A friend of mine is enrolled in an online medical coding course of study through a public community college. She began this course of study more than a year ago when her career job was outsourced overseas and she was unable to find anything in her field at a living wage, despite being willing to relocate. Abruptly, her skills and experience lost their value, and she was persuaded to train for another career. In her case a government grant paid her tuition and fees, but she has still invested a year of full time work. Taxpayers funded that government grant.
It has become apparent over the ensuing year that the opportunities in the new career are less rosy than they were represented, and the training she is receiving is becoming obsolete nearly as fast as she acquires it. This one example, of a specific career-oriented educational program through a heretofore reputable institution, strikes me as a classic example of planned obsolescence. That is, at the time the product (the course of study) was designed and marketed with a specific government program in mind, the people who designed it were aware that the product would become out of date rapidly and that the potential consumers (students) would be obliged to once again purchase additional product in order simply to survive.
Post-secondary education has an increasing tendency to become obsolete, even in more classic fields such as English literature where most of the information and adequate methods for accessing and manipulating it have been in place for a hundred years or more. A close examination of texts, curricular materials, and syllabi from the present decade, thirty, and fifty years ago makes it apparent that the education system is becoming less and less geared toward producing a durable product. Thanks to the ease of electronic editing and publishing, new editions of textbooks appear on an annual basis, and a comparison often reveals that the newer version does not contain substantially more information, or tools for using that information, but consists mainly of reworking the old material with a different slant, in a way that makes the old text unusable for purposes of obtaining credentials. I see another friend, who is working toward an accounting degree and has been obliged to accrue considerable debt to do so, shelling out hundreds of dollars per term on textbooks which cannot be resold and are likely to end up in the landfill. How valuable the accounting degree itself will be is questionable; so much of the field is being automated or outsourced, and the ground rules change rapidly.
I was taught, as a basic tenet of prudent financial management, that one should never borrow money to acquire something if the time to repay the debt would exceed the useful life of the object, and circumstances down the road are likely to force replacing the object. Otherwise, the fruits of a person’s labor end up being bled off into paying for something from which they no longer receive any benefit. This basic equation ought to provide a disincentive to high levels of planned obsolescence as a business plan: a repeat customer needs to be able to afford the replacement item. A prudent lender can easily see that making loans that individuals will not be able to repay is poor business practice in the long run.
What is the useful life of a college degree? Policy pundits warn that the average person in the United States is likely to be forced to change careers every five years. A career of any sort generally requires post-secondary education, and changing from one career to another does also. By simple arithmetic, then, it is unwise to borrow more for a degree than can be paid off in five years. Few student borrowers meet that criterion. Even fewer of them meet it if one factors in that they often enter a market where the market value of the degree is poor and the planned obsolescence factor has already come into play.
If it were not for a series of legislative acts, beginning with the Higher Education Act of 1965, which initiated the American government guaranteed student loan program, it would also be a poor business practice to make student loans at the current level. When it became evident in the 1970’s that lenders were making government guaranteed loans to individuals likely to default on them, capitalizing on origination fees and subsidies and anticipating early default, the Federal government responded by making it well-nigh impossible to bankrupt student loans and giving the lenders powers of debt collection unrivaled even by the IRS.
That this hurt student borrowers, encouraged the proliferation of dubious educational institutions, and benefited the loan industry goes without saying. Government guarantees and subsidies for lending, although attractive to politicians since they appear to be cost-neutral, can end up being a slippery slope, a species of Ponzi scheme which gives the illusion of growth without the necessary underpinning of actual value added to the system.
I have been examining the economics of American Higher Education in earnest for more than a decade, ever since I started working as a legal analyst in a bankruptcy office, and every year I am astonished that the whole system has not collapsed, as bubbles and Ponzi schemes inevitably do. Denial is an amazingly powerful facilitator of inertia, but it only forestalls the inevitable.
Photo Credits
Computer Lab – PCWORLD
Ford magazine ads from 1950s – Adbranch
“The standard repayment plan for federal student loans puts borrowers on a 10-year track to pay off their debt, but research has shown the average bachelor’s degree holder takes 21 years to pay off his or her loans.” – https://www.usnews.com/news/blogs/data-mine/2014/10/07/student-loan-expectations-myth-vs-reality
Using the “5 year” rule of career length, the average person will spend 4 times the amount of time in the job acquired with the education, to pay off the loan. Wow 🙁
Thank you for the link to the article. The statistic, that the average borrower takes 21 years to pay off loans for a bachelor’s degree, must be based mostly on students who graduated in the late eighties and early nineties, when jobs that were secure and paid enough to allow repayment of student loans were more plentiful. It is not a good predictor of the experience people currently in college are likely to face. If you read further you will note that the majority of recent graduates are not currently able to make amortizing payments on student loans, even at low interest rates..
Since I wrote this, the friend I alluded to in the first paragraph finished the training program and passed a grueling certification exam, only to discover that obtaining a professional job required completing an unpaid internship, not a possibility for someone in her circumstances. The proliferation of unpaid internships, often at “nonprofits” which have some highly paid employees and do a lot of subcontracting, is another factor in producing an exploited work force at the lower levels of health care and education.