College: Too Costly, Too Little Learning, Too Much Underemployment

Richard Vedder joins us this week to discuss what he’s identified as three major problems with the way today’s American higher education system works.

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Richard Vedder joins us this week to discuss what he’s identified as three major problems with the way today’s American higher education system works.

Why is higher education so expensive, and how did it become so expensive so quickly? If student aid and loans only aggravate the problem, can anything be done to remedy this? Is going to college more of a status symbol than a necessity these days?

Transcript

Trevor Burrus: Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I’m Trevor Burrus.

Matthew Feeney: And I’m Matthew Feeney.

Trevor Burrus: Joining us today is Richard Vedder, distinguished professor of Economics Emeritus at Ohio University and director of the Center for College Affordability and Productivity, an adjunct scholar at the American Enterprise Institute. Welcome to Free Thoughts, Richard.

Richard Vedder: Glad to be with you.

Trevor Burrus: So, a lot of discussion happens about higher education cost, quality. It’s been a hot topic recently. But maybe we just really get a scope of the problem. How bad right now is the problem for how expensive higher education is, student debt, quality? Is it pretty bad or is it overblown?

Richard Vedder: Well, I think it’s a pretty serious problem. I mean it is an area of human endeavor. We spent 3% of our national output on, which is to say 500 to 600 billion dollars a year, involves the life of 20 million students at any moment of time who are going to college, which is not an inconsequential number of people. There are three huge problems I can outline and I could do it in 10 words if I was compelled to, but being a college professor, I’ll take 100 probably to do it. College education is too costly. It’s too expensive. That’s the first problem. The second problem is there’s too little learning going on in college. That’s a little harder to substantiate, but I think it’s real. And the third problem and it’s also a big one is too many recent graduates of college are really underemployed. They are not getting the kinds of jobs that they expected to get when they entered college nor the kind of jobs that traditionally college graduates have gotten.

So, on all ways you look at it, it’s not doing too well. And all of that ignores several other problems that many of your listeners are probably interested in, namely the lack of intellectual diversity and higher education, the lack of tolerance of diverse views. They trigger warnings and free speech codes and all of the abominations around those things. Scandals in intercollegiate athletics would be another example and I could go on and on. Buildings that are opulent and extravagant that are subsidized indirectly by taxpayers and have little educational function or purpose. There’s a whole variety of what we might call secondary areas. But I’ve sort of outlined the main problems, I think.

Matthew Feeney: Well, I think we would love to talk about all three of these points, but I have a question about the first one, which is how did we get to a point that it is so costly? I often hear from people—all of them, , of course, who say, you know, “I went to college and I paid for it with summer jobs and working part-time.” What went wrong? How did we get here?

Richard Vedder: Well, let me as a historical background say that the tuition in Harvard in 1840 was $75 a year, which was about a little less than one year’s income of the average American at the time. The tuition at Harvard now is pushing $50,000, which is about one year’s income of the people. So, the only thing that I know of that I can think that is burdensome to people today—in fact, it’s probably a little more burdensome today—than as an expense item than it was 176 years ago in 1840. And how do we get there? Well, there’s a lot of theories and reasons and not all of it is related to public policy. But a good bit of it is. The biggest culprit in terms of public policy probably is the massive expansion of federal student of financial assistance programs, which in today’s dollars were far less than 10 billion dollars in 1970 and today are closer to 200 billion. So there’s been a 20%, 25% full growth in those programs in 45 years.

And you would think, “Well, gee, that’ll make college more affordable for students.” Colleges have raised their tuition levels accordingly and I think most of the benefits if any of those programs have gone to the colleges themselves, they are professors, people like me who have lower teaching loads now earn more money, have more trips to Europe and all the amenities we like. Administrators are excessive in number and excessive in pay and excessive in stupidity—well, I did not say that, but I just did I guess. I mean a lot of it is related to that problem.

Traditionally, it’s—some people say that education is like theater really, like take King Lear, which—Shakespeare since he died 400 years ago this year. It takes as many actors today to perform King Lear as it did in 1610 or whenever it was that Shakespeare wrote King Lear. And teachings like that—you know, I’m a professor, I’m an actor, I get up in front of 30, 40, 50 students just like I did 50 years ago when I started teaching. I’m still teaching. I’m teaching the same course the same way to the same number of students today as I did 50 years ago. That’s the truth. I’m not making that up.

So, zero productivity growth and yet wages and economy are going up with general productivity growth. So, you have to pay professors more and that, in other words, causes some inflation. There’s some truth to that argument, but only a little truth. I mean we have faculty or only a quarter of the employees at a typical university or a third—maybe a third of the budget goes for faculty salaries, two-thirds goes for other things. So that can explain all these inflation in its entirety. We have books and we have online education. We should have technological advances to help lower those costs and, you know, technology has lowered the cost of doing business almost everywhere else in the economy, why hasn’t it in education? Did in education.

Many colleges say, “We have to put a technology fee on. We have to charge more because we want to use new technology.” Well, if the—say, the Ford Motor company said they were going to put a technology fee on because we have to put new machines to build our cars. They would be bankrupt shortly. So, it’s a different world.

Trevor Burrus: But the American economy as you said, it’s a different world. The American economy has changed a lot just in terms of the kind of labor that people do, the kind of jobs that are required. My parents—my dad was the first one to graduate college and he ended up going to law school. And I think in about that time, in 1969, it was about 11% of people had college degrees.

Richard Vedder: Yeah.

Trevor Burrus: And so you could differentiate yourself as a high school diploma, but then you did get college and now increasingly you need to differentiate yourself through graduate degrees because more people are going to college and that just seems like a good general growth in the education level of Americans who could do the kind of jobs they’re required to do, less breaking rocks and more programming computers.

Richard Vedder: Yeah. You’re raising an interesting point. It used to be that college was a singling device. You had a piece of paper, “I am a college graduate.” And even if you went to—I hope I don’t offend some of your listeners. If you went to Slippery Rock State College in Pennsylvania, which is not, you know, considered to be one of the leaders in American higher education, and maybe have a sort of middling reputation or even below middling reputation. People would say, “Yeah, he’s pretty cool,” or “she’s pretty cool. He’s part of the top 10%—” it wasn’t top 1%, but at least the top 10% or 11%. And so, even people going to schools of mediocre reputation, getting a bachelor’s degree with mediocre grades still is somehow special. They were at the minimum or in the top quartile of the population in smarts and general ability to perform in the eyes of employers and everything.

Today, when you got over 30% of the population with college degrees and over half the population at least going to post-secondary schooling of some sort, it’s no longer special. And a person who is at the bottom of their class at sort of a mediocre-quality school, maybe even below the average of the American population as a whole. So, no longer does that piece of paper is a good singling device. So you get a master’s degree. I’ve been predicting we will offer a master’s degree in janitorial science, which is mopping floors. There are over 100,000 people in the 2010 census with bachelor’s degrees who are janitors and there were over 5000 went master’s degrees who are janitors. So I think that will be the thing, you know. You will need a master’s degree to wash windows or mop floors. Does that make any sense? I think you can ask that question.

Matthew Feeney: Well, that brings me onto the second question I had which is related to the second point you made about too little learning. So, is that professors still want to teach the right kind of things but they’re doing it poorly? Or is it that they’re not even teaching the right kind of things? And I suppose a tag-on question at the end of that is what do you think a university or college should be full? What role should it play in society?

Richard Vedder: I was afraid you were going to ask that question.

Matthew Feeney: I’m sorry. Let’s get philosophical.

Richard Vedder: Yeah, yeah. Let’s get philosophical. No, it’s an excellent—the latter part is excellent. But even just starting out with the earlier part of your question, are we teaching poorly? Or, what is the problem? And it’s a little bit of everything. There’s data form the U.S. Department of Labor that says that in the mid-‘60s, the typical college student spent 40 hours a week on academic pursuits, full-time students. Today, they spent 27 hours a week, one-third less time to get the same number of college credits as they did 50 years ago. And why? Well, we are not asking as much of our students. So does that mean we’re doing our job poorly? I think you could argue it. It doesn’t mean that and, of course, the major—the most obvious manifestation of that is our grades that we give. In the mid-‘60s, the typical grade in a college course was about a C grade or C+ grade—

Trevor Burrus: So truly average as it’s supposed to be.

Richard Vedder: The GPA, the grade point average of all students in the United States, undergrad students have about 2.4, 2.5. Now, it’s about a 3.1, which is above a B average. It’s between a B and a B+. In some disciplines, I’ll pick education as one, we do have colleges of education which I—by the way, just as an afterthought, I think we should abolish I think—if we are going to have military training and we’re going to bomb things, we ought to bomb colleges of education out of existence. I’m something of a pessimist, by the way, but if I would make an exception for bombing colleges of education. But, the colleges of education, a typical school, a typical grade is a B+, about a 3.6, 3.7. So you just believe in giving grades.

So, why should a student work very hard? Why should they study very much? Why shouldn’t they spend time going to the local recreational center or go drinking or engage in all sorts of wild, hedonistic activities, which we won’t go into detail here. Some of which are very fun—a lot of fun. But should we be subsidizing as taxpayers and I question that.

Trevor Burrus: Well, that’s an interesting point too because college has created an image I would say since about the ‘60s of having—it’s a consumer good just being there, being in a frat, going to your parties and playing beer pong, making sure you make a lot of mistakes and, you know, it’s that kind of “find yourself” kind of mission which is maybe partially what we’re paying for, that we have wealthier parents who paid for their kids to go find themselves while having—getting an English degree and a Religious Studies degree. Is that something that’s bad? I mean should we condemn that, giving them a four-year kind of club med?

Richard Vedder: I think it’s not only not bad, I think it’s sort of a natural byproduct of a more affluent society. People get wealthier. They want their children to live better than they did and part of that is all—sometimes people will send their kids off to do a gap year after school of traveling around Europe or Asia or something like that, which earlier generations could not afford to do. And some people send their kids to something we call colleges for a gap five years. It used to be four, but it’s increasingly five or six, where you spend—you dabble in education a little bit and you dabble in having fun and you dabble in drinking and you dabble in sex and you dabble in drugs. But, you know, we argue that that’s part of acculturation process, part of the maturation process of growing up. Those are things that you do and there’s nothing wrong with that.

Where I have some problems though is who pays for it? And should we, for example, have free college for all as Bernie Sanders argued or Secretary Clinton is arguing right now. And should we subsidize—should hardworking people who maybe didn’t go to college and are from families with $30,000 or $40,000 or $50,000 incomes be subsidizing people making twice as much money? Whose kids are going off to college and doing a little learning? They’re getting some learning done, but they’re also spending a lot of time doing these other things. I don’t mind people having fun, but I don’t want them to do it on my dime. I want them to do it on their dime.

Trevor Burrus: For trying to separate these cultural—because the way I kind of think about this problem is that we have a—we can have a cultural economic change and then we have a public policy change that is not necessary. So some of these are just good growth of an educated society, of a very rich society where people—adolescence is now extended to 30. I mean 30 is the new 20, correct? We need to all spend five years in Europe finding ourselves—after four years of college, finding ourselves and you might end up finding yourself in a coffee shop in Amsterdam or something like that, but that’s what an affluent society does as you said. So that’s the cultural side and then the governmental side. So what we can actually do about this? So we talked about federal funding and I couldn’t tell how much the federal student aid—how much you put on very, very easy-to-obtain federal student aid? Is that a big part of this?

Richard Vedder: Well—first, let’s look at the numbers, and how do you define the—a lot of these kids are paying back loan, so is it really government or not? But since it’s guaranteed by the government, even the college board counts it as federal student aid and those numbers add up to a number close to 200 billion dollars these days. The total spending on higher ed is a 500 to 600 billion dollar—500 billion dollar enterprise, a little over that, close—getting gone towards 600. So it’s a big deal. It’s not a little deal. That’s more than state governments giving subsidies to universities. So, it is the big—it’s a big factor.

And one wonders that even if you believe that there ought to be some special provisions for egalitarian reasons to provide to opportunity to lower-income people, for example, that whether—this is very efficient because that’s—many of those 20 million—many people are forgetting tuition tax credits and I’m a low tax guy as anyone at the Cato Institute would attest. But I don’t believe giving tax credits to go to college as opposed to doing something else is the optimal use of money, and at least when you’re giving those to people from families with $100,000 to $150,000 a year is an appropriate use of federal subsidies. And there’s about 20 billion or so of those that money given out there. So another 40 billion—30 or 40 billion given out in pilgrims which are grants. But even those grants are not given right to the students. They’re sent to the financial aid offices of these schools. Then, you have to come in and kind of beg for them even though that’s money that’s in your name.

I’ve always argued that even if you’re going to do that program at the minimum, give the money to the students directly so that you empower them a little bit. So, maybe they’ll decide they don’t want to go to your university this semester. They want to go to some other university. Or if they get turned down from classes they want to take, they go somewhere. So, I think there’s a lot of problems with the program.

Trevor Burrus: But if you had—how much is the interest rate guarantee on the federal system? How much is that a subsidy? Because it seems to me that if you had—if you had to go to a bank and take a loan out, they might actually—let’s just say there were no federal student aid whatsoever or only very little amount of it. They would ask you things like, “Well, what are you planning on majoring in?” And if you said puppetry, they may give you a 12% interest rate. But if you said engineering or business, they may give you a 5% interest rate because that’s the way the market works instead of the government just gives you one interest rate.

Richard Vedder: That’s right. The government programs have no commercial, no economic basis to them. There is an idea, by the way, that has gained favor for something called income share agreement which is sort of a private approach to funding college which is kind of appealing because under this scheme, a student would go to, say, a bank or somewhere and say, “I want you to finance half the cost of my going to college. I have enough cash and so forth to finance half it. I want to go to such and such university. I will need $40,000 for the next 4 years. What will it cost me for you to get to pay that $40,000?” And instead of giving the student a loan, they’ll give—they’ll say to the student, “Sell us 5% of yourself for the next 10 years or 7% or 10%. You will pay us 5% or 7% or 10%, whatever the amount might be, of your income. It might be for 5 years. It might be for 15.”

And picking up on your point, excellent point, is if you had an unimpeded market in that, you would great information, enormously useful information. The MIT kids even though—will be able to borrow that money or not really borrowing their money, they would be getting those funds for very small hunk of their income for a very few years and the kids major in gender studies at Chicago State University will be paying 30% of their income for the next 200 years or, well, for the rest of their life, ‘til death do us part. And that provides information and the market then is saying, “We don’t really want many gender studies.” And I’m making that up. I don’t know what the data really would show. But I have a feeling that electrical engineering major from the Massachusetts Institute Technology would be a pretty solid investment perceived by markets that way. And I have a feeling that MIT would be looked at better than the University of the District Columbia or—and I’m not picking on that institution, but it just doesn’t have a good of an academic reputation.

Matthew Feeney: So, this reminds me of a question I had coming in here which is what other options should exist? Because it seems to me that there are universities and colleges that train people for professions that you didn’t even need a degree for. So, is the answer more trade schools? Is the answer apprenticeships or other vocational training? What do you think it would be?

Richard Vedder: Well, I think we do need some more of that kind of stuff. I think there’s too much emphasis on bachelor’s degrees and not enough on providing just useful educational opportunities for students that often would be technical schools, career colleges, learning how to braid hair, weld. Welders make tremendous amounts of money, I am told. Driving these big 18-wheel trucks is very ruminative. I mean at least it pays reasonably well. And you could learn to do that in a year probably rather than 4 years or 5 years.

But there’s another option too. I agree that those are one way. Maybe we should have a national—I’m just throwing an idea out and you can blow it up if you want. Let’s create something we’ll call the NCEE. An NCEE is actually N-C-E-E that stands for the National College Equivalence Examination. We give exams. Colleges thrive on exams. That’s how we evaluate our students, are exams. We accept them in the first place. You have to take these collegiate aptitude tests or the ACT tests or something. When they graduate, they will take the GRE, the Graduate Record Exam, to see if they’re fit for graduate school. Let’s have all our students—in fact, anyone, 12-year-old kids, a kid in grade school could take the NCEE.

And let’s say all the kids who go to a certain university—let’s say we set as a national standard a 60. If you have less than a 60, you’re considered less than bachelor certified—bachelor’s degree certified. If you have more than that, you have a bachelor. So, people instead who will ask, “Where did you go to school?” might ask, “What did you do on the NCEE when you—?” You might say, “Well, you can’t make a single test up that covers all disciplines” and that’s true. But I mean we somehow deal with this other things. So we give them a 2-hour journal test, give them a little few questions in history and literature and mathematics and foreign languages, general knowledge, what an educated person should know. An hour and a half would do it actually to be honest. Critical thinking skills, have them answer an essay a little—and then a couple hours of questions. So test them on critical thinking and then have them have a segment where they—their major field where you ask them questions on their major field. You could do all this in 3-1/2 to 4 hours. We do it all the time with other tests. To be in the foreign service of the United States, you take a test, something like that. So why not do this?

And that might be—then, you know, charge a kid $100 to take the test and the kid might—the employers might catch on, “Well, hey, we want kids who do well on that test. It correlates very well with the kind of skills we want us employees.” And so, maybe we could change the whole name of the game. Yeah.

Matthew Feeney: So, in a world in which there is the NCEE, that would still be a place where universities to teach the liberal arts and the hard sciences for those more academically-minded and—I think, you know, we couldn’t have this conversation without mentioning at least once the state of the liberal arts. And before talking—before this question, we’d briefly discuss the state of, you know, trigger warnings, save spaces, things like that. I’d be interested to hear your thoughts on what you think the state of the liberal arts is even the sort of things universities should be doing.

Richard Vedder: I’m an economist and so I’m accused of being very vocationally oriented. But the reality is I’m very liberal arts-biased, pro-liberal arts biased. I spent a lot of time in college doing seemingly silly things like studying French literature in French, you know, things that—but I think back on it now and I think those are some of the most rewarding moments of my life. And I think we have de-emphasized the liberal arts too much as a general proposition. The data tend to support this. Students are spending far less time taking courses in the humanities, philosophy, languages, literature, history and even the social sciences, I feel a little less—more of fuzzy about the social sciences because some of them I don’t think teach very much.

But I think as a whole, people do need to have some—I think people can think better and think more critically and have a better context on which to evaluate human situations if they’ve had a sort of a broad-range of study that includes a little bit of philosophy and a little bit of, you know—everyone should read Plato’s Republic and everyone should read a little bit of Shakespeare and maybe everyone should take an economics course, I kind of think probably. But I’m less excited about that than I am about the Shakespeare.

And so, the data show a decline in the humanities and even the so-called liberal arts colleges are now emphasizing business majors and all of this sort of stuff. And I think a lot of it is too bad. And if you look at the data, by the way—this is my favorite statistics from payscale.com. Mid-career earnings of philosophy majors versus business administration majors. The philosophy majors pass the business administration majors about 15 years in their career. So, even if you look at education as nothing more than a vocation exercise, which I don’t, I think there’s a case to be made for the liberal arts.

Trevor Burrus: Well, both Matthew and I are philosophy majors, so we like the statistic very well.

Richard Vedder: Bill Bennett, former secretary of education and another fellow that I know, Alex Pollock, both graduated from Williams with a philosophy major about 40 years ago. Both did extremely well. One of them got a Ph.D. in philosophy. The other one became a successful banker. One of them became, you know, made a lot of money writing books and so forth. And they both think that the reason it all happened was they’re philosophy major. I’m not sure if William’s College is the right place, although it’s a good school.

Trevor Burrus: But that’s the interesting question back to what you had said about sort of choosing the right majors for human capital for actual job skills because—we talked about—we kind of threw gender studies under the bus, although which I’m all for, maybe religious studies. We can talk about all these other majors that might be bad, but then there’s a lot of people who would say as you just said that the liberal arts even if it doesn’t give you job skills is just good for you. I don’t think Shakespeare gives you job skills, but that’s just good for you to read. So maybe, you know, a Bernie Sanders supporter would say, “I think the government should be subsidizing that for America’s youth in the same way they think that high school should have—you know, we should read John Steinbeck in high school and job skills be damned; this is part of being a good citizen.

Richard Vedder: Well, you know, you write some very interesting questions. Where do you draw the line about what the public sector or what the government should do and provide an education? Should they provide any at all? In the industrial revolution, when it happened in Great Britain, it was most interesting. You had a colleague here at the—

Trevor Burrus: Andrew Coulson.

Richard Vedder: Andrew Coulson who is a friend of mine. And Andrew pointed out and I teach this stuff that in Great Britain which had an industrial revolution between 1750 and 1850 that began the greatest change in the betterment of human welfare that the world ever had and ever will have, that that happened in school. Kids were learning in private schools. There wasn’t a dime, nada—or I should say a farthing, I guess. Or a shilling. You sound like you might have a British background …

Trevor Burrus: He has an idea. A guinea would be another possible.

Matthew Feeney: One of the above.

Richard Vedder: You look like you’re part of the vast British empire of some—

Matthew Feeney: What remains of it, yes.

Richard Vedder: Or what remains of it. Anyway, until 1830, there wasn’t a penny spent. Then there was a little sort of intermediate stage. It was about 1870 that education was thoroughly made public, nationalized if you like in Great Britain. And the country faired pretty well. In the United States, as late as 1940, most kids going to college in universities went to private schools, not to public schools, as late as 1940. And this was long after our—you know, we had achieved the supremacy—economic supremacy.

So, I am one who sort of questions the very basic assumption that education is a public good that, therefore, needs to be publicly financed. It’s certainly though, if you—and you can make a case for it, but if you do, where do you draw the line? Where do you stop? Does everyone have the fundamental right to a Ph.D.? I mean why is it at age 17, we will pay our way through school and at age 18, you’ll say, “It’s time now for you to start paying some of your way.” And why there? Why at 18? Why not at 12? Why not—or why not at 25? Bernie Sanders would say it, why ever? 25. Others would say 12. I think there’s—we ought to be looking into the true—the positive spill-over effects of education. Shortly before he died, Milton Friedman and I had a conversation on this, if I may share this with you—

Trevor Burrus: Please do.

Richard Vedder: —because it seems like that might be an appropriate person to reference. Friedman in his book that he wrote, Capitalism and Freedom, said while he was generally very skeptical of government interventions in human life, he did think that there was a role for some public financing of higher education because of the public betterment that you—positive spill-over effects and so forth. Around 2000—2002 actually, to be precise, I wrote him—sent him an email. I said, “Milton, do you still believe this?” And he wrote back and he said, “Well, there probably are some positive spill-over effects on education, but there sure a lot of negative spill-over effects as well.” And he says, “It is an interesting empirical question whether we ought to be subsidizing higher education or taxing it.” And he had—he was clearly becoming very skeptical of the view that government should be involved in the financing of higher education. And, I think he made a very valid point.

Trevor Burrus: When we’re talking about the—you mentioned the national collegiate equivalency exam which I think is a really interesting idea because we have to—if we’re going to try and not blow up the system but at least unpack it into more useful constituent points and not have this monolithic model that might be a little bit antiquated for the modern age. We might have to do things like we need to get a signaling device that signals that you know enough. But there’s another problem here. We need to—part of the college diploma signals that you know how to get up at 9:00 am, turn in a paper when it’s due, you know, attend class—those are the job skills. You know, my dad always jokes that college diplomas really should say “This piece of paper certifies that this person can do the kind of things that a person needs to do and get this piece of paper,” which is a valuable signaling device for possible employers beyond just “do you know who the king of England was in 1540.” How do we give those signals if we’re going to try and extricate ourselves from the pure college model and have more—how can we give those signals to prospective employers aside from just knowledge?

Richard Vedder: Well, somehow in the middle of that question, that thinking of a friend of mine who owns a series of McDonalds restaurants. And my friend, most of whose employee—I’d say half of them never go to college, half of them go, you know. Most of them are 16, 17, 18 years old. He always asserted to me that he probably did more to help persons become equipped for job markets than colleges did because he said you will be at work at X time 12pm and if you’re here at 12:03, I’m going to duck your pay because we are expecting you here at 12:00. If you have dyed your hair yellow or pink overnight and put 3 rings in your nose, which is offensive to our customers. It would be very politically incorrect here, no doubt. We’re not going to employ you anymore. So, there’s a dress code, there’s a time code. We don’t want to hear you use—we don’t want you to swear. We don’t want to see you chewing gum while you’re serving customers.

There’s a set of rules, do and don’ts that we teach some in college, but I think we teach it—I think most of that is learned on the job and even college graduates learn most of it on the job. Most college graduates, you know, they get up—well, sometimes, they get up at 7:00 or 8:00 o’clock in the morning, but more often than not, they get up at 10:00 or 11:00. And on Fridays, they don’t go to class much anymore, so they sleep in or they’re out partying until 4:00 in the morning and so they are hung over. And when they go to work, I love to talk to kids 6 months after they’ve graduated from college and they’re coming back from their first job. “Oh, my gosh. Oh, this is a different world I’m in.” You know, it’s different. I got to dress up for work. I can’t wear T-shirts and so forth.

And so I think a lot of what we need for the workplace is a really non-formal education skills. I don’t want to denigrate the importance of college, and colleges do teach some real skills. I mean accounting has specialized knowledge that you need. Colleges are a good place to learn. Engineers have specialized knowledge. There’s—but, you know, I don’t know what it is a commuications—I’m going to get myself in trouble. Communications majors, education—

Trevor Burrus: I think those are the athletes, right?

Richard Vedder: Huh?

Trevor Burrus: I mean the communications degree-holders are the athletes. That’s the joke.

Richard Vedder: Year, yeah. And—yeah. And there are a lot of mushy major. And even things like art, which I—I think it’s illegitimate for the university to teach the arts and fine arts. I think that’s a nice part of, you know—I’m a supporter of that. But really how much of art is learned, you know, through formal instruction and how much is learned in other ways. In other words, there are other ways to teach besides the formal education process.

Matthew Feeney: Some listeners might think it interesting that the three of us who have all benefited from higher education are bemoaning the state of affairs and the—

Richard Vedder: We are a bit pessimistic, right?

Matthew Feeney: Right. And some listeners might—for the younger listeners, might be interested to hear what you think they should do if they are academically-minded. But they realize getting one of these degrees will be very expensive and when they finish, there will be thousands of other people with the same sort of degrees. What if any advice do you have for the 18-year-old who wants to go to college?

Richard Vedder: Well, the bottom line question really for many of people—and I think the answer varies from individual to individual. I don’t think there is a one-size-fits-all answer to that question. That’s why I very much disagree with what I call the college for all crowd who says everyone should go to college blanket. The kid who is graduating from a good private school or even a decent suburban public school or a high-quality inner city public school, for that matter, good-quality school in the top 10% of their class, who does very well on tests and so forth, who has excelled in student activities in addition to studying both athletics and non-athletic activities. Those students are going to be able to get into a very high-quality school and they’re going to excel. The average graduate of Duke University earns more than twice as much as the average earnings of students at the University of North Carolina-Greensboro, which is located less than 100 miles away.

The life experiences are—if you get into Duke, you’re going to do well. 95% of the kids that go to Duke graduate from Duke. At University of North Carolina-Greensboro, it’s 50-50. You got a 50% chance of graduating and 50% chance you won’t graduate. So, people learn very early still in high school what they could do and if the best they can do is get in a school of some marginal reputation, then maybe—and their high school grades are in the bottom of ¼, a quarter of their class, they might ask themselves “Maybe—do I really want to go to a traditional four-year college? Maybe to hedge my bets, I’ll go to a two-year community college,” where by the way the drop-out rates are huge, very, very high, “or I’ll go to one of these for-profit schools for a year or two years if I do well. If I don’t do well, I’ve at least minimized my losses to one year or two years rather than four years, and maybe $10,000 or $20,000 instead of $100,000.”

Or they might say, “Hey, let’s go to truck driver school. I always wanted to drive a truck,” or “I love working outdoors. I want to be working construction, but maybe ought to—one of my great former students learned how to build houses. He just built houses for a year. I think it’s great. Someone has to build houses. And, you know, 3 or 4 years later, he doesn’t have a college degree, but he’s making good money, probably $40,000 to $50,000 a year and happy.

Trevor Burrus: Is there a status problem that could develop here though? Because we do—maybe that’s the problem. We look down on to some extent truck drivers. I mean I hope I don’t, but I think generally society does. And so if someone makes a decision to go to truck driving school or go to plumbing school, there will be a status difference here. There could be a—

Richard Vedder: Yeah. But why is that—yeah, you’re absolutely right. That does exist to some extent. But part of it is our political leaders and even our high school guidance counselors, maybe in our Lumina Foundation and Gates Foundation, all these foundations founded by yuppies, who most of whom by the way did not graduate from college.

Trevor Burrus: Or they got like an English degree and $19,000 in debt.

Richard Vedder: I don’t mean to make this funny. Bill Gates is a brilliant man, but he didn’t graduate from college. You know, they say you got to go to college, you got to go—and that adds to the stigma if you don’t go to college. So we have encouraged that. And some truth is, I am usually not one to promote European values in the—because I think Americans have a higher quality of life than Europeans. But, it is said that in Germany and I think there’s some truth to this, that the German vocational education system is much, much better than ours because that stigma problem is far, far less. It’s much less obvious. And I think there is something to be said for that, so—you know, 50 years ago, we did have vocational high schools, vocational post-high schools and we still do to some extent, but they weren’t looked on quite as negatively as they are today. They become more and more shunned though. That’s just for the people who can’t make it in life, you know.

Trevor Burrus: Well, should we think about plans or suggestions to do student loan forgiveness?

Richard Vedder: I am very much against it, loan forgiveness. It sounds, you know, hard-hearted. It sounds like you’re mean. You don’t like people. But, if we start becoming very generous in forgiving student loans, you first will have what economist called a moral hazard problem. You’re going to college. You take out—your parents will probably tell a kid, “Borrow all you can. The government is not going to make you pay it back anyway.” So, you look at the borrowing almost originally as a grant rather than a loan. And so then we have a massive problem. The more you forgive loans, the fewer people who will even willingly make payments on. So that’s a problem. It sets the wrong message to people. It says if you fail in life, we’ll cover yourself. There’s no downside to poor—

And many people who don’t pay back their loans don’t—because they do poor academically in school, they don’t graduate from school. Now do you want to see these people literally die of starvation? Of course not. We’re a compassionate society. But, you know, even the Salvation Army and the St. Vincent de Paul society and the habitat for humanities, a lot of private philanthropies help these people and maybe even in arguably the government itself. But you don’t need to forgive their loans. A loan is a loan is a loan. And you made the point earlier, a very valid point, is we really ought to commercialize loans more. When you go to borrow, we ought to tell people, “What you’re proposing to do is risky and we perceive it as risky and so we’re going to charge you a little higher interest rate on your loan.” Or, “You want to go to MIT in engineering. You’ve got off-the-wall SAT score and you were number one in your class in high school. Go for it. We’ll give you a 2% loan because we want to encourage that.”

I mean if the government is going to get into lending business, which I’m against. They’re in it. I would prefer them to get out. But at least take account of the differences here. The government is encouraging people to linger around school. Let’s suppose—let’s talk about kind of real—

Trevor Burrus: Please, please.

Richard Vedder: Let’s take a pilgrim person. Here’s two students. One of them is brilliant, hardworking, works day and night, graduates from college in three years. Easily possible by the way. Go to summer school, etc., take overloads during the year. You can graduate in three years. I had a son who graduated three years. He wasn’t unusually brilliant, but he graduated in three years. No difficulty. Graduated Phi Beta Kappa, very good student. It can be done.

So here you got a student who graduates in three years on pilgrims all the way through. Let’s say he gets a $5000 annual pilgrim. He gets 15—or she gets $15,000 in pilgrims. Here’s student #2. Student #2 fails half the course that she takes or he takes. Has a drug problem, alcohol problem, etc., etc. Takes 6—but does graduate in 6 years. That student will get $30,000 in pilgrims. The good student will get $15,000. The poor student will get $30,000. That’s just the way it works. The federal government rewards poor performance. If you perform poorly, we’ll give you more money than if you perform well. Now that is sheer craziness. It is—it’s idiocy. It’s—and you say, “Well, we ought to have to put more money into need-based aid.” But let’s—if we’re going to—even want to go that route, at least put in some standards. We have 40% of the kids who enter college don’t graduate, don’t graduate. That’s madness. We waste those resources.

Trevor Burrus: So, when you …

Richard Vedder: You get me all excited here. I’m sorry.

[Crosstalk]

Richard Vedder: Yeah, you’re getting me—you know, I want to start, you know, this—let’s go to work.

Trevor Burrus: Let’s go to—DOE is down the street. We can go up there with pitch forks right now.

Richard Vedder: Let’s start a demonstration. That’s the “in” thing to do in college campuses today.

Trevor Burrus: Exactly. So what can we—in the immediate near-term future if you were to advocate for some public policy changes that could—not, you know, burn down the DOE or something like that. But just things that might have a big effect if we make some changes, maybe some better requirements on pilgrims on student loans or actually trying to—things like this.

Richard Vedder: Yeah. We could cut—we could cut the cost of the government expenditures by 40% in the student financial systems area without fundamentally reducing aid to a regular full-time student who has genuine need at all. There’s, first of all, 10% or more of the money goes for this student tuition tax credits. A lot of that goes to middle income families. 10% or so of the money goes to parents, not to the students, to parents who by the way don’t have to start repaying loans until six months after their kids graduate from school, which is crazy. I mean what does the kids graduating school have to do with a parent’s capacity to repay the loan? You know, that’s dubious. Why are you giving money to parents rather than to students? We have a lot of students who take six years, borrow money for five and six years. Maybe we should put a timeline on it. Five years, period, you know. The degrees are advertised as four-year degrees. Maybe we put four years on, maybe I’d be generous and say five. That still would save a fair amount of money.

What about law school, MBA programs? What about a kid going to get an MBA? An MBA—I have nothing against people having MBA degrees. But that’s a degree. It’s almost purely a vocational degree designed to increase one’s income. Why should the government be financing those kind of degrees? Maybe bachelor’s degree. Now I’m meddling when I say that. I mean where do you draw the line? And I don’t know. But you could make a lot of the money that we give out and lend out is for graduate education. It’s not undergraduate education.

And maybe we ought to put some limits on that. So you could say 30%, 40% of what we’re spending on doing these things. It would be hard to get it through congress. Well, you know, we have an impossible situation in Washington here and—as they do over much of the western world these days. Britain isn’t any better really, maybe marginally. So, there are things that can be done.

What about making colleges have some skin in the game? What if you say, you know, the reason these kids borrow all this money and the reason the colleges have to accept—and so the colleges are complicit in this in that they lure kids to their campuses. In some cases, knowing that the kid is very unlikely to succeed, but they want to collect tuition revenue from the student that sometimes state subsidies from the state government. And so, they do that and they do it knowing there’s a high probability the students will not graduate and a high probability that they will default on their loans.

Well, knowing that, maybe that’s undesirable public policy to allow that to happen. At least the colleges should if they have abused this and they have 20% or 30% of their students not paying back their loans, maybe we should say to colleges, “Okay, you pay some of that back.” And so, I’m a great believer in skin in the game as a sort of an intermediate solution to my long-run desire to just get the federal government out of this business completely. But that would be a nice, you know, intermediate step.

Trevor Burrus: Thanks for listening. If you enjoy Free Thoughts, please take a moment to rate us on iTunes. Free Thoughts is produced by Mark McDaniel and Evan Banks. To learn more about libertarianism, visit us on the web at www.libertarianism.org.