The IYF authors focus on the so-called “NEETs” in the United States and Europe. NEET stands for those Not Engaged in Employment/education, or Training. A 2012 U.S. study put the social cost per NEET youth at $37,450, when you factored in lost earnings, public health spending, and other factors. That brings the total cost of 6.7 million NEET American youths to $4.75 trillion, equal to nearly a third of GDP, or half of U.S. public debt.
— The typical income gap between the a college graduate and the a high school dropout has never been higher. Today, college grads earn 80 percent more than people who don’t go to high school.
— A 2009 McKinsey report estimated that if we raised our education performance to the level of Korea, we could improve the US economy by more than $2 trillion. (We could, in other words, add the GDP of Italy to our economy with education reform.)
— Yet another study from NBER estimated that the benefit of a good teacher over an average teacher could improve a student’s future lifetime earnings by $400,000.
— Finally, a study from the Hamilton Project found that $100,000 spent on college at age 18 would yield a higher lifetime return than an equal investment in corporate bonds, U.S. government debt, or hot company stocks.
There is a cost to not educating young people. The evidence is literally all around us.
Wow, never thought of it that way…
Financial aid, whether it’s a cheap loan, a work-study job at the campus library, or a grant, is supposed to make college more affordable and accessible for students. But what if, by handing money out to undergrads, the government is simply encouraging schools to spend more and jack up tuition?
Meet “the Bennett hypothesis,” the dismal notion named for Reagan Education Secretary William Bennett, who suggested it in a 1987 New York Times op-ed diplomatically titled “Our Greedy Colleges.” Generous student-aid policies had “enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,” he wrote at the time. “Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”
Twenty five years of swelling tuition prices later, Bennett’s critique seems to have received a stamp of bipartisan approval, courtesy of the Obama administration. It’s the driving spirit behind a White House proposal that would condition a small amount of the federal financial aid that colleges distribute to students on their ability to keep a lid on costs. “We can’t just keep on subsidizing skyrocketing tuition,” Obama told a rally audience at the University of Michigan last month as he announced the idea.
True enough. Subsidizing skyrocketing tuition sounds like a supremely poor idea. If only it were clear what the link between student aid and college costs actually was.
Read more. [Image: Thomas Barrat/Shutterstock]
This makes total sense. It’s a cycle that must be put to an end.