Theodore L. Caputi | Separation of schooling and state

The Quixotic Quaker | Don't let the government choose your major

By Theodore L. Caputi 09/29/15 11:49pm

Sen. Elizabeth Warren recently wrote an op-ed about her plan to mitigate America’s $1.2 trillion student loan burden by imposing fines on universities whose alumni are unable to pay off their student loans. Her intention is for universities to have “skin in the game” as “risk-sharing” penalties incentivize colleges to reduce their cost of attendance and/or improve student outcomes. Makes sense, right?

Don’t buy it. Warren’s plan is well-intentioned, but it will have unintended consequences that could undermine students’ personal freedom and eliminate academic programs that lead to low-paying jobs.

Currently, students who take out loans make their own academic choices and are held financially accountable. They decide for themselves which academic path will offer the best cost-to-benefit ratio based upon their own definition for success — which may or may not include a well-paying career. Because of this freedom, students can “bet” on themselves, even against the odds, by deciding whether or not the expected marginal benefit of choosing a specific major at a given school will be worth the costs.

If Warren’s plan is adopted, colleges may eliminate or limit admission to programs that don’t provide a “good enough” financial payoff. Consider most music performance programs. The average mid-career salary of a music major is a paltry $51,400 — a manifestation of supply and demand. Many students major in performance, but the supply of music performance jobs is limited. Those who don’t “hit it big” may be saddled with college debt they find difficult to pay.

So what might happen to music majors at some universities? Fearing future “Warren fines” the school may begin to make academic decisions on behalf of its students — and either shut down its music program or limit enrollment to only the most promising performers. In the end, how many performance music programs would be left?

All college programs associated with traditionally low or lower wage careers are at risk — goodbye special education ($46.8K), criminal justice ($58.8K) and social work ($46.6K) majors! Colleges under Warren’s plan will only be incentivized to host programs that lead to high average salaries, such as actuarial mathematics ($119.6K) and chemical engineering ($116.7K). Hello STEM education!

Warren’s plan turns students’ academic pursuits into a numbers game. And while you may bet on yourself as an anthropology major ($58.1K) who’ll beat the odds, it is unlikely that your college will.

Some argue from the viewpoint of academic paternalism. Perhaps the university ought to protect students from their own bad decision-making by taking some options off the table. But paternalism assumes that the university knows what’s best for individual students. In academics, there is informational asymmetry. Universities receive only signals about a student’s potential — usually GPA and SAT scores — without knowing what the student knows about their own capabilities. Relying solely on signals negates the value of one’s own self-awareness.

I propose an approach that treats educational investments like the U.S. Securities and Exchange Commission treats financial investments. The SEC won’t stop you from investing in a risky company — but it requires that publicly traded companies disclose the necessary information for you to make informed decisions. Right now, the Higher Education Act of 1965 requires colleges to publish graduation and retention data. Perhaps it should expand reporting to include other outcome data, such as salary by academic program. This way, students can make well-informed decisions about their educational investment.

The greatest danger of Warren’s plan is that, if implemented, it could stifle yet-to-be great achievers. What would she have thought of Chicago Mayor Rahm Emmanuel, who studied liberal arts at Sarah Lawrence College? (Behold the double whammy of a traditionally low-paying degree earned at one of the country’s most expensive colleges!) Would Warren have let him learn the critical thinking skills he uses as mayor — or would she have quickly shuttled Emmanuel to the computer science department?

If colleges had to decide whether each student’s educational path was economically sound, we might be deprived of the likes of media mogul Oprah Winfrey (speech communications and performing arts, Tennessee State University), TV host David Letterman (broadcasting, Ball State), former Disney CEO Michael Eisner (English/theater, Denison University) or even — Sen. Elizabeth Warren (speech pathology, University of Houston).

THEODORE L. CAPUTI is a College and Wharton junior from Washington Crossing, Pa., studying finance/statistics and mathematics. His email address is tcaputi@wharton.upenn.edu. “The Quixotic Quaker” appears every other Wednesday.

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