Default Education

Peter Wood

USA Today informs us that last year students took out more than $100-billion in new student loans, and that total outstanding student loans will this year exceed $1-trillion. That’s a lot of—mostly unsecured—debt. Lenders lend it because students are supposed to be able to take the skills they acquire in college into the marketplace and get the kinds of employment that will enable them to repay principal and interest. The biggest lender, the Department of Education, however, lends it because it is national policy to get as many kids into college as possible. The interest rates in the federal program are also high enough to produce substantial income for the government as well. This is a case where everybody wins—students get skills and a degree; employers get skilled, educated, intellectually agile workers; innovation happens because of all that unleashed creativity; the economy flourishes; and the government has even more money to invest in wholesome programs. 

But, uh … something hasn’t worked exactly as advertised. What is it? The large percentage of students who end up with student-loan debt but no college degree? The large percentage who achieve the degree but, truth be told, haven’t acquired much in the way of skills, education, or intellectual agility? The large percentage who remain unemployed or employed in work for which the college degree is superfluous? The reality that almost all significant technological innovation comes from a tiny sliver of the population, a sliver which includes many who dropped out of college or never went?

Forgive Us Our Debts

The Occupy Wall Street manifesto, originally drafted by Micah White of the Canadian Adbusters Media Foundation, called for someone—it is not clear whom—to “Forgive all student loan debt.” This was one of the steps that “can be done right now to rejuvenate democracy and economic justice in our country.” Our country presumably meant the United States, not Canada; though it is possible that OWS signals Ottawa’s territorial designs on its impoverished southern neighbor.

Evaporating $1-trillion in assets would certainly be a jubilee. But doing so would almost instantly put most American colleges and universities out of business. They pay a substantial portion of their operating expenses out of “current revenue,” and a substantial portion of that comes from the money that students borrow to pay tuition, room, and board.

Mass Higher Education

All this time I’ve been thinking that American higher education had made a serious wrong turn when it transformed itself into something-for-everyone mass higher education. I’ve been arguing for the last five or six years that we need to rethink this model. We should, I’ve said, foster a greater variety of rewarding options for high school students so that they don’t think college (and college debt) is the only viable path toward prosperity. We should free online education from the morass of regulatory obstacles so that it competes fairly with traditional colleges. We should unleash that innovative spirit that would allow more colleges to offer stripped-down and therefore less expensive versions of a bachelor’s degree. We pay uncalculated but very large costs for the dominant model of American undergraduate education in which colleges offer a cornucopia of “electives”—that often add up to very little real education.

I’ve been predicting that if we took such steps, the overall number of colleges and universities would decline but that most would adapt. And I was cheered when a Harvard Business School professor, Clayton Christensen, and a colleague, Henry Eyring, published a major book, The Innovative University, making a similar case. Others have been making kindred points, perhaps most notably my Innovations colleague Richard Vedder.

Perhaps all of us have been thinking too small. The OWS Manifesto’s call, “Forgive all student loan debt,” would be a quicker answer.  Exercise and dieting is one way to lose weight; anorexia is another.


The call for debt forgiveness is unlikely to find any serious political support. That call is interesting, however, in a variety of ways. It underscores how the higher education “bubble” is translating into a substantial grievance for many recent college graduates who find themselves unable to come to grips with current realities. And it pinpoints the financial structure of American higher education as a root problem. What we need is a way to rethink what happens to individuals after high school. Attempting to send everyone to college turns out to be a poor way to respect the ideals of personal freedom, intellectual autonomy, and human equality. Our one-size-fits-all approach offers only a veneer of choices and it results in educational mediocrity or something worse. It produces a mediocrity of both mind and practical skill, and it is typically a proud mediocrity that cannot comprehend its own stuntedness. This is, of course, the exact opposite of what contemporary higher education typically promises:  wholeness, personal growth and sophistication.

Debt forgiveness, even if it came, wouldn’t relieve the misery of finding out that these were hollow promises. Disillusionment is what’s needed. What we see now among those OWS protesters focused on student loans is a desperate attempt to ward off that reckoning.

This article first appeared at the Chronicle of Higher Education's Innovations blog on October 19, 2011.

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