Less Draconian Ways to Close the Skills Gap

Jan 9, 2012

Ben Wildavsky’s excellent column in the Chronicle of Higher Education last week examines China’s decision to cut back on degree programs that don’t bear a student good odds of landing a job through an American prism, wondering whether or not the practice is right for the United States. Ultimately, Wildavsky argues that what’s necessary is for a better flow of information to students, so they more fully understand the ramifications of selecting a major. 

It’s a rather timely suggestion, coinciding with an MSNBC article about a married couple—both public law librarians—who struggle to pay down $150,000 worth of student loan debt on their salary. More importantly, it coincides with the release of the new Georgetown Center on Education and the Workforce report, Hard Times, which concludes that the choice of a college major substantially affects employability and earnings, among many other things. It’s an excellent report and a must read for prospective students, their parents, and policy wonks alike.

Wildavsky is right, of course, that the problem is better solved through transparency. Congress recently passed a law forcing credit card companies to show you exactly what the long term ramifications are for paying down an existing balance using minimum payments. Some counties make restaurants put calorie counts next to their menu options. I see little reason why a similar device couldn’t be used for college students selecting their programs of study. It could include factors such as tuition, fees, and other “real” costs of attending school; the typical salary and lifetime earnings of a person earning a degree in that field of study; the likelihood of actually finding a job with that degree; an estimate of monthly student loan payments; and what your net income would look like after typical housing and other non-discretionary expenses at prevailing local rates. 

In fact, here’s rough view of how it might look. For the example, I used an actual private university in California and cobbled the information below from various websites:

Full tuition, fees, board, and other costs of attendance for four years[1]

$231,488

Average financial aid per student for four years

$145,164

Cost incurred directly by student

$86,324

 

 

Cumulative payments on student loans

$194,695.54

 

 

Average salary for students earning a Bachelor’s degree in psychology

$27,000

Average net monthly pay after taxes

$1,780

Monthly student loan payments ($86,324 over 25 years)[2]

$489.17

Median monthly rent[3]

$1,397

Average monthly utility bill[4]

$196

Net discretionary income after student loans, rent, and utilities to be used for groceries, clothing, transportation, medical and dental insurance, other debts, and all other purchases.

-$302.17

 

It’s one thing for a student to say that they love psychology and don’t care about the money. It’s another thing altogether when you show them that they’ll be lucky to be eating ramen noodles for the foreseeable future. You could even make it a web-based tool, allowing students to adjust how much student loan debt they’re going to take on, or where they plan on living after college. If we really want a more market-driven approach to guiding students towards in-demand occupations, showing the stark reality of their choices in black-and-white would likely be a good way to do it. If they still want to take the plunge, mazel tov. The choice will still be theirs to make. But in many other situations, they might see the data and take another path. That’s a good result for everyone, and one that takes very little effort or resources to obtain.

Fortunately, correcting this problem doesn’t require draconian, Chinese measures. A lot of information and transparency to students, combined with a little common sense in public policy, should get the job done. Unfortunately, transparency and common sense are commodities in short supply these days.

 

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