Education used to be the mantra for upward mobility. A few decades ago, that was the case. Lately, education is increasingly associated with student debt (approaching $1.7 trillion), and students’ underemployment after graduation. There are 44.5 million student loan borrowers (i.e., one in five adults). 34% of graduates and 41.1% of recent graduates are underemployed. The student debt delinquency rate is 10.8% and getting worse due to COVID-19. For context, during the height of the mortgage crisis of 2008, the mortgage delinquency rate was 11.5%.
Student debt is also affecting low income neighborhoods and Black borrowers in a negatively disproportionate way. Black majority zip codes have double the delinquency rate of white majority zip codes.
The major reasons for this situation are high school counselors pushing college without providing career outcome data, college ranking companies and ease of obtaining student loans. Institutions are another important cause for this situation. 40% of students don’t graduate from public universities within six years. Public universities would have been flagged for dismal performance if they were high schools.
Our Department of Education is also not taking the right steps. It rescinded the Gainful Employment (GE) rule. A few of the reasons given for rescinding the rule are that the Social Security Administration data sharing agreement expired and for profit institutions are not subject to the same rules as other institutions. The remedy is to negotiate an agreement and to extend the same rules that govern proprietary institutions to other institutions as well. Instead of working for that statutory change, GE was rescinded prematurely.
GE data is needed for prospective students to evaluate colleges based on employment rates immediately upon graduation and to measure taxpayer ROI. College Scorecard, an alternative, is being touted as a great tool by the Department of Education, but it is not. College Scorecard does not provide the valuable GE placement data immediately upon graduation.
Many students rely on ranking companies to guide their decisions. These ranking companies are behaving like the subprime mortgage debt rating companies before the Great Recession of 2008.
The ease of obtaining student loans guaranteed by our federal government removed the incentive for colleges to be responsible. Colleges should be made to have “skin in the game” by ensuring that they guarantee the loans and pay up if the person defaults on the loan. Also, public university administration salaries grew disproportionately from in 2010 to 2019 while graduates struggled.
Colleges should be tasked with 96% employment of their students upon graduation. This might seem outrageous, but we hold our government accountable if the unemployment rate is high. In the same way, we should hold colleges accountable since they get money from federal, state and local governments, as well as parents, students, alumni, banks, non-profits, foundations, scientific institutions and charitable organizations. Colleges should also publish a link to their career services graduates' job statistics in a prominent location on their website home page for the sake of transparency.
College education is not serving the market. This is why few companies are changing their policies to not require a degree. Google went as far as saying that a college degree is not required for certain positions and offers IT Certificates, and took steps to not require a degree for many positions. Ernst and Young UK dedicated a page to how to succeed without a degree. Colleges need to take the industry trends into account when they design their curriculum to gain support from businesses.
We need to have high school counselors provide career outcome data so that students can decide between college or vocational schools, bring back GE, regulate university ranking companies, improve college-industry partnerships and make universities pay up if their graduates don’t succeed by having colleges guarantee the loans that are made available for a noble cause — upward mobility.