  Liquid plasma HDTV might seem like too much to hopelessly old-fashioned fools like myself, but tell that to the 19-year-old who is not paying for it until he's 23; and for that matter, tell the administrators at a college that's paid for by 19-year-old kids who won't have to worry about what it all costs until they're 23.  The politics of federal loans for college makes a meaningful rollback all but impossible, too.  To say nothing of the fact that many, many decision makers -- and polemicists like me -- tapped federal student loans at some point, and the whole country now thinks cash is grown on organic tree farms.

Anyway, I shouldn't pick on Penn State because I have two degrees from PSU, they've served me well, and I'm a proud alum.  Still, I wonder whether higher education too focused on current recruits and funding to worry about the high school class of 2024.

Do any of them have any vision? 

Maybe not.  Like I said: they might get the message.  And they may not.  Or, they will and it will be too late, and my kids will be on their way to union pensions, inconceivable job security, plush benefits, oh, and a plush retirement during which they will have plenty of time to catch up on French Literature and comparative guitar.  Hey, now that I think about it...…

We do live in interesting times: Basic public education is failing, but everyone thinks they're entitled to go to college.  So many of them do that many people get a college degree that has an approximate equivalent of a high school diploma from the year 1957 in Des Moines, except that it cost them tens upon tens of thousands of dollars.  And then a grad school degree to distinguish themselves.  And then everyone has to go to college because the hotel front desk will not hire you unless you have a college degree.  And it all has to be subsidized by Uncle Sam, because no one has that kind of money sitting around, least of all to dump on a bad investment.  And the smart kids become plumbers.

Here's to hope that things will change, eh kids?  In the meantime, let us hope that St. Jude is listening.

Bill Lalor is an attorney in New York City and a former GOP congressional campaign manager.  He blogs at Bearding the Lion.

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