Joseph Stiglitz, the Nobel Prize-winning economist and former chief economist of the World Bank, recently warned that for-profit colleges are ultimately pretty bad for economic development. But such schools are merely the most extreme example of a huge problem across all in higher education: students are buried in debt
As he wrote in USA Today:
The peculiar provisions of our bankruptcy law, which encourage some of the banks’ most risky and speculative products and discourage those trying to better themselves through education, provide a telling example. So too, deficiencies in the regulation of for-profit schools, give them full scope to exploit those at the bottom who aspire to be part of the American dream.
Now obviously this isn’t based on an investigation of specific schools, but he’s got a point. Education is good for the country’s economic development; personal debt is bad. If you want to foster innovation, economic development, and entrepreneurship the best thing to do is to promote quality education and reduce personal debt.
For-profit colleges, whatever their benefits, don’t do this.
A study released recently by the National Bureau of Economic Research indicated that the some of the most popular fields of study for certificate and associate degree programs at for-profit colleges resulted in virtually no economic benefit to graduates. The average debt of a for-profit graduate is $33,050, higher than the debt of those who attend traditional colleges.
Proprietary colleges, however, are merely the most extreme examples of disturbing trends in American higher education. Students, even those who attended regular colleges, simply have too much education debt. Stiglitz:
The student loan crisis needs to be tackled head-on. Part of the answer is to make student debt more manageable, including by making it dischargeable under the appropriate circumstances. For-profit schools, which have proved themselves to be better at exploitation than at delivering a valuable education, need to be effectively and forcefully regulated. Even more important will be increasing government investment in higher education to bring tuition costs down. Such investments would have high economic returns, and would even help bring our country closer to our ideals.
Without taking steps like this, Stiglitz explains, economic inequality is just going to get worse. Education debt is becoming a problem. It’s a slow-moving problem, but one that the country’s ultimately going to have to confront in order to restore real economic prosperity.