Forgiving College Debt Won't Help Students

Gen Y Makes the Most of a Down Market
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College is too expensive, graduates can't find decent jobs and pay off their loans, and students, parents and educators all share in the blame. Now, President Barack Obama's is proposing a plan that would forgive more student loan debt -- but that will only make a bad situation worse.

More than half of recent graduates are working as waiters, taxi drivers or some other occupation that does not require a college education. The number in minimum wage jobs has doubled since 2007.

Slow growth and a tough jobs market is one reason, of course. But just as important: Too few college students choose tough majors like nursing, engineering and accounting that enjoy a robust demand for graduates. Instead, many still opt for liberal arts subjects, such as politics and history, and emerge with few practical skills for the working world.

Good jobs abound for technicians in health care, computers and other fields, and the Labor Department finds most rapidly growing occupations don't require a bachelor's degree. However, parents fear their children, without a four-year diploma, will lack the flexibility to navigate a lifetime of changing conditions.

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If students are lazy and parents are risk adverse, university professors and presidents are far worse. Professors simply teach less and do more research of questionable value than they did in the past. In the 1950s and 1960s, a significant track record of publications was not required for tenure at most undergraduate faculties—advancing the frontiers of science and the arts was mostly the work of professors in post-graduate departments.

Nowadays, professors at all levels must publish to win tenure, but much of what they do adds little value to either the practical world or the advancement of knowledge in a purer sense. But it does require teachers to carry lighter teaching loads. Once tenured, many professors don't publish much, but still keep their light teaching schedules.

University bureaucracies are even worse—presidents and deans often have staffs bigger than CEOs and managers running much larger businesses. And faculties, which make virtually all decisions by consensus, spend endless hours in committees advising presidents and deans, and are supported by mind-numbing bureaucracies, too.

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University presidents are politicians, not business managers. They understand who makes the choices (students), who pays the bills (parents) and who they must please in the Alice-in-Wonderland world of university governance—faculty.

They are rational: Instead of encouraging students to study useful subjects and containing sky-rocketing costs, they focus on fund raising and lobbying government officials to facilitate more student loans. Tuition jets into the stratosphere, students amass huge debt, and universities produce a lot of high-quality unemployment.

President Obama is rational, too. Parents, students and former students all vote. Instead of radically refocusing national policy to expand vocational education in high schools and community colleges, he promises to increase the percentage of Americans with four-year diplomas.

His proposed "Pay as You Earn," which came late last year, would forgive billions in student debt with federal dollars. Borrowers in the program would make payments equal to 10 percent of their monthly income, after rent and basic living expenses, and after 20-years of on-time payments would be forgiven of all debt—regardless of how much they had borrowed.

What the program fails to account for is that debt forgiveness simply encourages young people and parents to make poor choices, including borrowing too much. It will also embolden colleges to keep pushing up tuition—things the nation can't afford. It certainly won't help graduates find jobs.

To compete in the global economy and create good jobs at home, America needs workers with the right skills. That means limiting access to college to those who can genuinely profit from a university education, requiring professors to teach more and in on subjects that are truly useful in the workplace, and redirecting more of what the nation spends on education into other channels of vocational training.

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist.