Something to think about

From an interview with Harvard economist Lawrence Katz:

...What the government (did)—in the ’50s and ’60s, even into the ’70s—is invested heavily in high-quality colleges. Think of University of California campuses or Florida State. But since then, there’s been very little investment in expanding quality higher education. There’s increased crowding at community colleges and state universities, and states have greatly cut back on appropriations for higher education, particularly in the Great Recession.

The federal government has continued to have an important role, but it’s done it with flexible support through Pell grants targeted to low-income students. The problem is that we’ve had a surge of really low-quality colleges, and the worst of that is the for-profit sector, which Claudia, David Deming and I have studied. Particularly from the late ’90s to 2011 with this very large wage premium and funneling more federal funding into loans and Pell grants, a big part of that marginal growth—particularly for disadvantaged individuals—was at for-profit institutions for both associate’s degrees and bachelor’s degrees.

It’s been a bit of a disaster. Even though these for-profit institutions have tried to be up to date, very flexible, with high-quality online instruction, we have repeatedly found very little economic return to degree programs at for-profit institutions; instead, it’s become a massive debt trap. I think there is something to be said for the quality and capabilities, the faculty, the peer effects of a traditional public or private nonprofit university.

So, rather than what would’ve been the equivalent of the (earlier) high school movement—developing more University of California campuses or more Florida public universities, so we weren’t rationing access to quality public colleges—we allowed the for-profit private sector to come in both as a nimble creative but also as an agile predator.

The market choice approach, of course, is really good for commodities someone can buy repeatedly and assess. And it works in some cases for higher education as well. Where there are clear state certification requirements, the for-profit education sector has been reasonably good. For becoming licensed in cosmetology, for instance, or hair stylists or health tech occupations, it works, and we wouldn’t want to shut down the whole sector.

For things like getting a more ambiguous business degree or getting a nursing degree, though, the quality and infrastructure just haven’t been right. But recent work has shown that where people can get into quality institutions, a state university like Florida International University, say, on the margin, they get like a 14 percent a year return. That’s clearly telling us we’re not having enough access to good quality education. Seth Zimmerman at the University of Chicago has shown this...

Full interview at https://www.minneapolisfed.org/publications/the-region/interview-with-lawrence-katz