Is college a debt-fueled asset bubble?

President Obama wants to see the number of people with college degrees increase by 50 percent. Unfortunately, the attempt to get to that goal (through various taxpayer subsidies and public encouragements) could easily lead to wasted taxpayer funding, unnecessary personal debt, and wasted years.

Take for example, Amanda Magnus, a young woman profiled by Richard Vedder in a guest column he wrote for Forbes magazine. Magnus did get her bachelors degree, but now she has  a debt of $50,000 and few prospects for a good-paying job. Multiply that situation by thousands of graduates across the country and you’ve got a problem.

But at least Magnus has a degree; for every five students who start a four-year degree, only three finish within six years. What of the others? Most likely they never earn that degree–and quite possibly end up with a lot of debt.

This situation would be bad enough if the problems were simply confined to thousands of personal stories. But the debt incurred by college non-graduates (or even college grads who can’t get work in cinema or journalism, such as Magnu) robs the economy of valuable investments in businesses or even consumer purchases.

Even though students are taking on an increasing amount of legal responsibility through taking on more and more loans and receiving fewer grants, college imposes financial costs on society. This prompts Vedder to ask, “Why should society subsidize people to go to college for five or six years in order to take jobs requiring at most a high school education and some on-the-job training?” We might be witnessing, he warns, a “debt-fueled asset bubble.”

As someone who has not one but two college degrees–and liberal arts degrees at that–it pains me to say that Vedder is onto something. College has become an expensive screening device, a signal to employers that a person is willing to put up with a certain amount of work and discipline to get a degree.

As some people–including my professors–would say, the measure of a college education isn’t merely any extra money that a person might earn throughout his work history as a result. And they’re right. A college education can result in a person receiving the benefits of the examined life, wrestling with important philosophical questions that can’t be captured by dollars and cents.

But at some point, we–that is, policy makers and the citizens at large–need to question the utility of public subsidies to such pursuits.

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