What’s a Diploma Worth?

Americans have always loved college and real estate. So why do these assets need government support?

Every schoolboy knows that education leads to worldly success and material reward. “If a man empties his purse into his head, no man can take it away from him,” Benjamin Franklin’s Poor Richard advised. “An investment in knowledge always pays the best interest.” To the Irish poet William Butler Yeats, learning was “not the filling of a bucket, but the lighting of a fire.” As Emil Faber, founder of the college in Animal House, put it, “Knowledge is good.”

Yet there’s growing evidence that faith in the value of book-learning may be as ill-conceived as faith in the value of another asset inflated by public funding: real estate.

The overall cohort default rate on student loans has increased by more than 50 percent since 2003. The media have focused on the portion of this growth coming from students at for-profit colleges: According to the Department of Education, more than 40 percent of loans granted from 2003 to 2006 to students at such institutions will go bad over time. But students at nonprofit four-year colleges are also projected to default at rates between 10 and 20 percent. And the trend will worsen: Among 20 to 24-year-olds, college graduates are doing slightly better than non-graduates in the job market, but they still suffer an unemployment rate of 8.4 percent.

But if the worth of the asset is questionable, the price has been going through the roof. In the last 25 years, college tuition and fees have increased by 440 percent, according to the National Center for Public Policy and Higher Education. That’s more than four times the rate of inflation.

Early this year, students in the University of California system responded to tuition hikes with some half-hearted campaigns of campus unrest. The bankrupt Golden State—which has shielded generations of customers from the actual costs of maintaining a tenure-rich, administration-heavy public university system, but which can no longer keep up this impossible mandate—is an especially painful case. But Alabama, Wisconsin, Illinois, and more than 30 other states have experienced similar protests against price hikes at their state school systems.

Time was that a top school was considered impervious to these kinds of market forces. As recently as 2006, the College Board estimated that the wealthiest 10 percent of private four-year colleges and universities had an endowment cushion of $454,100 per student. But these nest eggs were raided in the great credit unwind. Harvard’s endowment has lost $10 billion, about 30 percent of its value, most of that under the leadership of current White House economic advisor Larry Summers. Yale’s endowment has lost $5.6 billion.

You can begin to see why experts at Forbes and The Chronicle of Higher Education have been warning for several years about a “higher education bubble.” But do we have the crucial ingredient, excessive leverage?

We do. Student borrowing has more than doubled since the end of the 20th century, according to the College Board, with $85 billion in loans in 2008, up from $41 billion in 1998. And as the rising rate of defaults indicates, borrowers in aggregate are not making the kind of money—i.e. twice as much as a decade ago—they would need to pay those loans back.

The government’s response to this bubble has been to get itself more deeply involved in the inflation. The administration has kicked in various types of assistance, such as a $100 million college prep program. And in March, President Barack Obama signed a bill eliminating the 45-year-old Federal Family Education Loan Program (which guaranteed student loans made by private lenders) and replacing it with a system of direct Treasury Department loans to students. The first part of these efforts is a straightforward waste of money. The second has the potential to be a marginal improvement on a system that shouldn’t exist.

So we have too much money going into an asset, not enough value coming out, a massive increase in leverage, and a large taxpayer liability for the difference. “Inflation in higher education continues apace,” says Joseph Marr Cronin, a former secretary of educational affairs in Massachusetts and the author, with New England College of Business and Finance president Howard E. Horton, of an influential 2009 Chronicle of Higher Education article on the bubble.

But while Cronin warns about the potential for an education crash, he is bullish about higher ed’s area of fastest growth: for-profit colleges, many of them with a substantial or exclusive element of online and distance learning. For-profits have seen their enrollments triple over the last decade, to 1.4 million students.

For-profits have been on an accreditation buying spree lately. In March, Nebraska’s Dana University was bought by a specially created for-profit. Last year, ITT Educational Services bought Daniel Webster College in Nashua, New Hampshire. The online for-profit Columbia Southern University bought Waldorf College of Forest City, Iowa. And San Francisco’s Heald College was acquired by Corinthian Colleges, Inc.

Accreditation buys access to your tax dollars, in the form of both subsidized loans and outright grants. That’s a danger for taxpayers, and it’s a liability for students who see tuitions ballooning as more free money flows in. A recent College Board survey found that a quarter of for-profit graduates had taken on $40,000 in debt to pay for their schooling—and the doors don’t exactly fly open when a job seeker flashes a University of Phoenix diploma.

But subsidies are distorting and inflating tuition costs across the board. At the for-profits, at least, the colleges’ no-frills approach is prompting a revolutionary shift in thinking about higher education. The traditional university of ivied walls, lecture halls, and full-dress balls is heading for a crisis. Non-traditional schools present an opportunity for millions of new scholars to consider what they want out of an education, and why. If diplomas are going to continue costing more and losing value, then at least the customers should have more choice when shopping around for them.

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Educators push a college alternative

What’s the key to success in the United States? Short of becoming a reality-TV star, the answer is rote and, some would argue, rather knee-jerk: Earn a college degree.

The idea that four years of higher education will translate into a better job, higher earnings, and a happier life — a refrain sure to be repeated this month at graduation ceremonies across the country — has been pounded into the heads of schoolchildren, parents, and educators.

But there’s an underside to that conventional wisdom. Perhaps no more than half of those who began a four-year bachelor’s degree program in the fall of 2006 will get that degree within six years, according to the latest projections from the Department of Education. (The figures don’t include transfer students, who aren’t tracked.)

For college students who ranked among the bottom quarter of their high school classes, the numbers are even more stark: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree. That can be a lot of tuition to pay, without a degree to show for it.

A small but influential group of economists and educators is pushing another pathway: for some students, no college at all. It’s time, they say, to develop credible alternatives for students unlikely to be successful pursuing a higher degree, or who may not be ready to do so.

Whether everyone in college needs to be there is not a new question; the subject has been hashed out in books and dissertations for years. But the economic crisis has sharpened that focus, as financially struggling states cut aid to higher education.

Among those calling for such alternatives are the economists Richard Vedder of Ohio University and Robert Lerman of American University, political scientist Charles Murray, and James Rosenbaum, an education professor at Northwestern. They would steer some students toward intensive, short-term vocational and career training, through expanded high school programs and corporate apprenticeships.

“It is true that we need more nanosurgeons than we did 10 to 15 years ago,’’ said Vedder, founder of the Center for College Affordability and Productivity, a research nonprofit in Washington. “But the numbers are still relatively small compared to the numbers of nurses’ aides we’re going to need. We will need hundreds of thousands of them over the next decade.’’

And much of their training, he added, might be feasible outside the college setting.

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives, and store clerks. None of those jobs require a bachelor’s degree.

Vedder likes to ask why 15 percent of mail carriers have bachelor’s degrees, according to a 1999 federal study. “Some of them could have bought a house for what they spent on their education,’’ he said.

Lerman said some high school graduates would be better served by being taught how to behave and communicate in the workplace.

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British children to debate 'rape myths' in lessons

Surely this is more likely to give the kids ideas

Children as young as 11 are being asked to debate myths surrounding rape – including claims that “women ask for it by wearing short skirts”.

A charity is distributing teaching materials to secondary schools as part of a campaign to end violence against women. The pack, which schools can buy for £100, covers subjects such as domestic violence, female genital mutilation, forced marriages, prostitution and human trafficking.

Rape Crisis said the lessons were intended to encourage mixed classes of boys and girls to discuss issues surrounding rape. In one class, pupils are asked to debate claims that “women enjoy rape”, while another lesson instructs children to discuss the myth that “women ask for it by wearing short skirts, drinking alcohol etc”.

Youngsters are also encouraged to act out a role play, including four-letter words, where a boy and girl recall a drunken encounter.

Resources have been produced by the charity’s Wycombe, Chiltern and South Buckinghamshire branch for use in secondary schools. Laura Colclough, the author, said teachers were expected to use their discretion over what was taught. “It’s not from an angle of supporting sexualisation or pornography but examining the link between those things and sexual violence,” she said.

She added: “Gone are the days when young people are not sexualised. Most if not all see the music videos, they see the culture, they surf the internet.”

But campaigners suggested that the lessons were “too explicit for schools”. Nick Seaton, of the Campaign for Real Education, said: "It is irresponsible because it is certainly not suitable for young children and probably not for older children either. "Just because these things happen does not mean that children need to have them rammed in their faces. “Sensible parents will be extremely perturbed that their children are being introduced to this sort of information at a young age.”

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