Paying Up

Beth Akers, senior fellow at the American Enterprise Institute, joins The Remnant for extreme wonkery ...

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Beth Akers, senior fellow at the American Enterprise Institute, joins The Remnant for extreme wonkery on student debt and the economics of higher education. Why have the Democrats become so fixated on the issue of forgiving student loan debt, and can a moral argument be made for forgiveness? Furthermore, are most graduate programs pointless? How can we fix America’s universities? And can anyone match Jonah’s raw disdain for journalism schools?

Show Notes:

– Beth’s page at AEI

– Beth’s first book, Game of Loans

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  1. DocHeartless

    You know how astrophysicists make fun of their colleagues that engage the public and "dumb down" their science so that it is palatable and *gasp* interesting for the layman. Yeah, economists have that same problem. Beth Akers is the Stephen Hawking of Neil d T of the economics world, I've decided. More from her, please! No disrespect to Brian Riedl, but I'll take Ms. Akers every day of the week and twice on Sunday over him. I felt that I came away with a firm grasp on a difficult topic. Set her on the path for two gold jackets, please!

    On a related note for another great guest, I was listing to Andrew Yang's forward podcast the other day (not bad, btw) and he had on 26 year old Coleman Hughes. This guys is amazing, and far too young to be this smart. I was hooked when I heard about his April fools tweet, "I'm happy to announce that Ibram X. Kendi has finally agreed to debate me!" but he is fascinating and wildly enjoyable to listen to. The Dispatch crew would love him.

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    Brendon

    Hi Jonah, Great podcast. As a 14 high school math teacher I just wanted to confirm your hunches about the whole educational credentialing apparatus that she acknowledged but didn't embellish on. I also wanted to comment on the Nathan Glazer quote you mentioned on your podcast about a month ago and that John Podhoretz mentioned no his Commentary podcast a few times as well.

    So, as you said, the way it works with public school teachers is a sort of scam. Our district offers a salary matrix (established by the union negotiated contracts with the district) that allows you to move steps and lanes. The lanes move each year you stay and the steps change based on whether you have completed a Masters, a Masters +15, Masters +30, etc...where the number after the plus indicates how many graduate credits you have acquired since the masters. Our district a few years back added in a +75 step beyond the +60 step. Naturally, most older teachers raced to that step by taking courses to get that pay increase.

    So what courses can you take? Well, this will give you an idea of what teachers can get away with and how multiple entities are sort of "in on it" when it comes to this scheme. There is an online university located in California that offers a graduate course in which you can acquire up to 6 graduate credits in a summer, depending on how much money you pay. The course merely requires you to work on anything you want to do to prepare for the upcoming year and log the appropriate number of hours. Then you have a 15 minute exit interview in which you share your log and "evidence" of your work, and the interviewer barely looks at what you have completed. What's more, the university changes the name of the course each year so that the HR personnel who approve these graduate courses in school districts don't really know that you are racking up credits by doing the same thing each year. So one summer it's called "Engaging all Students" and the next year it's called "Teaching for all Learners" etc...So it's a total scam that completely benefits teachers while not actually contributing much to their effectiveness in the classroom. (Also, many school districts offer tuition reimbursement up to like 1000 dollars so the courses end up being free in the end.). So you are spot on with what is happening, and your hunch that teachers unions have found a way to rig the system in their favor while constantly insisting that they aren't treated fairly is also totally accurate.

    I could go on but I'm seeing this post is getting long. Briefly, my comment about the Nathan Glazer quote refers to the way in which in the 60s municipal governments decided to stop focusing on what they COULD do well (pick up the garbage, stop crime, plow the streets..etc) and then turn to the more lofty idealistic goals that no one knows how to do (end poverty, end inequality). A analogous phenomenon has occurred within education in that it's no longer enough that I merely teach precalculus, calculus, computer science, etc... but we need teachers to do that things that no one really knows how to do at scale: develop Social Emotional Learning Skills, make students Anti-racists, make students have more grit...etc..

    Been a big fan for years, thanks for all you've done.

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  3. Clinton Smith

    There were a few important WHIFFs in this podcast:

    Akers left out that pay as you earn as currently constituted can gravely hurt borrowers. To wit: if the CALCULATED payment by the government (i.e., based on payers income) is LESS than interest on the principal, then the principal balance grows as interest is compounded in. Secondarily, when the balance is forgiven after 20 years, that's a taxable event by IRS as ordinary income (debt cancellation). So it's actually possible that a borrower could end up with a tax bill equal to the original balance owed.

    Why wasn't bankruptcy brought up as a means of cancelling debt? It's done everywhere else in the economy...

    Other reform ideas include Universities co-signing loans, escrow of payments, etc

    Also, Harvard and Princeton already use their endowments to ensure no student needs to take out loans. They've been doing this for about a decade now.

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    Ethan Cordray

    I think there's a lot to be said for reforming the federal financial aid system, for getting more kids to consider non-college career tracks, for making the existing loan forgiveness methods simpler and less dysfunctional, etc. This was a good podcast.

    But I think the core of the problem is more fundamental: we group too many disparate things together under the label "higher education," and expect a single model to do all of them.

    I live in a state university town. The university is *so many different things.* It does basic remedial education for kids who never really learned anything in high school. It does "liberal arts" education for kids who want a well-rounded intellectual life. It does intense technical instruction for scientists and engineers. It does easy ticket-punching credential degrees for middle-class professions. It does all of the vague politically-oriented "studies" programs for the liberal advocacy class. It does the fraternity/sorority social networking stuff for the offspring of the petit bourgeoisie. It does agricultural research. It does the "American educational experience" for the kids of privileged Chinese families (the moderately-privileged, not the extremely-privileged; it is a state school after all). Oh yeah, and it also manages two extremely profitable quasi-professional sports franchises.

    There is no rational reason why a single organization should be doing all of these things. And simply by the nature of the problem, it is incapable of doing them all well.

    Why should a Master's degree in chemical engineering come from the same place that a Master's in English literature come from? Let alone, why should either degree come from the same place that trains future NFL players?

    We think of "higher education" as being one thing, but it's actually dozens and dozens of different things, often competing with one another within the same institution -- literally competing, for budget levels.

    If we could disaggregate these things, maybe we could do a better job of letting each one be the best type of thing that it is. Don't expect poets to pass calculus. Don't defund the history department to build a football stadium. Let different things be different things, and let them flourish (or not) on their own terms.

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    Whitman H. Brisky

    It seems to me that a better model for higher education is to have more "trade school" type courses, maybe in conjunction with community colleges, where students would get educated/trained for a career. It might be combined with a two year course for students to get a taste of more traditional higher education, and in some cases catch up to where high school graduates ought to be. Traditional liberal arts college education could be pursued while working, likely over a longer period. Those who have the means, and those who are pursuing professional careers (law, medicine, etc.) which require an undergraduate degree would still do so. In the end, fewer people would go to a liberal arts college right out of high school. It would be more typical to pursue that degree while working than it is today.

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    Whitman H. Brisky

    Might a better system for education loans to loan the money to the schools themselves, who will then assume the risk of default by making loan decisions as to their students. In doing so they will have the incentive to make those decisions based on who is likely to repay them and what course of study will prove best at making repayment possible. Schools will be exposed more to market forces and be forced to adjust their tuition, course offerings, etc. so graduates will be able to repay their loans.

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      Ethan Cordray

      Something like that might be an improvement. As it is, schools basically have no financial risk, so they (quite rationally) price their goods to maximize their revenue accordingly.

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    Whitman H. Brisky

    I wonder whether it is really a good idea to subsidize public and non-profit employment through student loans, especially public employee who already have a pretty good deal as far as benefits, job security and working conditions.

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    Marc Frischhertz

    Not that I agree that student loan should be paid off, but the part of the discussion about jobs requiring college degrees seemed a little one sided and over simplified. As an employer, just the fact that a person completed college shows a quality that makes me more likely to hire. Whether the cost is worth it is definitely based on the degree, but successful completion of a 4 year degree is attractive to employers

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  9. Joseph Stevens

    To add to the student loan conversation. I've gone to grad school where our tuition was free and we as students were paid a stipend to teach or if we had grant money for a research assistant position our PI would put us on that so we didn't have to teach.

    Now that all being said many students took out loans as the stipend after fees was only around 16k a year. The general trend was that most students took out 5k a year to pay for living expenses etc. However there were people that abused it. One of my friends got a 20 thousand dollar student loan to pay off his credit card bills. He basically went from 28% apr to a little over 4% and because he was in school, interest would not accrue and no payments were required.

    So when Jonah says why don't we just pay off car loans and other forms of debt too, well we are in some cases but only for people who went to grad school.

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  10. Lylegruby

    Interesting conversation. One thing I’m awfully skeptical about is that she said college tuition keeps going up in price because it’s still a bargain. But why should *public universities* be maximizing profit?

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      Ethan Cordray

      Do you think they're not rational economic actors just because they're public institutions? They want to have as much revenue as they can, just like everybody else.

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      1. Lylegruby

        No, I don't think a state-run institution like a university should be profit-driven. Universities exist to prepare citizens to participate in the economy. Given that these are state institutions, why is it in the best interests of the students or the state to maximize profit and shoulder the students with debt? Wouldn't that money be better spent on business ventures, housing, and kids?

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          Ethan Cordray

          Of course it *would* be better for universities to be high-minded and selfless and not ever worry about money. But university people are people like everybody else, and they make decisions that are in their own self-interest. I'm talking de-scriptively about how universities behave under our present set of incentive structures, not pre-scriptively about how I wish they would behave.

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