The College Tuition Increase Act of 2007

I can't believe I missed the chance to name this thing in my post in the interest rate cut. Sloppy, just plain sloppy. I also liked, "The College Windfall Act of 2007." Feel free to use either/both.

Muscles, I know you responded in the comments section, but as I've been poking around I've found some interesting stats, and I'm not savvy enough to figure out a good way to create links in the "comments" section, so we're back to the front page.

First, to Muscles' point about a "Three Tier System" either official as in CA, or implied as in the rest of the country. And for Stalin, here's an official H-Blog BIAS ALERT, not only did I go to a Junior College, but I received a full on AA. That's right folks, my business card reads Unknown Blogger, AA, BS, MBA. So naturally I bristle at this notion that JuCo's are inferior. Perhaps because of this, I also feel a strong affinity for Trade School Grads. Both are often derided among polite company for not being "real college." But here's the thing, and we'll dig deeper into this later, but 4-year schools are not for everyone, at every time. I'll wager that there are quite a few people with college degree's earning much less than those with trade skills, electrical, plumbing, and of course, IT. Also, and here's another confession, it took me 3 years to earn said AA, and two to earn the BS, for a total of 5 (see, at least I learned to count in 13th grade). While I'm not the only person to take 5 years to get a BS, my extra year came at a much, much cheaper price than had it come during my time at an out of state private college. In any case, the JC was a great option for me, and having that in my background hasn't been any sort of anchor.

Now to the fun stuff. College grads do earn more over their lives than non-college grads (about a million - not chump change), but here's the thing, the article- here's the original data - compares bachelors to high-school diploma. This is key. No mention of trade schools (AA gets the nod, and earns about $14k/yr less than BA). But, there's also no mention of the debt load that goes with with the degree. As far as the $1,000,000 folks care, its all about the upside. You have to back out the expense of getting the degree to show the actual benefit. It's like raving that you're company earned $1 million, without mentioning that you're company spent $2 million to get it. You have to subtract expenses from revenue to get earnings. The media is just talking about revenue. It's not the complete, or fair, story. To be clear, I believe that the BA will out earn an AA, even when you back out expense, and probably even the Trade Schools, but it won't be nearly as dramatic as $1,000,000!

My bet is the real losers in the college grad game are those who go, but don't get the degree. They earn $18k/yr less than the BA's, but have taken on varying amounts of debt for the right to earn less than an AA, and probably trades. And this is where the debate gets interesting. How many of these folks would wind up in 4 year college if the loans weren't subsidized so heavily. Anyone can get into college (This is an absolute fact in FL, and here's why. Community Colleges accept everyone, period. FL has an arrangement where if you earn your AA, then you automatically gain acceptance to one of the State U's), but not everyone can afford the real cost of college. Most colleges will give direct scholarships to students they covet, dramatically dropping the cost of that students tuition, but will take other students at no real cost to the school. In a sense, those on the bubble fund those who the school wants. All this talk about how college is everything brings in people for whom college isn't the right fit. Pelosi is creating demand with her speeches, demand that only bumps up price. Pelosi would be doing a much better service if she played up the virtues of JC and Trade schools. If her speeches were geared to removing the stigma of JC and Trade schools, or better said, removed the shine of college degrees, she could actually impact the cost of said degree by decreasing demand.

Additional reading recommendation: Jacob Sullum over at Reason Magazine's blog has as good a summary as I've seen.

My wrap-up? Everyone floats the $1,000,000 number. However, no one backs out the cost to gain that income. Assuming most people who float this number have a college degree, they should know better. Second, the comparison is always between a High School Diploma and a Bachelors Degree. This comparison leaves out a whole swath of educational/vocational options. I want to see the data on real cost, and the delta from AA, to Trades to BA. I would also love to see the decrease in net (college payment/debt adjusted) lifetime income for some college vs HS, AA, and Trade schools. My personal bet is that a college degree loses some of its luster, and the incomplete college degree is downright ugly.

Actually, here a bonus issue. Congress just voted to decrease the interest rate. This action tells us a lot about student loan interest rates. If they're so artificial that congress can just randomly adjust them, then they are clearly not bound by any market sentiment. Among loans, at least as far as I know, this is unique.