Monday, January 27, 2014

Students Should Rise Above Without Debt After Education

I attended the Commonwealth Club again today to hear about how education breaks the cycle of poverty.  Students Rising Above (SRA) pitched the success stories of their intensive mentoring for low-income students bound for college.  I'm all about harvesting the unheralded talents of students from disadvantaged socioeconomic backgrounds.  Sociologist E. Digby Baltzell built a lifetime of research on the premise that ruling elites must recruit talent from upwardly mobile underclasses if civilization is to endure.  SRA is doing the right thing.  The rest of society should do a lot more.

The first obstacle society places in the path of the upwardly mobile is the difficulty of discharging student loan debt in bankruptcy.  The official Federal Student Aid guidelines on loan forgiveness, cancellation, and discharge describe strict conditions under which a bankruptcy court will discharge a student loan.  It's not impossible but it will require financial hardship.

The next obstacle I've observed is more nebulous.  The snobbery of students raised in elite households is real and very prevalent at top American universities.  I encountered this firsthand in the early 1990s and it has worsened along with income inequality.  The low-income students who are lucky enough to attend top-ranked universities will never truly find social acceptance from the vast majority of very privileged students they meet.  Class distinctions are hardening in America and having a brand-name degree is no longer a path to upward mobility.  I noted that SRA played two video studies of their best clients.  I found it telling that one became a teacher and the other became a non-profit worker after graduation.  Those are low-income, low-prestige occupations with zero upward mobility.  That's what the ruling class wants now for its non-pedigreed graduates.  We should do better.

The final obstacle I've noticed in society lies in the financial condition of the entities sponsoring financial aid.  The federal government cannot run persistent budget deficits forever and it will eventually try to destroy its unfunded liabilities with hyperinflation.  This will in turn destroy its ability to fund Pell grants and underwrite student loans.  Private sources of aid will fare no better.  The 2008 financial crisis devastated the endowment portfolios of Harvard, Yale, and other schools that had just made strong commitments to merit-based financial aid for low-income students.  I fully expect a repeat of that episode, with no recovery.  Private aid will have to fill the gap if private sources can survive hyperinflation.

Clark Kerr's California Master Plan for Higher Education defined clear roles for each tier of the state's post-secondary education system.  Changes in our society's structure are destroying this plan's ability to deliver value.  The junior colleges were intended to provide instruction in skilled trades for less intellectual students.  They have become feeder schools pushing academically unprepared students into four-year universities.  It should come as no surprise that college dropout rates are higher than ever.  A feeder system that encourages academically unskilled students to take on debt for degrees they cannot complete is a broken system.  Low interest rates have fed the student loan bubble but that will pop once the Federal Reserve loses control of the yield curve.  The crash in funding sources - any way it happens - will further destroy the sustainability of California's publicly funded university system.

I was pleased to hear SRA discuss the potential of MOOCs as course offerings for students who can't join their mentoring program.  MOOCs have the potential to completely blow away traditional resident universities in all academic subjects.  I believe we won't even recognize the educational landscape a generation from now once a critical mass of middle class and poor parents figure out that their kids can train themselves for any career online at their own pace for free.  No snobby brat can tell a poor kid they don't deserve a university education if the equivalent of that education is available on the Internet at no charge.  The rise of MOOCs is a free-market update to the Clark Kerr plan's noble goal of providing affordable education appropriate to all skill levels.

I will suggest one way forward.  I have written before on the potential for public option banks to address the financial needs of low-income citizens.  I think they can also address the needs of disadvantaged students.  If every state had a public bank, low-income students receiving financial aid through any government channels would be required to hold their money in this bank's no-fee checking accounts.  The banks could also be conduits for financial literacy education.  This ties together the delivery of aid and the maturation of the recipient.

My own merit-based scholarships to the University of Notre Dame and the University of San Francisco never benefited me.  Maybe SRA's clients will have better luck, especially with MOOCs.  They can rise above poverty without debt, or else they'll sink below into dead-end careers.  I made a career for myself anyway, as per my LinkedIn profile.  Poor kids can do it too.