Last week, my wife was flipping through cable channels and stopped on CNBC. I’d say that 999 out of 1000 times, she’d just continue on. However, CNBC was just starting a phone call with Mark Cuban. We are big Shark Tank fans here, so Mr. Cuban gets the clicker stopped.
It’s pretty rare that I disagree with him. On Shark Tank, I sometimes thinks he abandons good ideas and products too quickly, but more often than not, he doesn’t want to work with that entrepreneur due to a personality conflict. To some degree, I can understand it, but if I were him, I’d just be funneling the people I don’t like to qualified associates and still get in the product (assuming it is good).
Today’s topic on CNBC was student debt. Here’s the call with Cuban, so you can play it as you read (I’m going to test your multitasking skills today):
I often don’t write about student debt, because I was blessed enough to get a scholarship. I don’t know all the details and researching those details aren’t of interest to me.
However, what Cuban said struck a cord with me. The 1.2 trillion dollars of student debt held by Americans is amazing. It’s not surprising that if even half of this was put back in the general economy it could do wonders. How many students aren’t able to spend on cars, restaurants, and any of thousands of consumer goods, because they have to instead pay back debt.
It would be one thing if the debt was justified. However, Cuban makes a great point that colleges and universities are building new buildings when they don’t need to. They are paying administrators outrageous salaries. College tuition has far outpaced inflation for years, because it can… they simply saddle the students with more student loans.
Fortunately Cuban also has a pretty good answer. Create a cap of how much students can get in government loans and dial it back over time. As the “easy money” from the students is no longer available, the universities have to get… gasp… frugal and spend the money responsibly. The end result is that the students graduate with less debt and can spend money on housing, cars, clothes, tacos, etc.
I’m sure that colleges and universities are creating jobs with new construction of buildings and such, but I think I’d rather have that money in the students’ hands spreading it through the general economy as a whole.
That’s one of the things that I love about Mark Cuban. In 3 minutes he identified a huge problem with the economy… and he came up with a solution. I’m sure that it isn’t perfect. No one expects to have all the “i”s dotted and “t”s crossed in such a quick phone call.
However, it’s good enough to get started on… if only the people in politics would stop fighting each other and start working towards solutions.
Big Mark Cuban fan, both on Shark Tank and on his blog/sound bites. It is ridiculous how something good like trying to help fund higher education turned into the monster that it is today. I wrote 3+ years ago about a college bubble and while I haven’t been proven right yet I still believe its there.
If the gov’t pulls the funding of unlimited backed loans then colleges will HAVE to lower prices (much like the recent housing correction). Lower priced colleges will lead to a normalized ROI on colleges in general.
and yet every time you turn around, the answer to today’s job market woes is … COLLEGE! DEGREES! MORE EDUCATION! i say: baloney! all the education in the world won’t get you a job if the jobs are not there. there has been a ‘raise in expectations’ that borders on the ludicrous. combine that with the ‘technical degrees’ touted by the ‘for pay universities’ and you just add to the bubble.
Rebecca @ Stapler Confessions says
Eep! There already are limits on federal student loans. When you hit that limit, there are private student loans. Eliminating the private student loan industry is fine by me, although there is a problem: government regs require a certain percentage oftuitions to be paid by sources other than federal loans in order for a school to be eligible for them. That’s why some schools cost so much.
There is actually only 1 problem with the higher education system in America, it doesn’t know what it wants to be. All other ills can be explained by this fact.
1) Colleges (and Universities) are founded for Academics. You gain exposure through publishing papers, obtaining grants, and research.
2) Companies (which hire graduates) want students which are well trained to do certain jobs. They are passing the buck back to Universities for training a new employee when companies used to have Apprenticeships, or Junior level employees as they learned how to do things. Now they want an employee to “hit the ground running” and have all the skills necessary to do a job.
3) Students want to graduate college and get a job in most cases as this is the minimum requirement to get a job now. If they are inclined to go into academia, they will stay and get a masters or PhD.
4) Faculty gain money and notoriety by being academics (publishing and getting grants), and not by teaching classes. Thus they focus their time on the academics side of things and teaching becomes a secondary task if they cannot pawn it off on other students.
5) Finance industry gains tons of money on college debt, why give it up? It is like asking a bank to stop lending money when that is how they make all their money. They are more than willing to make up any government backed shortfall.
So why does all this matter? Most people (there are studies, I don’t have links) don’t care about how much it costs, just what their job will be, and what their college experience will be. So Universities are fighting for students, so they have to build bigger and better things (because people use those things as decision factors on which college to attend). Thus they realize there is limited market pressure to limit costs, but to gain the best and the brightest students, to make their faculty look better, they have to have higher qualified students.
So understanding why things are the the way they are, you have to look at Mark’s proposal. Yes it will put pressure on universities to lower costs if they cannot have students go there. However, remember the golden years (20’s to mid 60’s) when going to university was not a job requirement, but only for the wealthy. This is what will happen again if Mark’s plan was implemented. Companies are not going to eat the costs of hiring people and training them for a few years, so what is going to happen is you are going to have a grossly under-qualified workforce for the global economy, and there will be a huge gap in those with a high school education, and what is expected in the work place, and also only those rich enough to pay for college will be able to get access to those jobs.
So yes, I think Mark’s plan is a good start, however I think that there are 4 other legs of my pentagon that need to be fixed before this will work effectively. Here they are according to what I said before:
1) Universities need to throw out the rule book on AS/AA/BS/BA degrees. These are job requirements. Making “well rounded academics” is not a focus for most people. Create a degree which focuses on job creation. Then when someone wants to be an academic they take the traditional courses, however if they “just want the 4 year job training” they take that program. Yes older programs would dwindle, but the sunk costs on buildings are there and paid for, and also students will take other classes, just as electives.
2) Companies need to realize what they are hiring, and effectively train people again. This hurts the bottom line, but hiring a CPA right from college doesn’t mean they know anything about corporate accounting. They have to learn. Taking people who are not 100% qualified for a position if they show promise, desire, and 95% of the knowledge is a good thing. An example of this is I have 2 master’s degrees, many certifications, etc. I cannot take a job for a client because I don’t have one certain certification (even though I have been doing it for 15 years professionally). This does not make sense. Businesses are too rigid in their requirements for people, positions, and expectations.
3) Students have to be more educated on debt, and what they are doing in college (in terms of degrees, job prospects, etc).
4) Faculty have to shift their focus on what makes a successful educator. If you work in academia, then you can have the status quo. Faculty who teach need to have their focus on teaching and not other academic pursuits. The difference is that many faculty are being judged (pay raises, promotions) on their academic pursuits, and those that “just want to teach” are treated like pariah and even fired because they don’t want to add to the academic notoriety of the university.
5) The finance industry will not change, if there is money to be made, they will find a way. However by changing the limits on what a student might get from a lifetime of loans, this might help.
Tommy Z says
The problem with college these days is that you do not learn any valuable skills in school. The useful skills mostly come on the job (of course there are some exceptions). So why do students go to college? Because there is too much legal liability for employers to screen job applicants using tests for things like fear of racism and such. As a result, a college degree is a way employers can filter job applicants even though it would be cheaper and more efficient to society as a whole if employers could legally just test their own candidates.
Lazy Man says
That’s how I felt about it for a long time too… well except for the legal liability and screening and such.