Bram Berkowitz sees the student loan debt crisis spiraling out of control, and he believes we must restore value to the college degree to avoid another financial crisis.
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With the issue of the student loan debt crisis now a perpetual theme in today’s media, I sat at my computer one day sifting through articles, trying to make sense of yet another colossal meteor heading straight for the US economy. The student loan bubble currently plaguing the young adults of America is a bubble so big, that many believe it to be on the brink of collapse. Students have accumulated over 1 trillion dollars in student loan debt, risking everything to get their college degrees.
Unfortunately, the high-risk students are now forced to take is failing to produce high rewards. In the present day, qualitatively, our college degree is no longer valuable to the employers we seek employment with. In fact, the value of the college degree has plummeted. Students are struggling to land jobs, and the lucky ones that do find entry-level positions are being compensated in kibbles and bits compared to the cost of living, and the number of hours they are working.
The media believes the main problem lies with the financial situation, pointing to the fact that it dangerously resembles the housing market bubble pre-2008. While housing prices had seemed invincible, they were actually way overvalued. This deceitful depiction of the housing market was eventually unmasked, revealing the risky and crazy activities big banks had participated in, leading to defaults and foreclosures on a massive scale, resulting in a lack of confidence throughout the stock market.
The media’s argument is hard to deny. We have the college degree; a piece of paper that’s cost has soared throughout the years. Statistics from the labor department show that college tuition has grown by nearly 80% between 2003 and 2013. This growth doubles that of medical care, a scary thought considering we have spent the last six years trying to address healthcare reform. Yet, as the price of going to college has skyrocketed, some universities charging well above $200,000 dollars, returns on investment has not. And on top of everything, Lenders like Sallie Mae are still lending to anyone and everyone, the cost to attend college continues to increase, and the interest rates on student loans are threatening to go up as well.
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Politicians like President Obama and Senator Elizabeth Warren have tried to combat the issue by introducing bills and executive orders that would cap monthly loan payments, forgive unpaid debt after 20 years, and potentially refinance interest rates on standing student loans. However, even if all of these measures could pass through the pathetically sluggish institution known as congress, the enormity of the trillion-dollar debt would surely swallow the savings any of these efforts are likely to produce. The main problem at hand is still not being addressed, and it is easier to fix than trying to pass a bill through congress.
The logical answer is to make sure that every investment in a college degree is a worthy one, and not in the junk like form of the subprime mortgages and collateralized debt obligations that ruined the housing market. Employers need to once again equate a college degree with the skills needed to succeed in the job market.
The government has told us that unemployment is down around the 6% level, more or less right where it should be. Jobs are out there; us college graduates just need to figure out how to access them.
Today, the main purpose of college is to get a job. You pick up a lot of other skills along the way: learning the dos and don’ts of alcohol, public speaking, and being independent just to name a few, but the main purpose is to prepare you for the real world. Anyone who says different is probably full of shit or has more money than they know what to do with.
The first main problem with today’s college degree is that everyone has one. They’re not special. And what is even worse is that the performance statistics that back a college degree no longer have meaning. That’s right, I said it. The grade point average that judges a student’s college performance is meaningless. 2.5, 4.0, 3.6, who cares.
And to confirm this, none other than Lazlo Bock, the senior vice president of people operations for Google, also known as the person who runs Google’s hiring process. Bock has been quoted in the New York Times on multiple occasions. Once he said “Your college degree is not a proxy anymore for having the skills or traits to do any job.” And another time he noted that “Google had determined that “G.P.A.’s are worthless as a criteria for hiring, and test scores are worthless.”
Nice job Bock because college students across the country are praising your words. Now they can go out five times a week instead of four because why study, when the head of recruiting for one of the biggest companies in the world just determined your degree and GPA is worthless. I wonder if there is any correlation between the devalued Grade Point Average and worthless college degree? Hmmmmmm.
Well just to play devil’s advocate, I am going to go ahead and disagree with Bock, at least in a literal sense. Literally, college degrees have never been worth more. As I stated, some well over $200,000 dollars. But money is not the only investment. Young Americans are putting more time into their undergraduate educations than any other generation before them in the form of internships.
Looking at my alma mater, Syracuse University’s highly touted S.I. Newhouse School of Public Communications, the career center has said the average Newhouse student graduates with three internships. Over at the Whitman School of Management, home to my second major, without an internship, now a requirement in the curriculum, one cannot graduate.
I myself am on internship numero four. And while each one has been a vital part of my professional development that I consider lucky to have, I have definitely lost some vitamin D in the process. And although laws are supposedly starting to set some ground rules for internships, they certainly have not stopped the widespread of internships to younger demographics. At a student send off I attended last year, incoming freshman had already begun to throw away their precious summers, many of them completing internships in high school. And why not, according to a recent survey by the National Association of Colleges and Employers, 57% of employers prefer applicants who have experience from an internship or co-op.What does this mean? For one thing, students are going to be completing internships at younger ages than ever before. China better watch out because they are no longer alone in sending their kids to the factories. Have no fear; corporate sweatshops are on the way. Only difference being that the American kids will wear a suit and tie to work instead of an apron and respirator.
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We have to find ways to re-align the college degree with employment—and this should not be hard. Let’s once again make the GPA a measurement of one’s performance in college. That way kids can actually be compared to each other, and companies can clearly see flat out who is better. But for this to happen, first, the endless amount of inflated grading going on at universities needs to stop. Currently, all over the country A’s are being handed out like condoms at a university health center. In 2013, Harvard professor Harvey C. Mansfield was shocked to hear from the dean of undergraduate education, that the most frequent grade given out at Harvard was an A. Last year, in the Whitman School of Management at Syracuse, to fight this problem, they started curbing classes to allow only 33% of a class to get an A. Can you imagine the number of A’s being given out before hand? But honestly, good for Whitman, at least they see the problem and are serious about correcting it.
But even more so than just getting rid of the quantitative easing approach professors have embraced when grading, a student’s GPA needs to be based off a curriculum that translates to how one would perform at a real job. This way, employers can clearly see how one would do if they were ever employed at their company.
Skeptical? Here is how it would work: Universities would change the curriculum so it taught skills companies wanted their new recruits to have. For example, Bock said the main skill he looks for in students “is general cognitive ability — the ability to learn things and solve problems.” So we change the curriculum to make every freshman take a class specifically to test this exact skill. Bock would then be able to see to what extent kids had general cognitive ability. Maybe companies could even assist colleges to help make the curriculum.
Unfortunately, this is not how life works. When there is money to be made, common sense is forgotten. As former contributing editor of Rolling Stone, Matt Taibbi cites in his article on the subject matter, ‘“the check on crappy schools and sleazy “diploma mill” institutions is essentially broken thanks to a corrupt dynamic similar to the way credit-rating agencies have failed in the finance world. Schools must be accredited institutions to receive tuition via federal student loans, but the accrediting agencies are nongovernmental captives of the education industry. “The government has outsourced its responsibilities for ensuring quality to weak, nonprofit organizations that are essentially owned and run by existing colleges,” says Carey”’.
This definitely would explain why students continue to sit through an outdated education. We have the head of Google recruiting telling the world up front what he looks for, handing it to us on a silver platter, and yet no institution in our education system wants to look up. SMH.
But on the real, for anyone who has recently graduated, it is hard not to question certain parts of the education we receive. While I have valued from mine, I see the wrong classes being offered and enforced in one’s curriculum.
One of the more valuable classes I took at Syracuse was good ole’ Economics 203 (intro economics) with Professor Evensky. Does he remember me? No. Did I fall asleep once in a while during his Friday class? Absolutely.
More importantly though, Professor Evensky took basic economic theories and broke them down until he was teaching the material using M&Ms. And after I took the final on the last day of the semester, I opened up the New York Times and could understand a Paul Krugman article.
And right there, that is a great class! It taught me how to understand a part of the real world, part of the economy. Sadly, I am not sure that everyone is required to take this class. Some kids even leave college with no understanding of how our economy works. They do not understand something that can so easily affect their lives in such a drastic manner.
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Universities are not trying to guide students to the parts of our job market that are blossoming. They do not seem to understand the fact that certain majors and certain fields are just begging to grow. A recent Wall Street Journal article discusses Jerry Schill, owner of a landscaping business, who is turning away business daily because he cannot grow his company. Jerry cannot find people with landscaping and management experience, and he is offering 75k starting salary with benefits. He says no one seems to have the skill.
Am I saying go become a landscaper? Not necessarily. I am simply alluding to the fact that yes, of course there is a lot of structural unemployment. However, the universities should be the main resource to fix this. Instead of promoting marketing, business, communications and psychology, they should be strongly advertising the STEM (Science, Technology, Engineering, and Mathematics) fields.
In a US news report from 2013, 8 of the top 10 hot college majors leading to jobs were STEM majors. Also, a Stanford University conference predicted 1.4 million computer job specialist openings by 2020. This leads us back to several questions: Why is every college freshman not forced to take an intro engineering or coding class during their freshman year, just to try it out. Why are they not educated about the gold rush currently transpiring in our job market?
I have seen many students go into Accounting or Finance for two main reasons: job security and pay. But these students don’t realize that STEM related fields are spawning even better results in these categories. At Syracuse, the school of information technology is producing jobs with the highest salary out of the university. The funny thing is that when I was a freshman at Syracuse, rumors said applying to the iSchool gave an application the best chance of getting admitted to the university. Well, the joke is on us now as we watch our peers in the iSchool thrive in today’s job market.
Colleges all over the country should have a common goal: move kids into STEM majors. Right now, certain job fields are too congested. When a field is congested, a simple supply to demand imbalance shifts power to employers.
Because there are so many students to pick from, it becomes extremely difficult for one to stand out or show a competitive advantage over their peers. This problem essentially makes everyone replaceable, allowing companies to keep salaries and wages low. If one recent graduate chooses to turn down an offer, it is not an issue because there is another one only a phone call away.
Now if we could shift some of the marketing and psychology majors over to STEM fields, we could solve a few problems. For one, businesses would be able to find people with the right skills allowing them to grow and improve profits. And two, congested fields would free up, giving potential employees and recent graduates more value, and therefore higher salaries.
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The last big factor keeping the college degree in utter decline is networking. Networking has two sides to it: good and evil. Good networking is when one person reaches out or is connected to someone they do not personally know, and asks for help. In this process, the person reaching out has to prove their character and potential value. This side of networking is great because it allows people to help each other out, which is important in today’s world.
Then there is the dark side of networking where jobs are systematically handed down to people without evaluation. This type of networking is the loophole in our job system that encourages slacking off in school, inhibiting a student’s ability to get the proper training he or she needs. Why would any student have the incentive to study for a test or care about GPA when they already know they have the hook up?
According to a report from ABC news, 80% of today’s jobs are landed through networking. Everyone knows that the best people you can network with are your family. The people who love you most are naturally going to work the hardest on your behalf. So to put it bluntly, the more powerful or rich your family is, the better the job you can get out of college.
Don’t get me wrong, I have great parents who have given me every opportunity, and yes of course I have participated in networking. However, if you have attended a private university recently, you do not need to see a statistic to understand what I am referring to.
It is surprising when I hear people ask why the wealth gap in America is so lopsided. To me, it’s obvious—the rich hand down the best jobs and opportunities to their own. To an extent, it has always been this way. Old money from Ivy League schools will never stop flowing. I am not that naïve, but networking is more of a problem than it has ever been before. Who you know has become more important than the skills you have or the work ethic you possess.
As I enter my third month in the real world, I see that people were not kidding. The job market is tough, no doubt. The money most of us make cannot keep pace with the cost of living. In approximately three short months, I hit that illustrious benchmark in my career that every college student dreams about; the sixth month after graduation, or as recent grads know it, the time we start making payments on our student loan debt. Lucky for me, my debt is manageable and not out of control. However, some face the likes of 50k or 100k+ in debt, and will surely start to feel the stress of the burden.
Looking at the crisis, it is hard to think that the debt will go away. One trillion dollars does not usually just disappear, and while refinancing and capping current student loans would help, it is only putting duck tape on the pipe leak.
College tuition prices continue to rise as schools spend more and more on tenured professors and state of the art facilities they don’t need. With the problem already out of control, the best thing we can do is help current and future students by making their investments worthy. Allowing their college degrees to generate a return on investment that will pay off their student loan debt and allow them to put money into the economy. But for this to happen, a college degree can no longer be just a piece of paper. It has to become a certified insurance policy on a student’s ability to succeed in the job market.
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Photo: weeklydig / flickr
Thanks for commenting Evan. I agree, changing the system in place at institutions of higher learning is no easy task in this day and age. But in my opinion, tenured professors are not the main problem. University presidents and donors need to understand that people cannot pay back their debts because they are having trouble finding jobs after college. Unemployment is especially high for recent college graduates. Once upon a time, when college was affordable, it was acceptable to say that you paid to go to college to learn “how to think”. Although colleges still teach students “how to think”,… Read more »
The essence of the entire bubble trickles down to the two major aspects of our education system: the grading and the curriculum. Agree with what you said about both. The curriculum has to be thoughtful and practical. Then put every student on a freakin’ bell curve. It’s the most efficient way to start making improvements. But none of it is that easy when you factor in the checked out professors on tenure. It’s on both sides.