There was a time when I suggested all Hispanics attend college and later pursue graduate degrees to the nth degree.
I remember telling high school students, college dropouts and working adults that a college degree was the best investment they could ever make. I had charts depicting the financial benefits that accrued throughout a lifetime to those who earned a degree—in virtually any discipline. My message was pointed and a bit materialistic. It’s no sin to improve your family’s economic circumstances.
I comforted my idealistic liberal arts innards by assuring myself that a modicum of education would rub off on any individual who attended college. I was confident of that. I urged young Hispanics to attend college full-time because vast personal rewards awaited them. Indeed, that was true. Even today, college graduates earn a million dollars more than high school graduates in their lifetime. I urged academicians with master’s degrees to pursue doctoral programs as quickly as possible for promotions were waiting.
Times have changed, and it is time to reassess my conclusions.
Since the end of World War II, America has been very proactive in encouraging higher education. Some programs were very successful, such as the G.I. Bill of Rights. Later after Sputnik provided a wake-up call in 1957, the federal government wed defense and education to provide untold millions for higher education. Today, we are subsidizing STEM (Science, Technology, Engineering, Mathematics) careers.
Recently, we also encouraged hapless students to take on enormous loans. Today, student debt exceeds a trillion dollars. Many graduate with monumental debt and with reduced prospects of securing professional salaries to pay them off.
We know our skill-biased technological society rewards highly educated people. So a college education, while increasingly expensive, is still a worthwhile investment for both the individual and for society. College graduates on average earn 80 percent more than high school graduates. Further, they are less likely to be unemployed. So, yes, Hispanics must attend college.
Many Hispanic families cannot afford college. They need assistance. James McAndrews of the New York Federal Reserve has noted, “there are significant financial constraints on many families’ ability to finance a college education. After all, the costs of college are concentrated in a few years, while the benefits are spread out over a long period that comes later.”
Is there an appropriate role for the public sector to finance higher education? Yes, of course. Our policies should align the social and private benefits of attending college, and devise ways to relieve the liquidity and credit constraints that families face.
As important, we should direct scarce educational resources toward specific matches between students, institutions and programs of study that yield the best educational outcomes. The best matches avoid regrettable dropouts, a scourge for far too many Hispanics. Secondly, Hispanics should avoid programs of study that don’t offer good career prospects.
How do others address their public role? In Europe, higher education has traditionally been essentially 100 percent publicly funded. This results in large subsidies for people—mostly wealthy people—who could have easily paid for college if they had to. Making college free has also meant excess demand for the limited number of seats at high quality institutions. Twenty years ago, I worked on the Hungarian Higher Education Master Plan. Only eight percent of high school graduates were going on to college!
In the U.S. public universities’ tuition is less than the actual full cost of providing education. The difference is made up by state taxpayers (said amount has been systematically reduced for financial reasons by most state governments over the past 20 years). Subsidized tuition aligns public and private benefits and helps mitigate the liquidity constraints families face.
Second, Pell grants are available for families with limited means to pay for college. Further, through our income tax system the cost of attending up to four years of college is reduced for people with incomes below a certain threshold. These subsidies, which operate like vouchers since they can be used at different colleges and universities, serve to align private and social returns and relieve financial constraints. Because they are related to income, they also have the additional important benefits of reducing inequality and increasing diversity.
The final major way by which higher education is financed is through loans. They relieve immediate liquidity constraints, but they have placed a heavy burden on far too many students, including Hispanics.
Student loans once seemed like a good solution, but over the past decade, over reliance on loans has increased with unintended consequences. Between 2004 and 2014, the total student debt tripled from $364 billion in 2004 to an amazing $1.16 trillion in 2014. To wit: student debt increased by an average of 13 percent per year.
While balances on all forms of household debt—including mortgages, credit cards, auto loans and home equity lines of credit—declined during and after the Great Recession, student debt rose steadily and dramatically.
In 2010, student debt surpassed credit cards to become the second largest form of household debt after mortgages. Prior to 2008, student debt had been the smallest form of household debt. Today, too many students graduate with crushing loans.
First, Hispanics should definitely attend college preferably full-time, but many part-time opportunities exist. Just go!
Second, select majors, which you like but have real career opportunities in the future. That’s where you will be living. I have met far too many college graduates working as waitresses because they can’t find jobs with their liberal arts degrees. It worked for me, but times have changed. Be realistic.
Third, there has as of late been too much reliance on loans. Don’t get over loaded. It is best you pay as much as you can during your college years even if it takes a year or so longer to graduate. The best graduation gift you can receive is to be debt free. •
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