College Is A Scam
“Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.”
Ayn Rand, Atlas Shrugged
The cost of higher education has exploded over the past few decades, despite the decrease in quality and value of a higher education. Why is this happening? And what is the path forward?
This general topic has been brewing in my head for some time now, and I wanted to get a clear picture of the situation before making a post.
I’ve kept a page in my Evernote devoted to this topic, and have been adding relevant articles and thoughts over the past few months.
I believe it’s finally time to take a stab at this.
Why has the cost of a college education risen at such a dramatic rate over the course of the past few decades?
Take this graph that compares the price changes of various consumer goods over the past 10 years.
College tuition and textbooks have exploded in price relative to other goods, as has healthcare.
The logic follows that an extreme price increase must come as a result of an extreme increase in quality, or in scarcity.
Last time I checked, very few people get rejected from every single college, so scarcity can’t be it.
And quality? Today, more than ever, college graduates are having a tough time finding a job. Not only that, but many of the top companies in the world (mainly tech), are seeking candidates without college experience so long as they have comparable real world experience.
So what is it?
It’s a combination of three factors: government intervention in the student loan market, government reduction in university appropriations, and a society-wide funnel that forces college on all.
Let’s look at these three one by one, and then we can examine how they work in tandem.
To any of you who are attending or have attended college with some form of loans, you’ll be familiar with this.
The U.S. Government gives out student loans like candy. Seriously, I challenge you to try your best to get Uncle Sam to reject you.
In the same way that the U.S. Government gave out mortgages like candy starting the 90s, until the Great Recession, this behavior stems from a paternalistic belief—every person in America has a fundamental right to attend college, or every person in America has a fundamental right to own a home.
It works well if people are wise enough to only accept loans they can repay, or if the loan allows them to leverage their lives in such a way that they increase their future earnings.
But people are not rational, and they’ll gladly take any “free money” thrown at them, especially when it is going towards a goal that is widely respected and encouraged across society.
Just how people took loans for houses that were too big and expensive, and had to end up losing their homes when they couldn’t make payments, college students are being crippled by the debt they accepted, when they are unable to find a job or well-paying job.
Unfortunately for students, unlike mortgages, you can never get rid of student loan debt. Declaring bankruptcy does nothing.
But student loan debt is smaller than a mortgage isn’t it? Well, sorry to tell you, but the stories of people with student loan debt bigger than some mortgages is growing increasingly common. That’s a bigger economic disaster waiting to happen.
So we’ve established that the U.S. Government gives out loans freely, and guarantees these loans to the academic institutions.
When you create artificial (and irresponsible) demand, do you expect the supply side to take the moral road and not cash in? Absolutely not. That would be completely irrational.
This brings us to our second point, where the U.S. Government has scaled back the amount of tax dollars they send to public universities.
As this article expands on, universities are like any other corporation—they need money to keep the lights on and pay all their employees.
Just a few decades ago, they generated most of their revenue from non-tuition streams of income, largely aided by the billions a year that the U.S. Government provided them in the form of appropriations.
In order to fill that gap, the universities have had to turn to other sources, and have jacked up the prices of their existing revenue streams.
If, as a university, you know you need to make more money per student, and are aware that the U.S. Government will gladly extend loans to students who can’t afford the full cost—why would you not take advantage of that to the maximum.
We can perhaps assume that universities are doing this in good faith, with the belief that they will up the quality of their offerings, and thus the debt that their students incur will be erased by their future increased earnings as a result.
To be honest, I do not think any of the actors here are thinking outside of their specific place in the system, and thinking on any time horizon longer than the immediate.
Now for the final component: everyone has to go to college.
From the second you’re born (where parents are encouraged to start a college fund), all the way through your primary education (where parents battle to get into the top high schools, middle schools, even elementary), there is a constant bombardment of the propaganda that is college as a necessity.
The mere thought of not attending college is met with embarrassment and ridicule across all age groups.
College is framed differently depending on the demographic group. For the middle class, it is viewed as a ladder to the top. For the rich, it is viewed as admittance to the clubs and social circles that sustain wealth and power. For the poor, it is viewed as the only chance to escape their dire existence.
Nobody ever stops to question college as the next step after high school. Is it really prudent to send 18 year olds straight to a place where they’re burdening themselves with debt, to receive a piece of paper that they could sit in class, take notes, and do well on tests that have nothing to do with real world work.
Most 18 years don’t even know what they want to do with their lives, which is problematic when they’re forced to choose a career path off the bat.
The fact that we send everyone to college literally devalues a college education—it’s called credential inflation, and it’s why a bunch of entry-level jobs nowadays require graduate degrees.
Okay so now we understand why college is more expensive. The government makes the cost irrelevant to the consumer, the universities need the tuition money, and society pressures everyone to attend and take the debt.
That is the recipe for a market with no incentive to cut costs, as there is no formidable competition or incentives structure.
The Way Forward
I’ll break this section in two parts: personal advice, and systemic advice.
Personal advice is straightforward.
Early on, try to get as much professional experience as you can. I’m talking before college. It’s hard, but I know of high schoolers who have had mini-internships during the summer. Of course, you have no excuse to not get an internship in college.
When it comes to picking your college, this is even easier. If you don’t get into a top 30-40 school in the U.S. (and you could arguably narrow this list), then attend your local community college and transfer.
Prestigious colleges are worth debt, not just because their education is better (that’s honestly not that important), but because it’ll give you a massive advantage career wise. You’ll have access to on-campus recruitment, have a rich peer and alumni network, and you’ll be in an environment with intensely competitive and ambitious people that will drive you.
This can change industry by industry—for example, if you plan on becoming a doctor. In all honesty, don’t become a doctor. You can do more good for the world working at a healthcare or biotech startup. But in this case, it’s the graduate school that matters more than the undergrad.
As for picking a career, I say find a right balance between passion and money. If you come from a wealthy background, you probably don’t even need this advice, but you’re free to explore your passion.
If not, and especially if you have debt, you have to prioritize making money. And I promise you, there exists a job in the world where you can make lots of money and be happy enough for a few years.
I’ll defer to WSP here, which encourages students to choose one of three career paths: finance/consulting, tech, and anything sales (mainly enterprise). These paths will make you enough money to save up, pay off your debts, and ultimately leverage your time to pursue something entrepreneurial—which should always be the end goal, as this is paramount to achieving financial and personal independence.
This doesn’t mean you’re an abject failure if you don’t go down any of these paths, as business school is always a reset option, and people can make money in other industries. But this is definitely the quickest path.
Obviously if you desire to live an average or slightly above average life, and if you really have a passion for something, then it’s possible to just pursue your own desires and still carve out a happy life. Ultimately that’s all that matters. But a happy life likely does not involve being part of the rat race and financial slavery.
The alternative path is to teach yourself how to code, or to attend a respected software engineering bootcamp. Working at a tech company, I can personally tell you that I’ve met dozens of individuals making good money here at Twitter, with no college degree. Most of them starting coding in high school, and just working on personal projects they found cool, which built them a solid portfolio. If you’re good at what you do (especially in tech), no one gives a fuck about where you came from.
Now moving on to the systemic advice.
For the U.S. Government, stop treating higher education as a fundamental right. Do not offer student loans like candy. Provide serious financial education to students in high school. Also encourage other alternative forms of education/career paths, including trade schools, the military etc.
The private sector seems ripe to disrupt here. I sense that some well-to-do startup that offers an alternative form of funding (i.e. loans tied to your future earnings) can revolutionize the market.
For universities, how about you spend all that money on more real world relevant course materials and initiatives? I’m all for the value of a quality liberal arts education, but I have too many peers that are floating around with not the vaguest idea of what they’re doing after graduation, and no clue as to how to do any “adult things.”
For parents and the other gatekeepers of society, do your part to normalize alternatives to college, or at least push kids to take some time off before committing to college or any career path.
Like with most things in life, find out whatever the majority of people are doing—then run as fast as you can in the opposite direction.