Note: Today I’m heading to Illinois for a family reunion, so I won’t be posting a column on Monday. To make up for it, I’m giving you this longer-than-usual column, crammed full of wit and wisdom to get you through the coming Simpson-less Monday.
I’ve been reading about Trump’s plan to restrict universities’ access to federal student loans if the programs are failing those students. The definition of a failing program is an undergrad program whose graduates earn less than a typical high school graduate, and a grad program whose graduates earn less than a typical bachelor’s graduate. Programs that fail in two out of three consecutive years would lose their loan eligibility for at least two years, and schools where more than half of the programs are failing these tests could lose all their Title IV aid, including Pell Grants. The plan would also set total debt caps at $100K per person for non-professional degrees and $200K for professional degrees.
I love this idea, despite the fact that it gives partisan leftist media a golden opportunity to dishonestly spin the story. Not that they need an excuse, as you might remember from last week’s reporting of the Fly Dubai story, in which a Muslim terrorist pilot stabbing his co-pilot and tried his best to dive the plane into the ground, killing as many Jews onboard and on the ground as possible. The MSM described that as “an incident involving an altercation between two pilots.”
“Hey Martin,” you are not asking, because you already know. “Do we hate the media enough?”
Insert your own Dr. Evil-voiced, “How about NO!” here.
So of course various outlets called the plan an attempt to “ban students majoring in certain college degrees.” A MSN headline referred to the plan as one “that could disrupt students’ degrees.”
Inconveniently for the critics, the plan would not prevent students from getting beneficial loans; it would keep the schools from getting the loan money for programs that actually hurt the students involved. In doing so, it will hold university programs accountable for giving their students a worthwhile education, while also helping students avoid the disaster of graduating with a mortgage-sized debt for a worthless degree.
First, the plan is far from draconian. It allows a program to fail its students for one year, as long as it doesn’t do so in two out of three years. And it also sets a ridiculously low bar for “failure.” Common sense would tell you that a degree that takes years of your life and a big chunk of debt and leaves you no better off than if you had just graduated from high school would be a clear failure.
But a program that left you WORSE off than if you’d never gotten the degree in the first place!? How is that even possible? (I’ve got a few answers for you below.)
No reasonable person could object to keeping taxpayer dollars flowing to any program as dysfunctional as that. And no reasonable person does. Only college administrators, government bureaucrats and Democrats. (Boom! It’s my “painting with too broad a brush” joke of the day!)
This situation raises an issue that perhaps more than any other, I wish I could get my lefty friends to understand: when the federal government gets involved in financial transactions – such as buying/borrowing for a home, or buying/borrowing for a college education – it inevitably leads to much worse results than if those transactions had remained in a free market. The underlying reason is the differing incentives in both situations.
Incentives are clear in the free market: if you are going to lend money, your crucial incentives are to avoid losses, and to achieve profits. Government bureaucrats, on the other hand, don’t have any skin in the game, so they don’t need to worry about financially disastrous programs and decisions. On the contrary, they are often incentivized to grow their own department and programs, results be damned.
Besides college loans, the best example is home loans. When I was a young man, we rode horses to mortgage closings, and signed mortgages with quill pens dipped in ink. But that’s not important right now.
What is important is that the vast majority of mortgage loans used to be made by banks, and if a borrower went belly-up, the bank was saddled with the bad loan they’d made. So they had a strong incentive to make loans, but an even stronger incentive to make loans that the borrowers were very likely to pay back. So the banks spent a lot of time doing credit checks and other due diligence, and they turned down a lot of credit-risky would-be borrowers.
As the federal government metastasized during the 20th century – er, I mean “grew” – the feds started taking over more mortgage lending. They did so the same way a Hemingway character described the way he went broke: “Gradually and then suddenly.” Two huge “government-sponsored enterprises” – and if you’re smart, that phrase should send a chill up your spine – were the main players.
Fannie Mae (the Federal National Mortgage Association) started in 1938, and after toddling along for four decades, she was joined by Freddie Mac (the Federal Home Loan Mortgage Corporation) in 1970. And together, they ended up taking over the vast majority of home loans in America, which resulted in a time-honored, formerly universal banking principle becoming a very rare practice.
That practice involved using “portfolio” as a verb: when banks used to portfolio their home loans, that meant keeping those loans on their books. Nowadays, the vast majority of loans are immediately sold to Fannie Mae or Freddie Mac, so the banks only do only enough credit checking to see if the loans they make are “conforming” (i.e. meet the government requirements to be sold to the feds).
Of course that screws up the banks’ incentive structures. They no longer have to worry about whether the borrowers can pay back their loans, since Uncle Sucker is going to buy the loans about 10 minutes after a bank makes them. The bankers get all their fees and closing costs up front, and sell the risky loans (except for the ones they portfolio) to the feds, i.e. the taxpayers.
“But Martin,” you might be asking, “how long can a shady system like that last?”
Until roughly September of 2008, as it turns out, when the subprime mortgage crisis nearly destroyed the US housing market. (Read the Michael Lewis book The Big Short or watch the movie of the same name for all of the gory details.)
College loans have followed the same path as mortgage loans. Banks (and rarely, colleges) used to make college loans. Then the feds started to subsidize banks to make school loans through the Federal Family Education Loan (FFEL) Program in 1965. In 2009, Obama finally killed the FFEL, taking over virtually all student loan lending through a grab-bag of federal programs (subsidized loans, unsubsidized loans, Parent PLUS loans, etc.)
As per usual, the federal takeover upended all sane incentives. When banks were making their own loans, they looked at a student’s ability to pay them back. (Duh!) Major parts of that calculation were the student’s academic record, and his/her planned major. Straight A students with high test scores going into engineering, medicine or law were good risks, and got loans. Middling students, less so. Students majoring in art, theology or social work (no matter their ACT scores) were not good prospects, and usually had to pay their own way through college.
That last phrase probably sounds absurd to you. Who can pay their way through college with no loans?
The answer used to be “most people,” because college didn’t used to cost an arm and a leg. So what changed?
See the “Barack Obama loan takeover” paragraph above. But it wasn’t just Obama, of course. Though he did make nearly everything he touched worse (“If you like your doctor, you can keep your doctor!”), the issue was bigger than the bad actions of a few stupid politicians. The feds took over college loans, and their incentives were to give loans to everyone, regardless of merit or choice of major. So they did.
Annnndddd…now we’re in a mess, and college debt has skyrocketed. Because colleges are in the same position the banks were in in 2008: when the feds started passing out “free” college money, the universities blew open their doors and jacked up their costs, and school debt exploded. Two commensurate problems quickly revealed themselves: too many kids who had no business going to college went to college, and too few of them could succeed in traditional majors.
In the year 1900, only 2% of Americans graduated from college. After WWII many more Americans went to college, but by 1950, college graduates were still only around 5% of the population. By around 2020, a majority of Americans had at least attended college, and around 40% were college graduates.
If you know anything about the quality and standards of our K-12 public education, you might suspect that 40% of our high school graduates are not prepared to walk straight into college and start kicking arse in rigorous subjects like advanced calculus, astrophysics, chemistry and biomechanical engineering. Thus a long slide into eroding standards has only accelerated in recent decades.
Even when we’ve managed to keep old fashioned majors, the standards have declined. Back in the day, students of theology would be expected to know Hebrew, Greek and Latin. And maybe Arabic or Sanskrit, if they were studying false religions. (HA! I kid because I love.) Today, the few theology students left can’t necessarily speak their first language fluently, and the curriculum is likely to involve Gaia worship and commie-infused “liberation theology.”
English majors used to know Shakespeare, Chaucer, Milton and the rest of the Western canon; today they’re as likely to study slam poetry, comic books, and trendy Marxist polemics. We’ve gone from The Canterbury Tales to The Handmaid’s Tale, and from Jonathan Swift to the lyrics of Taylor Swift.
But even watering down the traditional curricula wasn’t enough to keep many students from flunking out – which our political sensibilities and the Education Industrial Complex couldn’t allow to happen. So new majors had to be created, to provide a home for those who weren’t motivated or equipped to work hard, and for those who had planned to go to med school, until the first month of Organic Chemistry beat them senseless.
Thus were born the popular studies and the grievance studies: media, film and pop culture majors, race and gender studies, sex and third world and colonialism studies. These are fields in which the profs are partisans, the answers are simple (women good/men bad in Women’s Studies; non-whites good/whites bad in Race Studies; other countries good/America bad in Post-Colonial Studies), and everybody passes, and everybody graduates.
But they graduate with six figures of debt.
In olden days, when most students graduated with little or no debt, degrees didn’t necessarily have to have obvious monetary value. If they produced graduates who were well-rounded and knowledgeable, and had been taught to understand, value and think about non-directly monetizable things like Western culture and history, ethics, logic, philosophy and literature, the theory was that such graduates would be able to successfully make their way in the world. I love those things, and I studied those things, and feel bad for people who know nothing about them.
But now that universities saddle many graduates with six figures of debt, giving them a degree with no rational ROI is malpractice at best, and robbery at worst.
And now we come to the answers to the question posed above: How can getting an expensive four-year degree possibly make someone LESS valuable to the job market than if they had not gone to college at all?
Part of the answer involves what reasonably smart high school graduates can do instead of going to college. Most parents would let their kid live at home for at least a year or two after high school graduation, especially if the kid got some kind of a job. And though those kids might not be thrilled with the amount of money they could make right out of high school, their expenses at home would be low, and without six figures of college debt, they could breathe.
If you were one of those kids, you might typically bounce around through four or five entry-level jobs before you landed in one that you found you like – helping a plumber or electrician or HVAC guy maybe, or being a waiter – and then see where that took you. If you found something that you liked, you could learn a lot on the job, make a good impression on the boss or owner, and four years after high school, you might have already taken a few steps up the ladder, increasing your pay as you increased your knowledge, experience and confidence. At the same time, your buddy who went to college would just now be graduating, with no work experience, and a six-figure monkey on his back.
But even more important than the financial disadvantage of debt is the psychological disadvantage of a college degree in a low-value degree in the various “studies” fields. Many times you’ll come out with a chip on your shoulder – your women’s studies profs taught you that patriarchy is evil and men are the enemy, or your black studies profs taught you that whites are oppressors and you’re an oppressed victim, or your Marxist professors taught you that America is a capitalist hellhole, and that you’ll be betraying your class brethren if you go to work for some evil businessman or corporation.
But even if you’re a more positive person and don’t fall for any of that, it’s still hard to resist the message our society has taught about education for your entire life: getting an education is always worth it, because it raises your social status and prepares you for a lucrative professional career, thus guaranteeing you financial and societal success. You spend four years going further into debt, and telling yourself that it’s okay, and that everything will work out all right once you’ve got that magic diploma in hand, all the while absorbing a subconscious belief that you’re a superior person who deserves a higher starting salary due to your educational achievements.
And then you get out, and find out that your grievance studies degree doesn’t equip you for any job. If you started to write an honest resume, you’d have to include skills like “I’m able to point out sexism in any workplace,” “I can critique exploitative inequities in any corporation or franchise,” and “I can raise race-consciousness and suspicion in employee seminars on company time.” Strangely, no employer seems to be looking for any of those skills.
Some even see them as red flags.
If by chance you’re able to land a few interviews and you get a tentative job offer, you are shocked at how little that entry level job pays. If the employer asks why you should start at your proposed salary, you are dangerously close to telling him the truth: because you have a college degree, and because you need at least that much to make your minimum loan payments. But you realize that neither of those answers has anything to do with the value of the work you’d be doing.
Your education raised your expectations and made you arrogant, and thus made you unfit for the kind of starter jobs that non-college grads would traditionally have taken, and even been glad to get. And if you should happen to meet up with your high school buddy who didn’t go to college, you might realize that he’s already started to move up in his job, and is poised to make several more steps, while you are scrambling to get a grip on the first rung of the ladder.
And if he’s got a big mortgage payment, it’s for a house. Not a diploma.
So I like the plan to start holding colleges (and students) accountable. Tuition has only been able to far surpass inflation because the feds have been tossing school loans out of the back of a helicopter onto any students with a pulse. And while that’s been great for universities’ bottom lines, it’s done a great disservice to students, not least because it’s allowed them to play pretend instead of acting like young adults.
A naïve 18 year old can now borrow six figures to pursue a degree in Gender Studies with an emphasis on Marxist complaining. If a banker was on the other side of the table – instead of Joe Biden or Mitch McConnell, both of whom would be staring into the distance and drooling on said table – the banker would say something like, “Let me just check on the average income of Gender Studies grads doing a bunch of Marxist complaining… Annnnddddd, half a Starbucks barista wage. We could only loan you up to $17.50 for that. You may see yourself out.”
The wanna-be grievance studies major would be very disappointed in the moment. But you know what she wouldn’t do next? Waste four years of her life piling up debt while getting angrier and more resentful, and then get out as a financial cautionary tale. And then immediately start agitating for taxpayers to be forced to pay her school loans.
That’s a win-win-win, for the students, for the taxpayers, and for serious university programs that give all their students a quality education.
More please!
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