Tuesday, June 30, 2009

Take that college degree and .......

These stories aren't exactly market related but the failure of our higher education system to prepare students to enter a global workforce is a pet peeve of mine. I found it funny that I heard three college related stories in the past 24 hours and I thought it might be worthwhile to share them here.

1) The always unbiased NY Post brings us: Don't get that college degree... This is an overly simplistic look at the finances behind attending college. Their argument is that an 18 yr-old that enters the workforce and diligently saves for the next 15 years while their colleagues are paying off student loans, is going to end up ahead of the person who attends college. This is the sort of thing that only works on paper. Unfortunately, all people under the age of 30 seem to have a distaste for saving - college educated or not. The example also falls for the old "stocks return 8% a year" joke. Those were the days my friends.... Anyway deep down in the article there is an argument for changing our system of higher education because it's broken right now.

"Students want jobs and respect. Degrees bring both. Employers, meanwhile, want smart, capable workers. A degree is a decent enough proxy for intelligence, but we want it to be more than that. We want degrees to mean that students have learned the foundations of human knowledge: literature, chemistry, physics, composition, metaphysics, psychology, economics and so on. If we didn't, we'd replace degrees with inexpensive vocational exams.

In 2005, the Department of Education created a commission to study the college system and recommend reforms. A year later, the Spellings Commission (named for then-Secretary of Education Margaret Spellings) reported a long list of shortcomings, including "a remarkable absence of accountability mechanisms to ensure that colleges succeed in educating students." It found "disturbing signs" that degree earners "have not actually mastered the reading, writing and thinking skills we expect of college graduates." Literacy levels among college graduates, the commission noted, fell sharply over the 12 years ending in 2003.

I hate to be the old guy that remembers the good old days, but when I see 75% of a high school class on the Honor Roll something is wrong. My high school graduating class had 5-10% of the students on the Honor Roll (with a class size of 27 you can guess that usually meant me and one other student). Today, my alma mater has north of 80% of it's students on the honor roll in every grade. This is not limited to my alma mater, just about every high school in the North Country puts about 60-80% of their kids on the honor roll.

2) This WSJ story isn't really about educational matters, but rather the failure of the YALE model of endowment management. This pleases me to no end. A couple of years ago you couldn't find a soul that would question the Yale methodology which allowed

"Yale University to profit from pioneering moves away from U.S stocks into often illiquid alternative investments, such as private equity, commodities and timber."

I always found this to be a strange methodology and I feared that as more endowments followed the same model, the groupthink of endowments across the US might lead to substantial losses. I was interviewing in 2007 for a position with an Ivy league endowment that shall remain nameless (sounds a bit like the maker of Spam :)) and I remember how the interview turned confrontational when I challenged their mindless following of another endowment's model. Needless to say, I didn't take the job.

Separately, how about the fact that Cooper Union doesn't charge tuition? I'm already filling out applications for freshmen class of 2018.

3) Finally, I caught a replay of Andrew Ross Sorkin's interview with Elliot Spitzer - yes, that Elliot Spitzer - and I was struck by the fact that he offered a fresh view on higher education. Mr. Spitzer mentioned a model of higher education that would turn the current model on its head. Tuition, not as a flat payment, but rather as a percentage of future earnings. The University would suddenly have a vested interest not in keeping you on campus for 7 years, but rather getting the student prepared to enter the workforce ASAP. The student could feel free to pursue a real passion as a career instead of chaining themselves to a desk (or spend weekends with a sleazy former Governor --- ooops, that's low) to repay $85k in student loans for their Art history degree from Tuscan University. Make more, pay more in "tuition". I don't know how we'd ever get the universities off the tuition model, but boy that sounds like an innovative approach.

Anyone with deep pockets want to launch this as a start-up? Set up online universities that are tuition free (have you seen how fast online universities like University of Phoenix are growing? Up 24% in this down economy) but require 10% of future earnings for the next 10 years. I see holes in this idea, but it has it's merits.


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