Free college is not the answer

Free college is not the answer
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A number of Democratic presidential candidates are supporting student debt forgiveness and free tuition at public colleges and universities in the United States. While certainly appealing in their bidding sweepstakes for voters, this is terribly dangerous to the economy. Most fundamentally, our American schools and universities are failing students and businesses who hire their graduates. Many economists like to rely on the alibi that contemporary technological innovations do more to make life fun than enhance productivity, but breakthroughs in renewable energy, artificial intelligence, and the like can offer great potential to accelerate growth.

Those require an army of technically literate workers and managers to effectively exploit, but American secondary school students simply do not do as well as peers abroad in math and science on standardized tests. Fewer than 40 percent of high school graduates are adequately prepared for education after secondary school. With some 70 percent going to a university or college of some kind, it should come as no surprise that the dropout rate is more than 40 percent. Of those students who finish four year programs, about 40 percent lack the critical thinking and problem solving skills traditionally expected by businesses of college graduates.

It is no surprise that Federal Reserve economists estimate 40 percent of recent graduates are in jobs that do not require a college education. Even more damning is that many colleges seem to add little value to student skills, regardless of admissions standards. With so many dropouts and poorly prepared graduates, businesses complain of skill shortages and too many graduates cannot pay off their loans. All of this has worsened because of how the student loan program has worked over the decades. Essentially, 18 year olds have been permitted to borrow large sums to attend college and bet, often with uninformed direction from parents, what programs they can actually finish and will lead to a decent job.

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That leaves inexperienced young adults at the tender mercies of all the university admission officers and faculty who often give out advice that serves their institutions. Many colleges have also exploited loan programs by admitting unqualified students into nontechnical liberal arts curriculums that offer little future, jacking up their price tags, and spending the bonanza on light teaching loads and student unions that make college more a Club Med experience than a real education.

I cannot tell you how many times I have heard students were told that a liberal arts education can take a young person any place they want to go. Academicians will cite very successful middle aged humanities graduates who went on to brilliant careers in business consulting and technology sectors. However, these days, American students spend about one third less time in class and studying than back in the 1960s, and the technical requirements of good entry level positions have escalated dramatically.

Over the last two decades, student loan programs have permitted our universities and colleges to push up tuition, after discounts, 38 percent faster than health care and a stunning 78 percent more than inflation. Meanwhile, faculty and administrators seem more obsessed with social justice and indoctrination than providing a useful education. Wiping away student debt and sending colleges more cash to do more of the same will not give our young people rewarding lives or our economy competitive workers to sustain technological leadership and a high standard of living.

Many young people were duped by student loan programs, and it seems highly unfair to burden them with a lifetime of debt. Consequently, I am in favor of aggressive debt forgiveness for those graduates struggling in low and moderate wage employment. But without compelling universities to cut costs and faculty to teach more and be more relevant about what they teach, free tuition schemes will leave higher education a terrible burden to the federal government when rising deficits are already stressing the budget. Universities have considerable assets in their buildings that could easily provide the collateral for bonds. In turn, the money raised could be used to share half the cost, along with banks, to finance student loans.

The government could promote this process by making these bonds tax free and enabling a market similar to the state and municipal bond market for those securities. However, when students fail to repay, the universities and banks should be on the hook, which is why the government needs to end the federal guarantee for student loans. Then admissions officials and bank loan officers should carefully scrutinize the student prospects for academic success, the marketability of their chosen majors, and most importantly, the cost against expected incomes. That would drive down tuition and raise quality, better serving our students and our economy.

Peter Morici is an economist and professor at the University of Maryland.