Saturday, July 23, 2011

College bubble the next to burst?

When governments want to encourage what they believe is beneficial behavior, they subsidize it. Sounds like good public policy. But there can be problems. Behavior that is beneficial for most people may not be so for everybody. And government subsidies can go too far.

Subsidies create incentives for what economists call rent-seeking behavior. Providers of supposedly beneficial goods or services try to sop up as much of the subsidy money as they can by raising prices. After all, their customers are paying with money supplied by the government. Bubble money, as it turns out. And sooner or later, bubbles burst.

We are still suffering from the bursting of the housing bubble created by low interest rates, lowered mortgage standards, and subsidies to Fannie Mae and Freddie Mac. Those policies encouraged the granting of mortgages to people who should never have gotten them – and when they defaulted, the whole financial sector nearly collapsed.

Now some people see signs that another bubble is bursting. They call it the higher-education bubble.

For years, government has assumed it's a good thing to go to college. College graduates tend to earn more money than non-college graduates. Politicians of both parties have called for giving everybody a chance to go to college, just as they called for giving everybody a chance to buy a home.

So government has been subsidizing higher education with low-interest college loans, Pell grants, and cheap tuitions at state colleges and universities.

The predictable result is that higher education costs have risen much faster than inflation, much faster than personal incomes, much faster than the economy over the past 40 years.

Moreover, you can't get out of paying off those college loans, even by going through bankruptcy. At least with a home mortgage, you can walk away and let the bank foreclose and not owe any more money.

Peter Thiel, the co-founder of PayPal, is adept at spotting bubbles. He sold out for $500 million in March 2000, at the peak of the tech bubble, when his partners wanted to hold out for more. He refused to buy a house until the housing bubble burst. "A true bubble is when something is overvalued and intensely believed," he has said. "Education may still be the only thing people still believe in, in the United States."

But the combination of rising costs and dubious quality may be undermining that belief.

For what have institutions of higher learning done with their vast increases in revenues? The answer in all too many cases is administrative bloat. Take the California State University system, the second tier in that state's public higher education. Between 1975 and 2008, the number of faculty rose by 3 percent, to 12,019 positions. During those same years, the number of administrators rose 221 percent, to 12,183. That's right: There are more administrators than teachers at Cal State now.

These people get paid to "liaise" and "facilitate" and produce reports on diversity. How that benefits Cal State students or California taxpayers is unclear.

It is often said that American colleges and universities are the best in the world. That's undoubtedly true in the hard sciences. But in the humanities and to a lesser extent in the social sciences, there's a lot of garbage. Is a degree in religious and women's studies worth $100,000 in student loan debt? Probably not.

As economist Richard Vedder points out, 45 percent of those who enter four-year colleges don't get a degree within six years.

Given the low achievement level of most high school graduates, it's hard to avoid the conclusion that many of them shouldn't have bothered in the first place.

Now consumers seem to be reading the cues in the marketplace. An increasing number of students are spending their first two years after high school in low-cost community colleges and then transferring to four-year schools.

A recent New York Times story reported that out-of-staters are flocking to low-tuition North Dakota State in frigid Fargo.

Politicians, including Barack Obama, still give lip service to the notion that everyone should go to college and can profit from it. And many college and university administrators may assume that the gravy train will go on forever.

But that's what Las Vegas real estate developers and homebuilders thought in 2006. My sense is once again well-intentioned public policy and greedy providers have produced a bubble that is about to burst.


Tests of limited use

Every year when Indiana’s ISTEP testing scores are released, many people who support government schooling feel a rush of energy. They become excited and nervous, and expend that energy cheering for any data that can be defined as “success,” “improvement” or “progress.”

I usually feel a rush of energy too but it comes out in the form of a stretch and prolonged yawn. I can’t cheer because I don’t care about ISTEP test “success.” I care about education and learning.

I don’t cheer when success is defined by a government authorized and an approved standardized testing system. Pride at the state, district and individual school level over test scores only tells me one thing really: that those in the system are merely getting better and better at teaching to the test.

This measure of success is not something I would ever cheer about because I don’t cheer when I see young developing minds forced to suppress their natural curiosity to comply with arbitrary and subjective government mandates detailing exactly what they should be learning and when they should be learning it.

I don’t cheer when teachers feel they must teach to these specific standardized guidelines measured on the tests because I know it leaves very little, if any, time left to explore and learn about anything else.

A lot of energy is wasted on these misguided attempts to standardize a one size fits all education process while ignoring individual differences. The latest proof of this was in a recent story reporting on local results where a government school administrator pointed out how important it is to motivate kids to score higher and “learn what’s being taught.” He said it requires lots of energy to accomplish this.

But it’s not necessary to spend all that time and energy working to motivate kids to “learn what’s being taught.” All they need to do is stop thinking in terms of forced learning and flip the administrator’s comment. Instead of trying to motivate kids to “learn what is being taught,” turn this concept around and “teach them what they want to learn.”

Students are naturally self-motivated when they are already interested. Doesn’t it make much more sense for teachers and administrators to work with that natural energy rather than spending most of their days fighting against it?

If schools focused on individual student’s natural interests and real-life reasons to learn, there would be little need for elaborate standardized testing systems. People would realize that there are many ways to evaluate learning and the best ones focus on the student.

Imagine how different education would be and how much more everyone would learn if teachers and administrators actually collaborated with students to help them self-evaluate and assess for themselves whether they learned what they wanted to learn.

Since I don’t believe it actually accomplishes the goal, I’m not going to waste my energy cheering for standardized testing as a major method of forcing school accountability either. However, I do understand that this was bound to happen in a system based on compulsory funding, where individuals are not free to opt out.

As a result of government involvement in education, we have created institutions that are now almost completely focused on the continual testing and standardizing of students. This is producing young people whose main method of determining whether they should bother learning something or not is to robotically ask a single standardized question of their own: “Will this be on the test?”

And to me, this is nothing to cheer about.


Hindu teenagers in Britain 'twice as likely as Christians to go to university'

Teenagers from Hindu backgrounds are almost twice as likely to go to university than those of a Christian faith, Government research suggests.

More than three in four (77 per cent) youngsters who describe themselves as Hindu go into higher education, according to statistics gathered for the Department for Education (DfE).

In comparison, less than half (45 per cent) of those that consider themselves Christian go to university.

The figures are drawn from the Longitudinal Survey of Young People in England, which questioned thousands of teenagers.

The findings also show that almost two thirds (63 per cent) of Sikh youngsters choose to take a degree, along with more than half of young Muslims (53 per cent). Just under a third (32 per cent) of those who give their religion as 'none' go to university.

Overall, young people with a religion at age 15 are more likely to be in higher education at age 19 than those without, regardless of their faith, the survey found.

The findings also show that 38 per cent of the white teenagers questioned went on to university, compared to 74 per cent of their Indian peers, 51 per cent of those from Pakistani backgrounds, 53 per cent of those of Bangladeshi origin, 66 per cent of those from Black African backgrounds, 41 per cent of those of Black Caribbean heritage and 40per cent of those from mixed backgrounds.

Professor Steve Strand of Warwick University suggested that religion is a 'proxy' for ethnicity.

He told the Times Educational Supplement that there were a number of factors why different proportions of teenagers from different backgrounds go to university.

Prof Strand said that generally, 'white working class children and their parents often do not see the relevance of the curriculum or of attending university'.

'Asian families, even if they are from difficult socio-economic backgrounds, see education as a way out.'


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