Dec. 7, 2011
Glenn Harlan Reynolds is a law professor at the Universityof Tennessee. He is also the founder of the Instapundit blog. Professor Reynolds has taken a considerable interest in the skyrocketing cost of higher education and the accompanying debt spiral. He wrote about the topic first in a Washington Examiner column in June 2010 (Higher Educations Bubble Is about to Burst) and then again in an Examiner column in August 2010 (Further Thoughts on the Higher Education Bubble). He also gave a lecture on the topic in the Fall of 2010 at the Clemson Institute for the Study of Capitalism at Clemson University (The Higher Education Bubble and What Comes Next).
At its core, Reynolds thesis is simple. He notes that education costs have risen at multiples of the general level of inflation in the economy. Roughly speaking over the past thirty years, U.S. inflation was about 106%; health care costs increased 251%; and, college tuition costs increased 439%. Next, he borrows the economist Herbert Steins maxim that things that are unsustainable, wont be sustained. These levels of excess cost increases for higher education are so great that they cannot and wont be sustained over time.
This weekend, Professor Reynolds, had another column on this topic in the Washington Examiner. Reynold made a couple of additional points. First, he believes that college loan debt should be subject to elimination in bankruptcy. That is not possible now. Related to this he makes the following recommendation:
For higher education, the solution is more value for less money. Student loans, if they are to continue, should be made dischargeable in bankruptcy after five years -- but with the school that received the money on the hook for all or part of the unpaid balance.
Up until now, the loan guarantees have meant that colleges, like the writers of subprime mortgages a few years ago, got their money up front, with any problems in payment falling on someone else.
Make defaults expensive to colleges, and they'll become much more careful about how much they lend and what kinds of programs they offer. China, which has already faced its own higher education bubble, is simply shutting down programs that produce too many unemployable graduates.
Second, Reynolds argues that it may be time for skilled trades to make a return along with a return of vocational education. (As he writes, We need people who can make things, and its harder to outsource a plumbing or welding job to somebody in Bangalore.)
Ultimately, he argues correctly that the skill that is most needed for young workers now is adaptability. That seems to be clearly correct.
Check out the articles and the lecture, they are worth your time if you have an interest in this topic.