Archive for September, 2010

College and Loans

September 26, 2010

http://www.npr.org/templates/story/story.php?storyId=127246882

This girl took on $85k worth of debt to get an English degree from Brandeis, and didn’t seem to spend much time thinking about how she would set up her post-college life to pay the money back. Her reasons for getting the degree—to become a writer in case her acting career couldn’t get off the ground—don’t seem to conform to the realities in either job market.

I don’t think that this girl’s problems are unique; I’ve noticed that many “intellectual” liberal arts college grads find themselves in similar positions. They major in something that they’re passionate about (often taking out significant loans) and find themselves at the end of four years with limited job prospects. The following all seem to be common traits:

1. Taking a narrow view of their strengths and abilities, and thinking of themselves as intellectuals. This automatically biases them against seeking out more remunerative work in the first place.

2. A desire to work in a very specific field arts/humanities, even though jobs are hard to come by, even for PhDs.

3. An unwillingness to “market” themselves for jobs that are complementary to their strengths.

4. Mistakenly thinking that their professors and administrators will prepare them to get good jobs, even though it’s really not their job to do so, and the career office is useful only for those that really work to take advantage of the resources available.

5. Mistakenly thinking that the problem will “sort itself out,” and that they will eventually get a job easily.

I remember thinking, as a very young kid, that people who went to Harvard, Johns Hopkins, Yale, or Stanford (the only schools I was really aware of) were “set for life.” It’s remarkable how un-true that is, and how little college alone really seems to matter in terms of long term earnings potential.

The kids who get good non-profit/private sector jobs or get into good grad schools are fine, but this girl isn’t one of them, and she’s not alone.

I don’t know exactly how to solve this problem. Kids go are constantly told throughout high school that college is the most important thing to prepare for, and that a more prestigious school is always better than a less prestigious one. What’s missing is any corresponding discussion of how to pay for it, or the likely career prospects from different majors and schools.

The easy availability of student loans is, I think, a big problem. No one in their right mind would loan tens of thousands of dollars to an 18-year-old kid with no income. It’s so common with student loans because the loan companies have been able to successfully lobby for making the debt so tough to get rid of. If the borrowers can’t discharge it in bankruptcy, Sallie Mae is going to get paid no matter what. It’s basically a risk-free return, far above the “real” risk free rate on government debt. I would like to see the loan money dry up and have colleges start to compete on price, but I don’t see that happening in the near future. As long as loans are so easily available, the schools will have an incentive to capture as much of it as possible. I’m not sure what a good intermediate-term solution is, but I suspect we’ll be stuck with what we have for a while.