July 23, 2015 - Freedomain Radio - Stefan Molyneux
59:38
3031 The Truth About The College Student Debt Crisis
The cost of higher education continues to rise and college debt has reached unsustainable levels. Potential students are faced with an increasingly more difficult decision: Do the benefits of college outweigh the costs? Is a college degree worth it? What are the parallels between the housing bubble and the current situation with student debt? How did we come to this point and what is the future of the United States higher education system? Find out the answers to these questions and many more in the The Truth About The College Student Debt Crisis!
Hi everybody, this is Stefan Molyneux from Freedom Aid Radio.
So college!
Oh, that's a big decision outside of getting married, your general choice of careers, and maybe buying a house.
It is probably the biggest decision that you're going to make with regards to finances and opportunity.
I have a mix, I guess, of both.
I started off as an English major, did a couple of years there, went to theatre school for playwriting and acting, did a couple of years there, finished off my undergraduate in Montreal, Canada, in history.
I did a graduate degree in history, focusing on the history of philosophy at the University of Toronto.
And then I became a COBOL programmer.
And then I was an entrepreneur for about 15 years in the software field, and then finally put some of my education to use So, I've both enjoyed some of the fruits of higher education and also had a career which had nothing to do with the education that I chose.
So, I kind of see it from both sides of the fence, perhaps.
So, you may have heard people say, of course, higher education is an investment in one's future, and it's therefore an essential part of life.
And we're going to make a case that's a little bit more nuanced and complicated than that, because if you're an investor, you know, yeah, there are some...
Investments that are good, and there are some investments that are not so good.
You know, invest in the dot-com bubble in 93, 94, you're doing okay.
Invest in 98, 99, not so much.
Same thing with real estate at various points in Western history.
So, an investment can make you rich, or it can sentence you to a life of penury and attempting to fly from high building ledge towers.
Now, after mortgages, students are the highest proportion of United States household debt, over a trillion dollars.
And that is a giant hole that young people are hanging over.
And if you're one of those, I think you'll know what I'm talking about as we go through this Presentation.
Tuition fees continue their massive upward death spiral of infinite stratospheric achievement, but median income has remained essentially flat.
So you're paying more with the same amount of money or your parents are.
And paying off student debt is becoming increasingly harder with each consecutive year.
If you graduate with an average amount of student debt, some economists calculate that you need a starting salary of at least $40,000 to really begin to make a dent in it in any significant way.
Rates of student debt delinquency, of course the inability to make a loan payment, have nearly doubled over the course of the last decade.
So given the very high cost of college and the fact that median income is not budging, it's really important that you learn the truth about the higher education bubble.
So what does this look like?
Grease?
A little bit.
Cost of a four-year higher education in the U.S. This is from 1964 to 2013.
So the red bar, private education, yellow public, and median personal income.
This is one of the great tragedies of...
the last 50 years or so, is the degree to which real income has not budged.
This is despite the most staggering advances in technology that have ever been seen.
I guess you could argue for two in the history of the world.
One is the agricultural advances that led to the agricultural revolution, where there was a 8 to 10 to 15 times improvement in crop yields.
This was sort of in the middle of the Middle Ages, which created the excess food, which led to the capacity for there to be city dwellers and so on.
So that was the first one.
The second was industrialization and mechanization, the invention of the steam engine and trains and so on.
In the 19th century and then late 20th century, we have computerization.
Now, all of these prior revolutions led to enormous growths in personal income, but this last computer one has basically been hoovered up by financial institutions, government debt, fiat currency, and war, and personal debt, and all fiat currency, and war, and personal debt, and all of this giant mess.
And one of the things that's hoovering up all of this capital, as we mentioned to the tune of a trillion dollars a year, is this higher education bubble.
So these are in constant dollars, of course, and it just shows you, of course, that...
Rough gauge of estimate is that from basically the 60s to the 80s, things were relatively flat, declined slightly in public education, but the cost has tripled since 1980.
And that is a very, very important factor when it comes to trying to make a decision.
Student loan debt, 2004 to 2013.
As you can see, in 2004, It was 347 million, and now it has just topped a trillion as of 2013.
It's a 100 billion increase in a single year.
From 2012, 960 million, to 2013, a trillion and 71 million.
That is about 11.1% of it is 90-plus days delinquent ore.
Now, all of this money, this debt that you see here increasing, has been taken out of the economy as a whole.
In other words, it's no longer available for entrepreneurs to borrow or companies to invest and grow their businesses.
And that is a huge problem because you've got diminished economic growth for the sake of pumping money into education.
Now, what you could say, of course, is that, ah, but investing in all this education is going to make the economy grow in the future.
The problem with that thesis is that massive increases in access to higher education have been occurring for the last 50 years, but as you saw, median income has remained relatively flat.
So, 50 plus years of investment in higher education has not budged personal income up at all.
Is 51 years going to turn it all around?
I do not think that's what was promised.
So, let's have a quick look and compare, because there's so many similarities, it's eerie, the housing bubble with the higher education bubble.
So, looking at the housing bubble, there was a report that came out that said, oh, banks discriminate against minorities, because fewer minorities get...
Mortgage loans.
This report turned out to be completely flawed, completely false, repudiated, rejected, eviscerated, busted all across the media.
But it doesn't matter because once the ball gets rolling in this sort of thing, it's almost impossible to stop.
So in an attempt to make housing more affordable for minorities, the U.S. government mandated that banks make more loans to poor and ethnic communities.
And that's a big problem, right?
Because for reasons outside the scope of this presentation, a lot of the minorities could not afford the houses that were being offered.
Plus, of course, because government debt is so high, the government has a huge incentive to crush down interest rates to reduce its loan repayments.
When you crush down interest rates artificially, then you make things seem affordable on credit that aren't affordable in reality.
So banks are forced by the government to make more loans to poor and ethnic communities.
Banks begin to loan money in this way, lowering the standards that have been in place in the banking industry for over a century.
And this, of course, created a housing acquisition mad stampede and drive the price up of new homes.
And because a large proportion of these loans that were required and enforced by the government were low quality and high risk in nature, borrowers began defaulting on their payments in 2006 and eventually triggered a meltdown that caused many banks to go bankrupt.
This crisis, of course, contributed significantly to the global economic recession that followed.
So here we see the government mandates that standards be lowered.
This creates a huge amount of demand, which creates a bubble, which then crashes as reality intervenes, as it generally does if you leap off a building thinking that you can fly You know, you might get a couple of seconds of Superman fetish fantasy, followed by ripe watermelon-style stains on a sidewalk.
In the higher education bubble, it's okay, because it started three years later, in 1978, the U.S. government passed a law that guaranteed everyone a student loan.
Everyone gets a car and mountains of debt.
Prior to that, only low-income students could apply for aid.
So loans are handed out with no regard to the borrower's perspective ability to pay them off in the future.
So people who are studying petroleum engineering, which is one of the highest income degrees that you can get right out of school, they get loans.
And so do people studying art history and history itself.
So enrollment and tuition skyrocket.
And student loans and delinquency over time and defaults begin to rise.
So here we're seeing it's the same pattern.
Thank you.
So let's look at housing versus higher education.
This is the National Home Price Index.
As you can see, it's been trending upwards with massive amounts of ups and downs.
And here you can see we've got a bubble that is going on for your education costs.
And you can see it's following the same general pattern but without the same kinds of ups and downs.
So, how did we get into this potential mess?
In 1944, US Congress passed the GI Bill, offering returning soldiers taxpayer-funded college education.
So, because everyone became a central planner in the 1930s and in the 1940s, particularly under the massive amount of government intervention that was inflicted on the remnants of the free market economy during the Great Depression, Depression from 1930, 1929, 1930, up until the opening of World War II, everyone became a central planner.
And so you had all these millions of men out at war, and everyone was afraid, oh my goodness, if these men come back, there's going to be massive unemployment, they're well-armed, they're traumatized, they're angry, they're disappointed, so let's stuff them in school so that they won't disrupt the marketplace.
It's all nonsense.
Of course, everyone came back and jobs were available and it all worked.
But...
They wanted to give taxpayer-funded college education.
So following World War II, the GI Bill drove up college enrollment rates temporarily.
But after the Korean and subsequent Vietnam Wars, the landscape of American higher education changed dramatically.
Back then, of course, the US military was still drafting men to fill up its ranks before they got replaced by drones and robots.
So higher education became very appealing to young men.
You could avoid conscription by going to college.
A college degree was very popular among low-income men.
Of course, low-income men are disproportionately targeted by the draft.
And this, in part, prompted President Lyndon B. Johnson in Part 667 of the Great Society Welfare Estate Programs to sign the 1965 Higher Education Act, which made federal loans available to families with income below $15,000.
Returning soldiers drove the college enrollment rate up even after the war ended, but beginning in 1975 the popularity of higher education declined sharply.
Higher education enrollment doubled between the beginning and end of the Vietnam War, of course, as everyone's trying to avoid the giant human disassembly machinery of this conflict.
And if this artificial rate had been allowed to return to the pre-war state, a lot of institutions would have gone bankrupt, leaving many professors unemployed.
Getting on the wrong side of the intellectual classes, therefore, is never good for anyone's career in government, so politicians quickly came up with a solution.
So we'll lift the 1965 family income restriction and allow everyone to finance a degree by borrowing money at a low interest rate, thus appeasing the intellectual class who doesn't really like to work too much for a living.
Okay.
Thank you.
Jimmy Carter said in 1978, The Middle Income Student Assistance Act, which I am also signing today, is similar to the GI Bill as a landmark in the federal commitment to aid families with college students.
And he was right.
It was, in fact, a landmark piece of legislation.
The new bill succeeded in driving up college enrollment rates, which continued to increase up until 2010, when the astronomical cost of college began to outweigh any benefits to some degree, So one of the reasons why President Barack Obama, in his January 2015 State of the Union Address, talked about making community colleges free and universal as high school is the sharp decline in higher education enrollment since 2010.
All right, brief rant aside time here.
There is this not-too-smart approach to human life, which completely messes up cause and effect.
There's a bell curve of intelligence.
And intelligence, let's say, is largely fixed by the time you're out of high school.
And there's lots of people who argue that intelligence is fixed pretty early in life.
There's a lot of genetic basis for it.
But the reality is that it ain't going to change that much after high school.
And what that means is that...
If college is for the intellectual elite, and this doesn't mean moral elite, it doesn't mean better than you or better than me, it just means that they're super smart.
You know how opera is for the singing elite?
You know, you've got to be really good at singing in order to become an opera, and You know, being a rock star is for people really good at writing songs and singing and performing and so on.
And so they're the elite.
And the idea that, wow, you know, Freddie Mercury is a great singer.
So if I want to be a great singer, I should be the front man for Queen.
Oh, I've had the dream to.
But anyway...
It's not how it works.
It's true that there are a lot of tall people in basketball.
It is not true that if you take a short man and draft him into the NBA, he's going to gain a foot and a half or two feet in height.
It's not the way the preselection occurs before that.
So the idea that you can just take people of average intelligence, put them in college, and they'll Be exactly the same as the smart people who used to go to college beforehand is absolutely, completely and totally false by all statistical indicators.
We'll get more into this in a little bit.
It's just weird how people think this kind of stuff.
So here's the higher education enrollment rate from 47 to 2012.
And so, in the post-war period, it's already artificially high, but we've got the top 10% of intellectual ability, in general, going to a college.
And, of course, it begins to dip down.
In 1955, the Vietnam War begins, yeah, that's right, almost a 20-year war.
And you get a huge increase in enrollment in the war.
Now of course because there were a lot of leftists and Marxists in higher education in America, a lot of these people had fled Europe after a lot of the last totalitarian regimes had rolled in and attempted to end their careers and lives.
So basically what happened was you had a whole bunch of American GIs fighting socialism, national socialism, who then came back to America and ended up being indoctrinated in socialism and Marxism in the post-war period.
Their kids then grew up for the sexual leftist revolution of the 1960s.
This is how the virus of the left spreads.
So you can see it goes up all the way through the 60s.
In 1973, the draft was abolished.
U.S. withdraws from Vietnam.
And then it begins, you see, to start declining.
And this, of course, decline makes everybody, oh, we're going to lose.
Everybody just comes up with all these lies, right?
I mean, it's so important to know.
Everybody comes up with all these lies.
So the moment that the education bubble begins to diminish, everyone is like, oh, no, we're going to lose our competitive edge.
Those Soviets, they're really getting a lot of people educated.
And if we don't get more people educated, it's going to be the end of the world.
And they're all lies.
This other one just wanted to keep their jobs.
So 1978, guaranteed student loans for everyone.
Here you begin to see the bubble goes up and up and up.
The plateau in the 90s may have had something to do with the dot-com bubble, getting people into high-paying careers and intellectually stimulating and rewarding careers without necessarily needing to have a college degree to do so.
I mean, think of a lot of the luminaries in the software field don't have college degrees, Bill Gates, Steve Jobs, and so on.
Now, of course, not all students take out loans, so the crude rate is rather low.
In 2013, only about 69% of students graduated with debt, not counting future debt of liver failure from drinking, just talking finance.
So the average four-year education cost at the top here you see is going through the roof.
Oh, look!
It's pretty much soon after guaranteed money came in and the federal loans per student.
But they track fairly, fairly closely.
Now, of course, just for those of you who are going to remind me, correlation is not causation.
The previous slide, is it that, wow, you know, the cost of education just began to skyrocket and the loans had to scramble to keep up?
Is there a causal relation between an increase in federal aid and a rise in tuition fees?
Intuitively, we would say, of course.
Because when the supply remains relatively constant, but the demand increases, the price is going to go up.
Now, certainly giving lots of students, quote, free money to go to college is going to vastly increase demand, right?
As you saw, we went from under 10% to 40-45% of young people going to college.
I mean, that's, you know, three to four times or more increase in the demand and supply remains somewhat constant.
But there was a study from the Federal Reserve Bank of New York examined how federal aid eligibility of students impacts the cost of their tuition.
After policy changes raised the amount of government subsidies, the researchers found that tuition increased in proportion to the number of student aid eligible students around the time of policy changes.
So that is very important.
If you give 5% more people the capacity to go to college, 5% more people apply, and then after that, tuition goes up 5%, then all that's happening is the government is not making college cheaper or more affordable for students.
What they're doing is subsidizing the university by allowing them to increase their rates because more people can afford to go.
The fine-grained longitudinal approach provides strong evidence that increased federal aid does in fact cause a rise in tuitions.
Do universities spend the additional money on improving the quality of education they provide?
Not really.
As one author put it, And institutions of higher learning have been on a building boom, running up new administration buildings, athletic facilities, dormitories, recreation centers, and classrooms.
So one person has pointed out that the ratio of professors to students has remained somewhat constant at about 7 per 100, but the number of administrators has doubled.
So, um...
It's just empire building with taxpayer money and it's got nothing.
And it's the whole time when college courses are available online, when raw intelligence could be very easily tested by prospective employees with an IQ test, but in America that's not particularly legal because it's perceived to discriminate against minorities.
And so the whole time that this should all have gone through a fundamental revolution, it is like...
It's like the federal government subsidizing calligraphy and lawn bowling.
It just doesn't make any sense anymore.
So higher education enrollment keeps increasing, but labor force participation has been on the decline since 1997.
Remember, you have to fund higher education, so the story goes, to make sure that people have great jobs and your economy grows in the future, but that is not really what has been happening.
Labor force participation peaked in the late 90s, has been declining considerably and higher education enrollment rate has continued to go up.
Nearly 40% of people in the United States aged 16 to 24 say they don't even want a job.
And that's a sizable proportion of these staggering 92 million Americans who are currently outside the labor force and who would be then fermenting a genuine change in the system except that they're kept relatively drugged and sedated by a steady diet of government cheese.
So is it worth it?
On average, the higher the level of educational attainment, the lower the unemployment rate, and the higher the earnings.
However, as a 2012 Georgetown University study points out, not all majors are created equal.
For example, the unemployment rate for recent electrical engineering graduates was 7.4%, compared to 12.6% for the fine arts majors, with engineers having nearly twice the starting income.
In fact, even lawyers recently have had great difficulty trying to find work According to 2013 data compiled by the Payscale Company, chemical and electrical engineering majors have starting and mid-career salaries that are twice the amount art, sociology and social science majors earn.
Indeed, the top 10 highest paying degrees were all in the field of engineering, applied mathematics and computer science.
So the way that it works, and the way that it worked for my father, who has a doctorate in geology, is that a company offered to pay for his doctorate and pay for everything associated with his doctorate if he agreed to work with them for a certain amount of time after he graduated.
And so that's how the business pull creates the capacity to get through higher education if you don't have the money.
And that means that the higher education is pointing directly at vacancies in the business world.
But simply funding people whose brains are still half a decade away from maturity, the ability to go through whatever they want and then hope to land a job afterwards, that is just not the way you do it.
College graduates are not necessarily competing for jobs in their field of study.
In a recent report, researchers at the Federal Reserve Bank of New York, who apparently do only research, noted, quote, Although finding a job has gotten easier for recent college graduates during the past few years, landing a good job has not.
Indeed, the rising underemployment rate for this group indicates that recent graduates have increasingly continued to take non-college jobs, or jobs that don't require a college degree.
So here's an example that one economist put together.
So the assumptions here, this is at age 50 from somebody who graduated from high school or had the capacity to enter the workforce at the age of 19, is going to live to 100, retires at 62.
So we've got Joe who decides to become a plumber.
So he makes $71,685 a year.
But he can spend $33,243 a year.
Sally, who's a teacher, makes $89,584 a year.
And if you just look at that, you'd say, wow, that's like $18,000 and change more.
But she can only spend $27,608 a year.
Why?
Because she got into the workforce later, because she had to take her education degree.
She incurred some debt for taking that education degree, which she has to pay off over time.
So that's quite important.
Bob, a grumpy-looking guy, he spent an extra two years to get his master's.
Now, he makes a salary of $103,250 a year.
And so you'd say, well, that's pretty good, because that's like $12,000 a year, and I just have to spend two years, that pays for itself, and blah, blah, blah.
Not true.
Because he spent an extra two years and incurred a little bit more debt, he actually can only spend $26,503 per year.
So, Joe the plumber, who started in his chosen profession shortly after high school, is able to spend the most.
The people who went into debt and delayed entering the workforce, well, they end up making more money on paper, but their actual spend capacity is much, much lower, right?
So...
Let's look at Jill the Doctor.
Oh, look at this.
A staggering $185,895 a year.
Jackpot, baby!
Woo-hoo!
We're in the money!
Ah, oops.
Oh, dear.
Because she gets to spend of that money only $33,666 per year.
Remember, Joe the plumber, he gets to spend $33,243 a year.
Jill gets to spend $33,666 per year.
Because she only has 31 years of working to cover...
81 years of living from 19 to death at age 100.
And again, you know, 100 is high.
You could lower this and it would change the numbers a little bit.
I'm just going with what The Economist put together.
Well, she's got very high debt.
She was in school forever and she's paying 36% in taxes on her income.
This doesn't even count the additional overhead she might have in terms of, of course, high liability costs, malpractice insurance costs, and so on.
So, Jill, you'd look at the top numbers, 71K, 89K, 103K, 185K, and say, ah, that's how I want to make my decision.
But in terms of the actual money you get to spend, there's no difference between Jill, the doctor, and Joe, the plumber.
And so when you actually look at the breakdown, this is the important stuff.
You've got to talk to people in the field.
You've got to figure out what their take-home is.
You've got to run these numbers.
Don't just look at the top number and assume that it's going to make sense.
Jill, of course, on call.
She's there at night.
She has, of course, going through working through 30 hours straight and so on.
Joe has to deal with pipes and sometimes sewage and so on, and you could certainly argue that although Sally can spend a lot less money than Joe, it's nicer being a teacher than being a plumber.
I mean, that's all a personal decision.
But in terms of the money itself, when you look at the plumber and you look at the doctor, and they could spend about the same amount of money, who has a more stressful job?
So what are the opportunity costs of attending college?
Everybody sees what's there.
It's harder to see what's not there.
The opportunity costs, of course, of not going to get a job.
Let's just say that, I mean, just basic 101, right?
You go to a four-year college degree, let's say you could have made $20,000 to $35,000 or $30,000 or so.
Well, it's $120,000 that you're out just by going to college and not working.
According to a Forbes calculation, students enrolled in a four-year program miss out on $36,000 if they work and $93,000 if they don't.
Combined with $95,000 to $140,000 in tuitions, room, and board, the cost of a degree increases significantly.
We haven't even factored in loan interest rates and the hard-to-quantify loss of time.
The other thing, too, is, of course, you're four years further back in your career.
Right?
So if you spend four years in the workforce rather than four years in college, then you've gained work experience, you've got something on your resume, you've got contacts, you've learned how to work within a hierarchy, you've learned how to navigate the challenges.
Everybody starts off with idiot bosses because really smart bosses move very high up in the organization and are not generally available for people starting out.
So generally the quality of bosses declines as you go lower in the hierarchy.
So you kind of have to start with the toughest and you end up with the best.
So while you're amassing debt and missing out on a stable salary, someone who didn't go to college is already gaining experience and earning money in your field.
Now, his savings and lack of debt make him more attractive for a potential employer.
He doesn't have a huge debt to pay, so he can work for a lot less, right?
So you have to start roughly at $40K to pay off any reasonable or substantial amount of student debt.
Somebody who doesn't have any debt can comfortably get by on $30K or $35K, so you're going to be underbid.
The guy's going to still have more take-home money to spend than you do, but you can be underbid by somebody who doesn't have a college degree.
And of course, he's got practical skills, on-the-job experience, as opposed to a degree that carries increasingly less weight.
Huge numbers of employers say that college students basically aren't ready to work.
A lot of college students say the same thing.
Someone who's got references, and like I was an employer, I interviewed hundreds of people and hired many, many people.
References and a proven capacity to work and get the job done is really worth a lot in the business world.
So if you're an employer, who are you going to hire?
The debt-ridden person who's got no job experience and whose degree may to some degree or not match what you want or somebody with a proven work history who can work for less and has references and so on.
Now again, this doesn't count, of course, the fields like law, like engineering, like being a doctor, where if you don't have the degree, you can't play, right?
I mean, that's just a government requirement that you need these certifications in order to work in the field.
So that doesn't count for this, but for a lot of the other stuff, particularly in the software field, it's a lot more open.
I remember talking to an R&D manager who said almost all of his coders were English majors.
Just typing.
48% of employed U.S. college grads are in jobs that require less than a four-year degree, rendering it a very bad investment for them.
1.5 million or 53.6% of college grads under the age of 25 were out of work or underemployed.
Half of grads say they would choose a different major or school if they could do their education over.
This is a little, perhaps, way for you to avoid.
That is an absolute life catastrophe.
I mean, this is a life catastrophe on par of marrying the wrong person, right?
That is a big life catastrophe, and I don't want you to have to go through that.
40% of grads from the nation's top 100 colleges couldn't find jobs in their chosen field.
In this measurement, social science grads are at the very bottom.
Only 36% are working in their field of choice.
15% of taxi drivers had at least a bachelor's degree in 2010, compared to 1% in 1970.
But that's nice, because, you know, sometimes you want to have a nice chat with the taxi driver when you have a long drive.
If he's educated, it's usually maybe a little better.
Now, college can't make you smarter.
Can't make you smarter.
It can't make you smarter.
College self-selects for smart people, and it doesn't particularly care about your income when you come, and college selects for smart people.
Sending more and more people to college doesn't make them smarter.
All it requires, all it necessitates that college begin to lower its standards to account for the less intelligent people.
So, we've established, I think, to a reasonable degree of certainty, why college tuition keeps rising, because government keeps stuffing more people with more money into the pipe.
But one question remains.
Is the increased cost a reflection of higher quality education?
Like a car, you pay more, you generally get something better.
So, I mean, if you're going to get your money's worth, maybe paying the high tuition is not a bad idea.
But, you know, we're a philosophy show.
I'm not an economist or an investor or anything like that.
So we should really explore the subject theoretically.
So, okay, the NBA team suddenly started employing short and morbidly obese players.
So what's going to happen?
It's going to be a lot less dunking and a lot less running, a lot more fainting.
And that's the reality.
You know, if I were a politician and said, everybody has to be a rock star, everybody who wants to be will give you a band, well, would that mean that the quality of music would go up enormously?
Would you then say, well, you know, if you go to a bar or you go to a stadium, you're going to see the very best?
No, you know, it would be karaoke with live music.
That's sort of all it would be.
Rock stars are self-selected for the quality of what they do, and simply mandating people to become rock stars will just mean that the whole concept of rock star goes out the window.
As rock stars sometimes do.
Meli Vanilli.
As the higher education enrollment rate for civilians began to skyrocket in the 60s, there was an influx of students from a broader range of intellectual ability, to put it as nicely as possible.
So teaching standards or grading would have to be adjusted to accommodate the lowering of the average, right?
I mean, if the top 5% or 10% of people are going to college and then suddenly you say, okay, 45% of people go to college, okay, well, it just means that you have to lower your standards because people of less intellectual ability are now going to college.
Now, if they didn't lower their standards, then graduation rates would fall behind enrollment rates and deter many potential future students from applying.
You see...
In a rational or sane universe, education would either be a hobby, which is fine.
I mean, I study lots of stuff for this show to hopefully synthesize it and provide it to you in a digestible and mildly entertaining format.
So it would be a hobby, or it would be something that would be market-driven.
In other words, employers would pay for the education, or you'd go to school to learn how to be an entrepreneur or something.
So it would be driven by some sort of market phenomenon.
It's either a hobby or it's some sort of market phenomenon.
And so colleges should be in the business of delivering economically valuable people to employers or to being self-employed if that's what the students want.
But that's not the way it is right now.
And so what would happen is if a college...
Began supplying low-quality people, then that college would get a bad reputation among employers because the employers would say, well, you know, most of the people you send to me are complete neckbeard, cheese-eating dunderheads, and so I can't use them, so I'm going to steer away from hiring people from this college because their standards are so low I can't tell who's good from who's not good.
So that's a very important aspect of things to understand.
And so colleges normally would resist producing lower-quality graduates.
However, if colleges are paid by government loans, then there are no standards, and colleges can just pump people out.
And because people aren't using college as a slingshot to get into higher-paying occupations, they're not doing the kind of research as to, well, how much money do I make, how many people graduate, what's the demand like, and so on, which is the signals businesses would be giving through the educational system if that was how it were to work.
So they lower the standards, which wouldn't happen in a free market environment, but happens because by lowering the standards, they make more money, right?
In a free market system, you lower your standards as a school, you make less money because people don't want your graduates, therefore graduates don't want to come to your school.
But when the government's stuffing the pipe with free money, well, what happens?
By lowering your standards, you capture more students who themselves aren't doing the research to figure out if their degrees are valuable.
And so you'll lower your standards to make more money in this government environment.
Universities transition from providing training for very intellectually demanding disciplines to general purpose education.
Yeah, shift in attitudes regarding educational quality standards, to say the least.
Derek Bach, who was a president of Harvard University for 20 years and now is a professional chicken, recently wrote, quote, Despite the favorable opinions of undergraduates and alumni, colleges and universities, for all the benefits they bring, accomplish far less for their students than they should.
Many seniors graduate without being able to write well enough to satisfy their employers.
Many cannot reason clearly or perform competently in analyzing complex non-technical problems, even though faculties rank critical thinking as the primary goal of a college education.
Few undergraduates receiving a degree are able to speak or read a foreign language.
Most have never taken a course in quantitative reasoning or acquired the knowledge needed to be a reasonably informed citizen in a democracy.
And those are only some of the problems.
Yeah, of course. - Yes.
And the other thing, too, is that by the time young people go to college, the government's already had them for 12 years.
The fact that after they graduate they still can't think and read and write is only part of the problem.
The big problem is that should all be easily achievable by the government when it has them for 12 years.
Teachers can't make up for crappy parenting and colleges can't make up for crappy government education when the kids are younger.
Studies on student learning and engagement bear out a lot of Bach's claims.
As two researchers noted, quote, No kidding!
Put short people into the MBA, it doesn't make them taller.
And so at least almost half of the students, no measurable improvement by debt.
So they've become economically crippled by this because the degree hasn't made them smarter.
And therefore, since income is so closely related to IQ or intelligence scores, it has made them smarter, but it has put them heavily into debt, and it's had them out of the workforce for a couple of years, so it's very bad overall.
In fact, there are studies that show that if you take a course in economics, your knowledge of economics a couple of years later is worse than people who've never taken a course in economics.
So remember we talked about the MBA drafting short, obese people.
The lowering of average dynamic in the MBA example might explain the well-documented phenomenon of grade inflation, the continual rise of average grades.
Look, just like in the Atlanta school system, everyone's doing better!
One study titled, where A is ordinary, oh wait, that's Canadian verbal tics, found the following, quote, contemporary data indicate that on average across a wide range of schools, A's represent 43% of all letter grades.
I mean, sorry, an increase of 28 percentage points since 1960 and 12 percentage points since 1988.
D's and F's typically total less than 10% of all letter grades.
I mean, I got an A in my...
A final master's thesis.
I mean, that was an unbelievable amount of work.
The researchers concluded, quote, The gradual creep of grades wouldn't be so significant except for the fact that it has been so long-lived.
When A is ordinary, college grades cross a significant threshold.
Over a period of roughly 50 years, with a slight reversal from the mid-1970s to the mid-1980s, America's institutions of higher learning gradually created a fiction that excellence was common and that failure was virtually non-existent.
The other thing, too, like, if you can't fail students and if you can't weed out It's intellectually inferior students.
And this doesn't mean inferior.
I mean, everyone's like, as soon as you say, like, if I say shorter, people understand I'm not saying worse.
It's just shorter.
People who aren't as smart, not bad people, fine people, nice people and all that, but, you know, just not, don't have the aptitude, right?
And you get a different kind of teacher.
The teacher who has to aim to the middle or a slight below the middle is a different teacher than one who can aim to be at the very highest level of intellectual achievement and challenge.
The evolution of grading has made it difficult to distinguish between excellent and good performance.
At the other end of the spectrum, some students who were once removed from school for substandard performance have, since the Vietnam era, been carried along.
America's colleges and universities have likely been practicing some degree of social promotion for over 40 years.
Social promotion is you just...
Like, when I was a kid, you could get kept behind a grade.
And social promotion is you just get promoted with your peers no matter what, and the next...
Teacher can deal with the problem.
To continue the quote, Evaluation has become so flawed that employers, graduate students in professional schools that try to use grades to identify outstanding prospects are likely often engaging in a futile exercise.
Increasingly, they have to rely on standardized tests to make evaluations of student talent.
Now, the other thing to remember, of course, is that when more people graduate with degrees, each degree becomes less valuable.
When a degree was, you know, 5, 6, 7, 8, 9% of the population, a degree really meant something, because the people who couldn't cut it would get drummed out.
But now, when everyone goes to college and everyone gets an A... It becomes far less valuable for the smart people who would have gotten an A in a really difficult course set.
They're blended in with all of the dunderheads, and therefore employers just throw everyone out as far as that goes.
Ah, critical thinking.
Really, the cornerstone of what I'm trying to achieve in the world is to promote critical thinking, or as it's colloquially known, thinking.
A study of 66 U.S. colleges, amongst which were prestigious institutions like Stanford, Caltech, UCLA, and UC Berkeley, found the following, quote, though the overwhelming majority of faculty claimed critical thinking to be a primary objective of their institution, 89%, Only a small minority could give a clear explanation of what critical thinking is.
Oh, it hurts.
It's the most important thing we do here.
What is it?
I have no idea.
You're fired!
To continue, furthermore, according to their answers, only 9% of the respondents were clearly teaching for critical thinking on a typical day in class.
But when you're getting a bunch of chatterheads who've gone through terrible government schools and who are only preparing for your class five hours a week or five hour a week for all of the classes, critical thinking would basically be a neutron bomb in your classroom.
You must learn how to think critically or you can't stay in this classroom.
Echo!
I listen to Freedom Aid Radio!
You can stay!
Quote, though the overwhelming majority, 78%, claimed that their students lacked appropriate intellectual standards to use in assessing their thinking, and 73% considered that students learning to assess their own work was of primary importance, only a very small minority, 8%, could enumerate any intellectual criteria or standards they required of students or could give an intelligible explanation of those criteria and standards.
Learn to think for yourself.
What does thinking for yourself mean?
I have no idea.
And thus endeth the Republic.
When asked how they conceptualized truth, a surprising 41% of those who responded to the question said that knowledge, truth, and sound judgment are fundamentally a matter of personal preference.
Or subjective taste?
Oh, you relativists!
Oh, I just want you to take your soft brain curds up against the cheese grater of the free market and fall apart.
Oh, you relativists!
It's like going to medical school and saying, well, the important thing is to cure disease and promote health.
What is health?
I don't know, whatever you want it to be.
What is disease?
I don't know, whatever you like.
There's no objective definition of good or bad or right or wrong or cure or disease or anything like that.
It's like, then you're basically a giant Cuisinart blending up the brains of potentially intelligent people and turning it into general statist mush.
You ass clowns.
Get out of the way, you sophists!
Ugh!
It has been estimated that the average GPA of US students is rising at a rate of 0.15 on a 4-point scale every decade.
It's a brain miracle!
Video games are super!
If this trend continues, practically everyone would be receiving an A for excellence by 2050.
This kind of equality would likely be ideal for certain types of Marxists, but it's certainly divorced from reality.
Yeah, somewhat like Marxism itself, or should we call it Marxism, with an RK. You know, the idea...
I'm still going to pump this idea.
I wrote an essay as an undergraduate.
At Glendon College, part of York University, I wrote an essay called Marxism, where they said, look, everyone who's a socialist should donate, you know, all of their marks into a common pool, like their grades, right, on a 1 to 100.
Everyone who's above, say, a 65 should donate all of their marks to a common pool, and then anyone who's under 65...
Could take those and get their own marks.
So everyone ends up with sort of a 65 and a 66.
I put that forward and of course all the Marxists were like, but then I wouldn't get into grad school!
Yes!
So if you don't want to give up your marks, don't call yourself a Marxist.
Because the same with money later on.
What's interesting is that the grade inflation is particularly rampant in the field of education, where future educators are trained.
There is some pretty significant evidence that the ultimate chowderhead congregation factory is the education department, which takes a lot of the lower performing people to become teachers.
Researchers have found that, quote, education departments award exceptionally favorable grades to virtually all their students in all their classes.
Ah, students and education faculties have an average GPA of 3.7 to 3.8, which is exceedingly high compared to other faculties.
Because they're so smart, you see.
It's nothing to do with inflation.
The everybody is a winner postmodernist principle seems to apply to teachers first and foremost.
As one professor noted, ultimately a sizable fraction of the workforce in the education sector is trained in education departments where evaluation standards are astonishingly low.
Well, that's true.
So in summary, not only are students awarded higher grades for less work, but they're increasingly more likely to be taught by mediocre teachers who weren't held up to any standards themselves.
It's a vicious cycle.
It's not what it used to be.
There's lots of causes for the declines in standards.
An increasingly media and video game driven culture, a lack of conversation, a lack of two parent families where quality conversations are easy to have at dinner time.
The fact that you cannot fire teachers, which began in sort of the public school level.
The fact that you cannot fire teachers, which sort of began around the mid 1960s, has also meant that more chowder heads and flotsam and jetsam and deadwood are filling up the educational arteries of the future.
But one cause for the decline in standards that most researchers who like their jobs ignore is affirmative action policies.
So let's run through this.
A 2009 study found that on average, Asians need much higher SAT scores for those outside the US, those standardized tests to figure out your aptitude for college.
Asians need much higher SAT scores to enter elite private institutions compared to whites and particularly blacks and Hispanics.
So this is a score where ultimate super geniuses, doubtless played by Travolta, can make 2,400 is the maximum possible score.
Harvard and Princeton undergrads have an average of 1,505 in their...
So we're basically talking about a score of 1,500 or so.
Asian applicants would have to score at least 140 points more than whites to get in.
They need to score 270 points more than Hispanics and 450 On a roughly 1500 scale, they have to score a third higher than blacks to get into college.
So in other words, an Asian needs 1460, whites need 1320 or 10% and change lower.
Hispanics only need 1190, which is minus 22.7% from Asians, and blacks need only 1010 on this score, which is minus 44.6%.
That is really quite shocking.
One of the reasons why this discrimination against Asians exists is to avoid their over-representation in the student body.
Since Asians and whites have much higher SAT scores than blacks and Hispanics, they would dominate the more elite and selective institutions.
And of course, before everybody rushes to, oh, it's culturally biased and blah-de-blah, it's not the answer, because Asians, even coming from other cultures, score much higher.
So it's not that these tests are somehow culturally biased.
This means that in the U.S. higher education, intellectual ability is selected against, and educational standards naturally decline to accommodate students who are less intelligent or less capable.
These findings have even prompted a recent lawsuit against Harvard.
It's not clear whether the legal action would succeed, let alone carry any weight.
It's a bunch of Asians saying discrimination.
Now, this, of course, you could say, well, the SAT has nothing to do with success in college, but unfortunately it does.
At the flagship University of Colorado at Boulder, test score differences between black and white students have been more than 200 points, right, the SAT scores.
And only 39% of black students graduate compared to 72% of white students.
So the blacks do worse in the SATs and graduate a little more than half of the time.
Meanwhile, at the University of Colorado at Denver, pretty much across the street, where the SAT score difference was a negligible 30 points, there was also a negligible difference in graduation rates.
50% for blacks and 48% for whites.
So where you close the SAT scores, in other words, when you don't racially discriminate for SAT scores, more blacks graduate.
Yay!
That's wonderful, because smart blacks should have every opportunity compared to smart everybody else.
Now, racial preferences, racial discrimination in SAT scores was ended in California.
And of course, there was all this hysteria.
Oh, blacks are going to be kept out of higher education.
And it's not true.
And we've got this sources, Tom Soule, who is a fantastic economist, happens to be black, but who cares?
Recently, the fact has come out that there are now more black students in the University of California system than there were when racial preferences and quotas were ineffective.
The same is true in the University of Texas system.
So when you get rid of affirmative action or racial discrimination, you end up with more blacks in the system.
And this is evident to anybody with any brains, that if you let less intelligent minorities into the educational system, the smarter minorities find their degrees are worth less because employers can't tell who is who.
The parallels with the housing crash, you lower standards, and in both cases it happened to be largely for minorities.
You lower standards and you fundamentally change the entire system.
You degrade the quality of what the education people are receiving.
The education becomes much less valuable.
You create an entitled class that politicians are afraid of and therefore will continue funding and funding and funding.
You've got to think of the student loans are bailouts for the professors in the same way that you had bailouts for the bankers.
There are way too many professors and way too much higher education.
There should be on-the-job training.
There should be online training.
I give away all my stuff for free.
I certainly appreciate donations if you find the information useful.
But this is a bubble.
It is a bubble entirely funded by lowering standards and government subsidization just as it was in the housing market.
And the people making the bad decisions are making good decisions relative to these massive subsidies.
These massive subsidies will end at some point There will be a crash and there will be a much more rational allocation of resources.
One of the reasons why income has not grown is a lot of people are being stuck into liver-destroying, socially fun and economically disastrous pseudo-intellectual non-campuses that used to be producing very intelligent and skilled people and now are producing people who aren't any smarter and who are heavily in debt.
Now, governments like that because they like people who are heavily in debt because they don't tend to rock the boat.
They tend to be ground down and worried about their debt rather than seeking any kind of social change in reality.
And so you've also increased the amount of propaganda that people are being subject to because propagandists don't tend to actually add value to somebody's critical thinking, right?
Businesses want people who aren't propaganda robots.
They want people who can think critically and challenge paradigms.
That doesn't What can happen when you have government funding in universities?
You can end up with these little leftist and Marxist enclaves that I had to battle through, through undergraduate and graduate school, because they don't have to produce people who can think.
Most people who go into higher education, particularly master's level and beyond, what are they aiming to do?
They're aiming to get a job in higher education!
And so they have to conform to whatever the standards are in higher education.
Conformity rather than critical thinking becomes the hallmark of what is considered higher education.
In other words, you're taking your most intelligent, most creative, most capable people, and you're shredding their brains and forcing them to conform in order to get a job in higher education.
And those jobs are so fantastic.
You get paid $150,000, $175,000 or more a year.
And you only have to work a couple of hours a week.
You get sabbaticals.
You get three or four months off in the summer.
I mean, these are plum positions for lazy, entitled sophists.
And you're turning all of the intelligent, creative, energetic, challenging, revolutionary thinkers into these soft, padded, end-of-the-movie, wall-y, round-bottom weeble heads who can't think their way out of a paper bag but can snarl at anyone who can.
You're destroying the intellectual foundations of the very freedoms that have created the wealth that have allowed for these horrible subsidies to continue.
Who knows when the bubble will burst?
I mean, the government's intervention is at its core, so it's going to come down to a lot of politics and some eventual economics.
What's going to happen?
Well, when the stock market crashes, or when the stock market and the housing market crashes, it's going to be similar to how it's going to play out in the education.
The eyes of employers' degrees are going to lose a significant amount of their value.
Many institutions that granted those degrees are going to go bankrupt.
And a lot of people are going to be left in debt.
And memories of the endless partying and the fun that they had in their early 20s.
Footnote.
Fun assumes you are not accused of rape by some crazy feminist.
While in general it is reasonable to weigh the pros and cons of a particular decision equally, given the current educational and political climate, the negative aspects of getting into higher education should be significantly emphasized relative to some of the positives.
It's common for young people these days to assume, I get a college degree and I'm going to have it made.
The data suggests that...
You've got to be really skeptical.
My position is that I would say not getting a degree is the default, and that I'm going to do a research to try and justify why getting a degree is going to be worth it.
Like, I don't want you to end up in a situation...
I was reading about this guy.
He's 70 years old.
He's still paying off his student debt.
I don't want you to end up in a situation where you can't get married, where you can't have kids, where you can't have a house, where you lay awake all night wondering how you can pay $400 or $500 or $600 or $800 a month forever when jobs are scarce in your field.
Be skeptical.
You can do fantastic things with your life if you're smart.
And I'm not sure that you really, again, this is outside the fields where a degree is necessary to enter.
But I'm not sure you want to work for an unimaginative, cover-your-ass kind of boss who will only hire people who have degrees.
When I was a hiring manager, I would certainly go to people who had degrees and I would talk to them and so on.
But what I cared about was were they passionate about the field?
I hired a guy with no education in computers at all, but who'd been building computers since he was 12.
Because that kind of passion...
Shows me that the person is going to really go the distance and is not just in it for the money.
And I had a guy with a PhD in computer science who was absolutely terrible at what he did.
And I had a kid who was a stone genius at this stuff who didn't have any formal education at all.
You look for quality.
You look for intelligence.
You look for passion.
If you're a smart hire and people loved working for me and I loved working with people and I don't want to sort of extrapolate my experience into things as a whole, but if I were looking for a job these days and if somebody said, you have to have a degree, that would just be a completely unimaginative and boring place to work where risks would not be tolerated and therefore progress would be eliminated.
So, you know, be an entrepreneur, find your friends, sit down, come up with some plan, and try and work it out and try and get it moving.
The barriers to entry to creating stuff these days is much lower.
You don't need to build a factory to make a piece of great software product or even hardware these days.
So, be careful about higher education.
You know, the myth has floated down from the past when it was worth a lot more.
Now, it's a giant generic soup of low-rent chowderheads all over.
Having sex and drinking and that's fun, don't get me wrong, but is it worth a quarter million dollars of your lifetime and energy and effort?
I'm not sure that it is.
You can still do that stuff when you have a real job.
So just my thoughts.
Please, of course, give me your thoughts and comments below.
I will have a look at them.
Give me your thoughts and experiences.
Share where you think I'm right, where you think I'm wrong.
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