Fun with student loans

The NYT today offers up this column on student loans. In particular, it considers the sad case of of a young, attractive and intelligent woman called Cortney Munna, who recently completed her B.A. at NYU and is now having some difficulty paying off her student loans.

The column frames Cortney's situation as one where she has been ill-served by some combination of the government, NYU and her bank, but mostly by NYU. She is, the story goes, a helpless victim of the system.

The column suggests that NYU should have told her to change schools midway through her degree when her debt reached a certain level. Even taking this idea on the column's own terms, which are that young, attractive and intelligent women are actually helpless waifs who need to be told how to manage even very obvious aspects of their affairs, this makes no sense. There is little point to spending lots of money for two years of filling distribution requirements at NYU only to then switch schools and receive a degree at some SUNY campus. Where you finish is largely what matters. Moreover, Cortney's debt levels at various points in her university career were quite predictable at the time she started. If she was not to finish at NYU she should not have started there.

My concerns about this column run deeper. First, it focuses entirely on the "where should I go to school" margin and ignores the "what should I study" margin. The columnist buries the key information, which is what Cortney majored in, at the end of the article. As it turns out, she has an "interdisciplinary degree in religious and women's studies". I am pretty sure that this is not the field of study at NYU with the highest expected earnings. Sad as it may seem, in a real world of budget constraints and tradeoffs, students sometimes face tough choices between their heart and their head. Cortney went with her heart, which is fine; the point is, after all, to maximize utility, not earnings.

But that is her choice, not evidence that the system is somehow broken. Information on expected earnings by major is easy to find; if you do not believe me just google " earnings by college major" as I just did. The numbers one can find are of course estimates and are necessarily a few years out of date but for the purposes of the decisions that Cortney faced, both about where to go to school and about what to study, they provide plenty of information. Do we really want to say that someone who has the test scores to get into NYU should not be assumed responsible enough to spend 10 minutes on the internet (or talking to college educated adults) to gather the basic information related to the one of the most important decisions in her life?

More broadly, and from a slightly different angle, the NYT columnist is essentially proposing that colleges bring back the doctrine of "in loco parentis" - in place of the parents - under which undergraduates are treated not as young adults but as old children. Would the NYT columnist like public universities to go back to the days of single-sex dorms and curfews? If not, why are those aspects of university life different than decisions about where to study and what to major in?

Having said all that, I do think it would be useful for the federal loan agencies to require loan recipients to demonstrate knowledge of program details and of broader financial literacy as part of the process of qualifying for a loan. Adding in some information about the means and variances of earnings associated with particular fields of study at particular types of schools, and about rates of degree completion, would not hurt either. The public should not be offering big loans (and big subsidies) to students who cannot perform simple interest rate calculations or who display little or no knowledge of their likely earnings and loan payments.

Hat tip: Sarah Turner

Addendum: Reason's take on Cortney and her travails.