Who Needs College?
Ferguson, Niall, Newsweek
Byline: Niall Ferguson
Higher education is becoming the new caste system.
School is in the air. It is the time of year when millions of apprehensive young people are crammed into their parents' cars along with all their worldly gadgets and driven off to college.
The rest of the world looks on with envy. American universities are the best in the world--22 out of the world's top 30, according to the Graduate School of Education at Shanghai Jiao Tong University. Once it was Oxford or Cambridge that bright young Indians dreamed of attending; now it is Harvard or Stanford. Admission to a top U.S. college is the ultimate fast track to the top.
Little do the foreigners know that all is far from well in the groves of American academe.
Let's start with the cost. According to the College Board, average tuition and fees for in-state residents at a sample of public colleges have soared by 25 percent since 2008-09. A key driver has been the reduction in funding as states have been forced to adopt austerity measures. In the same time frame, tuition and fees at private universities rose by less (13 percent), but still by a lot more than inflation.
According to the Consumer Financial Protection Bureau, total student debt (which includes private loans and federal loans) climbed to more than $1 trillion. It is the only form of consumer debt that has continued to grow even as households pay off mortgages, credit cards, and auto loans. In real terms, students are borrowing twice what they did a decade ago.
It's not only Facebook stock that Silicon Valley superstar Peter Thiel is selling. He's shorting higher education, too, arguing that college is the new asset bubble--the natural successor to subprime. Remember when we all believed that a home was an investment that would never lose money? Now, Thiel argues, exactly the same thing is being said about a degree. To back up his point, Thiel is paying 20 of the country's most promising students $100,000 to walk away from their studies and become entrepreneurs.
Thiel is not alone in his skepticism. "President Obama once said he wants everybody in America to go to college. What a snob!" Rick Santorum famously declared. "There are good, decent men and women who go out and work hard every day -- that aren't taught by some liberal college professor trying to indoctrinate them. …