The Other Debt Crisis

As the August 2nd deadline to raise the U.S. debt ceiling looms and much of the media attention turns towards prospects of a U.S. default on paying its bills, it may be worth remembering the debt problem that no one is talking about -- one that may have even more direct implications on unemployment, consumer spending and even the next election -- our educational debt crisis.

Make no mistake -- it's a crisis. Student loan debt has surpassed total credit card debt in the U.S. This year's graduating class of college seniors had the highest average debt to date, projected to reach more than $1 trillion later this year.

Since 1982, the average cost of attaining a college degree has increased by 439 percent, while the typical family's income increased by only 147 percent. The average cumulative debt incurred by a 4-year college student is $27,803.

As an example of the inordinate hikes that students are seeing, University of California regents approved a 9.6 percent tuition increase on top of an already approved 8 percent tuition increase starting in the fall after a cut of $650 million in the California State University budget. Additionally, studies show the increase in the cost of 4-year institutions has been attended by a decrease in percentage of actual graduates (even factoring in 2 additional years).

All of this would be tenable if four-year universities produced students that entered the market labor-ready. But According to the Clinton Global Initiative, there are three million jobs right now which have no takers because applicants lack the skills. If those positions were filled, it would cut the unemployment rate in half. But job openings, according to Bill Clinton, are being filled at half the pace of previous recessions.

Clearly, we have a higher ed sector that isn't aligned with the needs of our struggling economy. At the same time, vocational training continues to be stigmatized as an ignominious substratum, a place to consign unpromising students. The way ahead is clear: There must be a rethinking of what jobs require a traditional four year degree, and which are better served by a lower cost, expeditious option more aligned with the demands of our economy.

Let us start by saying that this is not an attack on the university. We honor the original purpose, which was to foster the spirit of the Renaissance and the Enlightenment as a beacon of learning, a rejoinder to the obscurantism of the Dark Ages.

The first ever university in Europe, the University of Bologna, promoted the notion of academic freedom in its charter, and we are all beneficiaries of the sciences and arts which emerged from that grand enterprise. Those institutions need to be preserved and defended against summary budget cuts. But one would be hard pressed to show how a degree in Professional Golf Management accords with the spirit of Francis Bacon or Erasmus. It proves even more difficult to explain why it is priced at six-figures when it might be more appropriately offered as a certificate course or on-the-job training.

For many, the dream of earning a college degree (and the social acceptance that comes with that accomplishment) trumps a more analytical, cost-benefits approach. Simply put, strict adherence to an illusory intellectual caste system is an indulgence our nation can no longer afford.

Before we continue to accept a four-year college degree as the gold standard, regardless of one's aspirations, consider these facts: According to the Bureau of Labor Statistics, a two-year associates degree, or a certificate in a particular trade might be the smarter bet to financial stability. In their recent survey, nearly 30% of associate's holders achieved greater income than their traditional four-year counterparts. Furthermore, more than one-quarter of those holding an industry specific certificate surpassed earnings of either counterpart. "A four-year degree in business -- what's that get you?" asked Karl Christopher, a placement counselor at the Columbia Area Career Center vocational program. "A shift supervisor position at a store in the mall."

Other countries seem less alarmed by the dichotomy between a college degree and skills training. A study in Germany found that of those who passed the Abitur, the exam that allows some Germans to attend college for almost no tuition, 40% chose to go into apprenticeships in trades, accounting, sales management, and computers. "Some of the people coming out of those apprenticeships are in more demand than college graduates because they've actually managed things in the workplace," says Robert I. Lerman, Professor of Economics at American University.

So, how can we keep successive generations from being burdened with a Sisyphean debt load without a guarantee of recompense? First, let's look seriously at online universities where students are relieved of travel, lodging, even textbook expenses, and where participation has risen on average 17-19% per year since 2005. This year, over one million adults are taking degree or certificate programs delivered 100% online in the U.S., according to Eduventures. Employers are increasingly accepting of OU applicants, but admit a bias towards traditional brick and mortar institutional graduates. Given two equal applicants, they will choose the traditional student. It is anticipated that as the current workforce "greys out", and more hiring managers come from OU backgrounds themselves, the perception of OU inferiority will change accordingly.

The other avenue is certificates. According to the Center of Education and the Workforce at Georgetown University, a post-secondary certificate adds almost $117,000 in lifetime earnings over a high school diploma or those with no other degrees. Take the curious case of Anne-Diandra Louarn, a 23-year-old native of Paris who graduated from N.Y.U.'s journalism certificate program in 2009. She claims it secured her post at France's Tiffany newspaper, Le Figaro, where she reports for the Web site and manages the newspaper's Facebook and Twitter pages. She had no journalism experience, other than an internship at a small social media company in New York and a two-year degree in communications from Paris Descartes University. At N.Y.U., she took seven classes, over two semesters, paying about $3,000 to complete her certificate. When applying for jobs, she says, the pedigree carried clout. "Because N.Y.U. is a very well-known university," Ms. Louarn says, "I know it helped me."

Martin Scaglione, president and CEO of work force development for ACT advocates "certification as the new education currency - documentation of skills as opposed to mastering curriculum." Little more than half of all certificates are awarded by public sector institutions, mostly community colleges, while only four in ten are granted by for-profit institutions. Certificates have also become a source of upward mobility for lower-income groups and minorities: Women account for close to two-thirds of certificate-holders. Black and Hispanic students earn about one-third of all certificates issued, compared to just 20 % of all bachelor's degrees.

Then, there's the good old-fashioned trade school. Noted New York Times reporter Louis Uchitelle wrote about the kinds of jobs in demand back in June 2009, saying:

"...unnoticed in the government's standard employment data, employers are begging for qualified applicants for certain occupations, even in hard times. Most of the jobs involve skills that take years to attain. Welder is one...Electrical lineman is yet another, particularly those skilled in stringing high-voltage wires across the landscape."

For those with visions of Victorian smokestacks, it is important to know that the new manufacturing job isn't about pulling levers but, because of automation, increasingly involves computers, math, writing, and communicating. Over the next decade, the 20 occupations in the manufacturing industry that are expected to need the greatest number of workers will require at least some post-secondary education, according to the Manufacturing Institute, (part of the National Association of Manufacturers). Those 20 occupations, according to data from Chmura Economics & Analytics and the U.S. Department of Labor, will provide more than 1 million jobs over the decade - more than half of which will be in high-tech industries. Such jobs pay higher average wages than all others excluding health care and social assistance. Managers can earn an average annual wage of $107,970 and industrial engineers an average of $75,740.

Hardly the dungeon of the educational system that it's portrayed to be, vocational training delivers far better return on investment than most traditional universities. The key to effective vocational training is the community college system. More than 30 states, with the backing of industry and the federal government, are introducing a new national credentialing system for community college students and employers across manufacturing sectors. It has won the support of President Obama, who, earlier this month, said he would back an effort to help 500,000 community college students obtain industry-recognized credentials. The White House has also proposed a program to train 10,000 engineering students a year. "We need to triple and quadruple what we're doing at community colleges with retraining to really start moving the unemployment numbers," says William J. Holstein, author of the recently published book, The Next American Economy. "We need to think big, not incrementally."

Lastly, we need to promote employer-sponsored, on-the-job training.

In today's world, work and learning are becoming parallel as opposed to sequential events. The timeframe for employees to apply new and synthesized knowledge is being compressed. The only way to remain competitive as a nation is to allow working adults to keep one foot in the classroom throughout their careers.

The University of Phoenix reports that its average student is now 34 years of age, which supports the modern day profile of the "Working Learner". The same surveys found an average of 40% of postsecondary graduates deficient in these skill areas. Both increasing the number of workers with postsecondary credentials and enhancing their skill mix so they are ready for the innovation economy will require a much closer alignment of the nation's worker-training programs and our traditional higher education system. Worker-training programs must expand public investments through the federal Workforce Investment Act and a variety of state-level initiatives as well as those programs funded by employers and through joint-management labor partnerships.

Most of the elements needed for the postsecondary education system we outline already exist, but they operate according to policies that are still aligned with the mass-production economy in which technical knowledge and workplace savvy could be developed separately rather than the innovation economy that requires that they be developed simultaneously. We need our leaders in business, education and legislation to embrace smart, focused programs that drive Americans where they long to be: Back to work.

Special thanks to the researcher and co-author of this article, Heather M. Carper. Heather was an honor student, whose attempt at Higher Learning at an elite college ended in nearly $40,000 debt and no degree. After over a decade in the workforce, she is currently in an accredited certificate program, and has recently applied to a state college.