Although I don't have the hard data, I'd wager the word "prestige" is the most-used non-article word in threads and posts on this site. Prestige of firms, groups, universities, etc. has been discussed ad nauseam on WallStreetOasis -- but could prestige be less than the boon and blessing that we believe it to be?
Are universities, in an attempt to bolster their prestige through rankings and league tables, in part to blame for the ballooning cost of education and subsequent student loan numbers in the US?
Despite so many fat years, universities have done little until recently to improve the courses they offer. University spending is driven by the need to compete in university league tables that tend to rank almost everything about a university except the (hard-to-measure) quality of the graduates it produces. Roger Geiger and Donald Heller of Pennsylvania State University say that since 1990, in both public and private colleges, expenditures on instruction have risen more slowly than in any other category of spending, even as student numbers have risen. Universities are, however, spending plenty more on administration and support services (see chart 2).
What's most jarring to me about this entire higher education debacle is that, according to this article, only 57% of people who enroll in a four-year college or university graduate within six (not four) years! The next logical question is -- who authorizes these loans? Understandably the federal government has taken over providing most loans for higher education to students, but back in the golden days of private lending, how are these loans renewed on a yearly basis if a student is in jeopardy of not finishing his/her degree? And it's not just a few students here and there -- it's 43% of the people who go to college!
And those who do graduate, at an overwhelming majority of schools in the US, are no more prepared to join the workforce than they were after receiving a shiny high-school diploma. One of my neighbors told me the other day that she's about to get an A in her statistics course, and after talking to her about it for a few minutes, I realized that she didn't know what standard deviation was...
I understand that we want to make higher education accessible to everyone, but problems begin when people start receiving loans without a real plan to pay them back. See the housing crisis for a good example. Should people with good grades in STEM majors be rewarded with lower interest rates than someone who is more "risky", say pursuing an English degree? There's no denying that the former student will be more likely to pay off his/her loan than the latter, assuming everything else holds constant.
But really, where is all the money going? Expensive administrative costs, rising bureaucratic costs, and a preoccupation with rankings (and our old friend prestige) that do not focus on producing higher-caliber graduates. The degree means less than it once did, but costs more than ever -- what gives?
What's to be done about this, all? How do we incentivize people do pick majors that create value AND give them the ability to pay off loans? Have students become too comfortable with receiving loans? I've recently talked to friends inwho made it seem like taking out $240K isn't a big deal at all -- this would keep me up at night for the rest of my life if I were in their shoes!