The College Scam

The College Scam
By John Stossel
7/6/2011

What do Michael Dell, Mark Zuckerberg, Bill Gates and Mark Cuban have in common?

They're all college dropouts.

Richard Branson, Simon Cowell and Peter Jennings have in common?

They never went to college at all.

But today all kids are told: To succeed, you must go to college.

Hillary Clinton tells students: "Graduates from four-year colleges earn nearly twice as much as high school graduates, an estimated $1 million more."

We hear that from people who run colleges. And it's true. But it leaves out some important facts

That's why I say: For many people, college is a scam.

I spoke with Richard Vedder, author of "Going Broke by Degree: Why College Costs Too Much," and Naomi Schafer Riley, who just published "Faculty Lounges and Other Reasons Why You Won't Get the College Education You Paid For."

Vedder explained why that million-dollar comparison is ridiculous:

"People that go to college are different kind of people ... (more) disciplined ... smarter. They did better in high school."

They would have made more money even if they never went to college.

Riley says some college students don't get what they pay for because their professors have little incentive to teach.

"You think you're paying for them to be in the classroom with you, but every hour a professor spends in the classroom, he gets paid less. The incentives are all for more research."

The research is often on obscure topics for journals nobody reads.

Also, lots of people not suited for higher education get pushed into it. This doesn't do them good. They feel like failures when they don't graduate. Vedder said two out of five students entering four-year programs don't have a bachelor's degree after year six.

"Why do colleges accept (these students) in the first place?"

Because money comes with the student -- usually government-guaranteed loans.

"There are 80,000 bartenders in the United States with bachelor's degrees," Vedder said. He says that 17 percent of baggage porters and bellhops have a college degree, 15 percent of taxi and limo drivers. It's hard to pay off student loans with jobs like those. These days, many students graduate with big debts.

Entrepreneur Peter Thiel, who got rich helping to build good things like PayPal and Facebook, is so eager to wake people up to alternatives to college that he's paying students $100,000 each if they drop out of college and do something else, like start a business.

"We're asking nothing in return other than meetings so we make sure (they) work hard, and not be in school for two years," said Jim O'Neill, who runs the foundation.

For some reason, this upsets the left. A Slate.com writer called Thiel's grant a "nasty idea" that leads students into "halting their intellectual development ... maintaining a narrow-minded focus on getting rich."

But Darren Zhu, a grant winner who quit Yale for the $100,000, told me, "Building a start-up and learning the sort of hardships that are associated with building a company is a much better education path."

I agree. Much better. Zhu plans to start a biotech company.

What puzzles is me is why the market doesn't punish colleges that don't serve their customers well. The opposite has happened: Tuitions have risen four times faster than inflation.

"There's a lot of bad information out there," Vedder replied. "We don't know ... if (students) learned anything" during their college years.

"Do kids learn anything at Harvard? People at Harvard tell us they do. ... They were bright when they entered Harvard, but do ... seniors know more than freshman? The literacy rate among college graduates is lower today than it was 15 or 20 year ago. It is kind of hard for people to respond in market fashion when you don't have full information."

Despite the scam, the Obama administration plans to increase the number of students getting Pell grants by 50 percent. And even a darling of conservatives, New Jersey Gov. Chris Christie, says college is a must: "Graduating from high school is just the first step."

We need to wake people up.
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