Some of the big challenges in higher ed👇

- Price is too high & rising
- Too much student debt
- Too many students dropping out
- Too many students underemployed
- Credential inflation
- Misaligned incentives on multiple levels
- Oligopolistic market dynamics prevent competition

- Education costs have increased by 300% since 1980.

- Gov't spends 3% of GDP ($600B) subsidizing higher education.

- Incentives are misaligned such that the more gov't dispenses subsidies, the more expensive college gets.

College debt is now ~$1.7 trillion (was $300B in 2000). Avg student is $40K in debt

Debt is now non-dischargeable in bankruptcy. If you don’t pay off loans by 65, gov't garners social security

Excessive debt leads ppl to delay having families and buying a house

- Only 37% of borrowers are paying down their debt. The other 63% are in delinquency.

- During mortgage meltdown, lenders were accused of predatory lending.

- Why not here as well? after all, subprime mortgages did better than 37%
Where does the $600B in subsidies go?

- Only 25% of tuition goes to core part of education (classroom)

- It goes to administrators, athletics, buildings, & high status profs

- This doesn't exclude tax-advantaged statuses on multi-billion dollar endowments

- Student services

- Went from 1:2 admin to faculty to 2:1.

- Yale spending ~$60K per student on administration

- Part of it is b/c higher regulation, so need ppl who can manage regulation.

- Weird incentive to lobby for more regulation to justify increased admin budgets.

- 60 out of 100 college students graduate in 6 years.

- 40 of 100 drop out.

- Only 36 out of 100 college students get jobs worthy of a degree (the rest drop out or work at Starbucks etc).

- Consider the opportunity cost of 4-5 yrs of work experience + 0 debt.

- Only 50% of employed college graduates got jobs requiring a college degree & only 37% take jobs requiring just a high school diploma.

- Over 100,000 w/ bachelor's degrees became janitors. Over 5,000 people w/ master's degrees became janitors.
Professors are miserable:

- There are two to three times as many PhDs seeking professorships in those positions than there are actual jobs to teach.

- "Universities are a series of individual faculty entrepreneurs held together by a common grievance over parking."
Kids are learning less than they used to:

- They spend 27 hours a week learning compared to the 40 they used to spend

- They don't learn much & what they do learn they forget

- They get worse at math,& there's little evidence their writing or critical reasoning skills improve
Students don't want to be there:

- When asked whether they'd prefer the credential w/ 0 learning, or no credential w/ significantly more learning, they pick the former.

- What other products do you pay for that you're happy when you can't access them? Very few.

- When gov't increases subsidies, colleges raise prices. There's no incentive to change this, so price will keep rising.

- Indeed, colleges lobby for increased borrowing limits so they can raise tuition proportionately.

- College rankings have a direct relationship
between how much you spend per student (including real estate, athletics, etc).

- So if you spend less & get the same output, your ranking will go down.

- Measured by only inputs, not on any student outcomes...

- Companies used to give personality & IQ tests, but then they outsourced that to colleges (IQ via SAT, conscientiousness via completing 4 year program)

- Now they’re eliminating SAT & many graduate exams.

- What does it mean to get in? or to graduate?

- Since everyone is going, it's not as impressive anymore. Consider when someone stands at a concert, and then everyone stands up & no one gets a better view.

- Prisoner dilemma: as an individual, I'd benefit from getting the degree but the group doesn't.
Why is there no competition?

The accreditation system, which determines who gets subsidies & tax breaks (hard to compete w/o them).

It’s basically a government sponsored cartel, where the incumbent businesses get to decide who's going to compete, & how they're going to compete.
The lack of competition also explains the lack of innovation: Why disrupt yourselves when no one else can disrupt you?

Which is why top universities have remained the same for *centuries* w/o new entrants posing much of a threat.

Stanford, the most recent, was over 100 yrs ago
We’ve recreated the healthcare system by moving to a system of 3rd party payer, where people basically don’t have to pay for it themselves, because there's so many subsidies directly and indirectly built into the system that it breaks down all accountability from consumers.
This is what happens when the government restricts supply: price escalates. Quality remains stagnant. The system is running as designed!
Sample solutions, perhaps we should consider:

- Giving money to the students directly rather than indirectly via the gov't.

- Subsidizing not only access, but also outcomes (paths to jobs) & be measured accordingly.

- Ensuring colleges have skin in the game & share the risk
Also we go into a bunch of this in this podcast:…

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