Education debt and policy

This started as a comment on a Demos article about education debt and bloomed into… well, something.

I have said this before in many places, but I’ll add it here as well: This is a very complicated issue and deserves careful thought about the entire system of education.

Higher education benefits society as a whole. We as a society ought to encourage it in various ways. But the primary beneficiaries of higher ed are those who actually go to college. That’s why it makes sense for most students to pay a significant portion of the cost of their schooling. Because education is strongly correlated with higher earnings, it makes sense to finance the cost of education and pay it back when you’re educated and have more earning power.

That’s why student loans exist: They’re a useful tool, and in moderation, generally a relatively fair way to allocate the cost of education.

Of course, lending money to young people with little earning power and no income is risky, so that’s why the government has stepped in with subsidies (the Direct Loan program) and regs (making the loans harder to discharge in bankruptcy).

Per McArdle, “a little student debt” is often good – but the key is the “little” part. Everyone can agree that “a little” student debt is OK but “too much” is bad. The hard part is defining “too much” and “a little.” I’ve seen people with six-figure debts pay them off handily after landing six-figure salaries (mostly law and medicine grads). I’ve seen people default on loans of less than a thousand dollars (often beauty-school dropouts).

Given that education and education finance is a complicated system, serving humans with huge varieties of need and circumstances, run by humans and enacted by politicians, it’s imperfect.

Obviously we need better mechanisms for helping people avoid predatory loans and predatory schools, as well as mechanisms that can more cleanly offer forgiveness for people whose educational achievements are not matched with financial ones. And it needs to be without regard for the type of degree. A CS major may fail to become a successful programmer as much as an arts major may fail to become a successful commercial artist as much as a gas-fitting and plumbing certificate holder may fail to build up a customer-base of delighted residential and commercial plumbing customers. None of those people will be well-served by adding permanent indebtedness to their professional setbacks.

So very little of the debate I’ve seen anywhere has addressed the entire issue. It’s always a single corner. We can talk about debt. We can talk about tuition. We can talk about tenure, and administrators, and campus amenities, and online education, and the merits and failures of the for-profit model, and go on to argue “What is a university anyway” and then disappear up our own navels.

Blue sky: What would a good, fair, functional post-secondary education system look like?

And what would it take to get there from here?