It’s Time To Hold Senator Warren Accountable For Not Understanding Education Economics
Massachusetts Senator Elizabeth Warren recently announced “DeVos Watch,” aimed at Department of Education (DOE) Secretary Betsy DeVos to “ensure that the Education Department acts in the public interest.” Essentially Warren is on a higher ed-focused crusade against DeVos’s deregulatory policies under the banner of people shouldn’t make money off of students. The brutal irony of Elizabeth Warren, who made $430,000 to teach a single class at Harvard, “championing” education affordability and accountability is but a tragic indicator of how much her agenda lacks economic reasoning and sincerity.
First, Warren’s insinuation DOE was serving the “public interest” before DeVos doesn’t hold up to even slight scrutiny. Guaranteeing and subsidizing hundreds of billions of dollars in student loans sounds nice, but it’s simply the fallacy of governing on intentions versus outcomes.
Today millions of former students owe tens of thousands of dollars, half at best have degrees, and those degrees are rapidly losing value. This all traces directly back to federal student loan subsidies and guarantees. Of course a college degree can dramatically improve life and no one can be blamed for wanting that. Yet the same can be said for a whole bunch of money, and if you print enough of either they become worthless. Whose interest is that serving?
Progressives argue that without public loan support only the rich will have access and there are aspects of an education that will never be “worthless.” Neither point directly challenges the core logic of diminishing marginal value—which you’d think progressives like Warren would understand since it’s also the primary defense for higher taxes on the rich.
Beyond ignoring the existence of scholarships and charities, the average four-year degree is losing value and isn’t a golden ticket out of poverty. Subsidizing and pushing universities lures rich and poor students alike away from trade schools, the workforce, and internships/apprenticeships—all of which have increasing value without similar debt. Making it easier to obtain crippling debt for a dime-a-dozen liberal arts degree isn’t helping the poor.
As far as the intrinsic value of an education, while there are theoretical benefits of a highly educated population exposed to a diverse array of knowledge, anyone making this argument is either on the higher ed take or hasn’t recently been to a campus. Today’s average college experience is maximizing leisure while doing just enough to graduate, increasingly featuring episodes of students and staff stifling any even marginally conservative ideas.
Also, if a college education is so necessary today, what does this say about the state of our “free” K-12 system?
Warren also laments the presence of “profits” in education, yet only seems concerned with private loan financing and for-profit schools. This narrow focus is pure demagoguery. The entire higher ed sector is profit driven, the money just ends up in different hands.
Besides any monks, nuns, and volunteers, no one is teaching purely for the sake of it—as Senator Warren’s previous earnings make clear. The average full-time professor salary at doctoral universities is more than double the median household income (roughly $130,000 vs. $57,000).
The real money, however, is in the ever-growing administrations of these schools. These positions easily average well into six-figures, with many positions averaging over $200,000 per year. What’s more is that the number of these administrative positions has exploded. There’s now roughly one administrator for every two professors at research universities, quickly approaching 1-to-1.
This all goes without mentioning the massive amenities arms race, featuring waterparks and luxury dorms, sweeping across academia. To Senator Warren’s credit, this is an issue she has addressed. However she continues to stand behind public guarantees and subsidies which fuel the fire.
According to a study from the New York Fed, each dollar of subsidized loans drives up tuition by a staggering 60 cents.
Regardless, Warren has trained her sights on DeVos to make her a scapegoat for a student debt crisis she had nothing to do with. In fact, Warren’s main objections to DeVos regard regulatory changes that will help stabilize this over-inflated market.
DeVos has withdrawn Obama administration memos constraining practices of student debt servicers. No doubt it’s an unpopular change, but not all medicine tastes good. For one, changing regulations via memos has contributed to the problem of regulatory “dark matter,” creating unclear and ever-changing rules that increase compliance costs.
Further, student debt is uncollateralized, meaning there’s nothing tangible the lender can seize and resell to recoup costs, like a mortgage or car loan. There must be consequences or else students won’t properly assess risk, leading to higher debt and increasing delinquencies—both of which are growing problems.
DOE loan programs have been inflating the cost and destroying the value of higher education for the past several decades. While it’s good to deter fraud in private loans and daytime TV-advertised schools, bellyaching about these few bad actors and criticizing marginal changes while ignoring the massive systemic problem outlined above doesn’t make you a higher education champion. It makes you another expensive administrator not helping students.
Patrick Hedger manages the Regulatory Action Center for FreedomWorks Foundation.