 Welcome to Building Tomorrow, a show about how tech and innovation are changing our world for the better if we let it. Today we're going to discuss attempts to disrupt higher education. Now, here's the too long didn't listen version. When you were in college, were you bored in massive lecture classes? Do you hate the mountain of student loan debt you're still paying off? There may be fixes for that. I mean not fixes for you dear listener, you're screwed, but fixes for the next generation of college students. With us stay in the studio is Aaron Powell, the editor of libertarianism.org and special guest Neil McCluskey, the director of Cato Center for Educational Freedom. Welcome to the show Neil. Thanks for having me. Now to start, I thought we would talk about MOOCs. So Neil, can you tell our audience just in case they don't know what is a MOOC? Well, that is a massive open online course. Probably you heard about MOOCs, or at least you encountered the term MOOC five or six years ago when these were going to be the next big thing. So the idea was that some place like MIT or Harvard or Princeton or any college really would sort of put courses online and anybody who wanted to could take those courses. And it sounded great, sounded revolutionary. Don't hear about MOOCs as much anymore. They're still out there, Coursera, edX, operations like this, but they were really kind of the hot thing about five years ago and they've cooled off a little since then. Yeah, they were supposed to utterly transform higher ed. Everything was going to be MOOCs, or most students would be in MOOCs by now. But yeah, that hasn't panned out. Why is that? Well, there's probably a lot of reasons. For one thing, everything, it seems to me, when it first comes out gets a little overhyped, especially if it's technological and technology is great. It improves lots of things, but there's always sort of strikes me some over-enthusiasm for the newest thing. And so it's not really surprising, just regardless of the effect of MOOCs educationally, that people backed off a little bit from them, or at least they're not as celebrated as they were. And there are a lot of problems. One is that there's still an open question whether or not the effectiveness of getting your instruction online is the same as if you're in a course. Certainly people sit in lecture classes and they're bored. I think lots of people, though, sit in front of the computer to watch a lecture, still get bored, and do other things. Netflix and chill while you're watching the class lecture, yeah. Yeah, yeah. Among other things, I mean, the Internet's full of stuff you can do to distract yourself even while you're involved in your massive open online course. Maybe as big a problem, though, is that a lot of these courses you couldn't get credit for, or they weren't in a degree-granting program. And ultimately, a big part of higher education is just about getting some sort of certification that you've not necessarily even learned something or can do something, but you've put in seat time to eventually get something called a degree. And so I think that was also part of it, is sure you could access these great lectures from really impressive professors. But what was really the substantial thing you got out of it that enabled you to some concrete way improve your life other than you've maybe gained some new knowledge or watched a great lecture? Does that mean then that there's kind of two ways we can think about the question of have MOOCs worked or do MOOCs work in the sense that we can say, do they work from the perspective of are people who are participating in them learning? So they work as an educational tool and then as an educational tool that allows people who would not have had access to attending college to learn the kinds of things one would learn in college. But that that's distinct from do they work as a alternative to or ultimately replacement of college because the former they could, you know, you can sit there and you can listen to the lectures and you can learn and there's the distinguishing fact, the difference between sitting in front of a MOOC and sitting in front of a professor in a large lecture hall is, I guess, the lecture hall is higher resolution. But and especially now that students seem to, I mean, I was shocked at the difference between when I was an undergrad and then when I was in law school between those two is when people started bringing laptops to class. And so people kind of goofed like people looked bored in lectures when I was an undergrad, but in law school people just surfed the web during lectures. So so they look even more like MOOCs because you've got the same distractions are sitting right in front of you. But that's different from then it seems like the the question of certification if that's the the ultimate goal. And so they work as that isn't really a problem with MOOCs so much as it's a problem with legal structures or institutional structures or so on. So do we know do we know, I guess, on the former on MOOCs as a way to become educated, whether they work or don't work compared to a university curriculum? Yeah, and that's absolutely right is when we talk about education, we're often talking about two things that we think should be connected but are really separate, which is what are you learning versus what piece of paper do you get when you're done. And getting a degree often doesn't really have much connection to am I learning a lot that's useful. So the question then is let's set aside the degree part and say, well, do we have evidence that people are learning more less equal amount if they're in an online course versus in person. And if we're talking about online courses, it's not necessarily MOOCs. I mean, we should talk about just online delivery in general. I would say the first thing is, I don't think we have a whole lot of really great in depth research that does the sort of thing you'd want to do to decide does the online course supply better education than in person. You'd want to sort of randomly assign people to an online course or an in person course. We don't have a whole lot of that. Generally, what we see from the research that exists is, you know, maybe the people who take a course online get the same outcomes. There's some research that shows that there's some research that says, well, really, they they don't do quite as well. But it's really hard to make an apples to apples comparison of who's the person who's selecting into an online course versus who's the person going to a traditional in person course. But the studies I've seen that come closest to an apples to apples comparison suggests there's really not a big difference in the outcomes. I also think, though, that it would make a big difference of what kind of course it is. So you can't do physics laboratory work at home. You can learn about the Canterbury Tales, probably as well, if you're at home as if you're at school. So there's a whole lot that makes this a not so simple question. I wonder too if the second part, the works as a accreditation thing would factor into the first of works as an educational tool in the sense that the accreditation ultimately also works as an incentive. So one of the reasons that you pay attention in class is because you know there's going to be a test. And if you do poorly on the test, it's going to bring down your GPA, which is then going to go into your permanent record. And the MOOCs don't have that. And so even if the material is just as good, if not better, more engaging, you'd still be like, oh, well, I'm going to hop over and watch a YouTube video or I'm going to surf Pinterest or whatever. That that can hook you a little bit more because you don't have the, oh my God, I'm not going to get a job or my parents are going to get mad when they see my report card. Yeah, I don't, this goes again to a much bigger higher education and K through 12 education question, which is does a degree or certification actually represent that you've learned anything of value. So even if you go to traditional set aside online education, you go traditional class, you work really hard to get that a or a plus in the course. And then what we find is people kind of immediately brain dump a lot of that. So it appears that when employers in many cases ask for something called a degree, it in no way actually signifies, well, we know this person has learned skill X, Y and Z that we require to do this job. It's usually just a sort of basic screening or signaling device to say, well, we know this person kind of follows the rules because they went to school. We know they at least have the stick to it. And this is that they completed a program and maybe depending on what school they go to, we can tell a little bit more about, you know, are they pretty smart or they are they not that smart at this point. You can't really trust GPAs because different schools have different measures of your GPA and great inflation, great inflate testing. We have lots of standardized tests, but a lot of how you do on a standardized test. You can game, right? Because you take the strategy courses for SAT or ACT or the school on the state tests has said, well, we're going to teach you testing strategies. So there is a huge problem just generally of you get a degree in something. There's not a whole lot of evidence that that often means you now have concrete skills and knowledge that the employer wants. It varies a lot by what you study. Engineers typically have learned stuff that's very useful to employers. Many other people doesn't seem to be much connection. So I'll throw out my my own experience teaching for online education at Penn State. And they so it combines those two problems. One which is a course design, which discourages really knowledge acquisition. So it as an inferior product, product compared to in classroom instruction. But then also the signaling issues. I mean, so a lot of what you've been saying, Neil reminds me of Brian Kaplan's book, The Case Against Education, Why the Education System is a Waste of Time and Money. This education as social signaling or even class signaling as opposed to skills acquisition per se. But it combined those two. So at Penn State you could take online courses that were essentially doppelgangers for in-person classes. But they were cookie cutter based on like old taped courses from decades before. So as an individual instructor, you didn't get to really design the course. You didn't design lectures. You just delivered material that was prepared for you. So that doesn't exactly make for a dynamic classroom experience. Just delivering someone else's words, someone else's assignments, etc. This meant a super high dropout rate. Students would just come and go a very low engagement rate. Like the percentage of students who turned in material, who did their assignments, was lower than in classroom experience. It was just less engaging, less interesting. Students got less out of it than if they had been in a real world class. And also it was something you did through an kind of an alternate campus. They called it World Campus. You could get a degree through it. It was a degree granting program. So you could get like a history, I forget what they called it, some kind of humanities degree through online education only basically. But it came with a World Campus of Penn State stamp. And everyone knows that the World Campus stamp doesn't mean as much as the University Park stamp, let alone one of the branch campuses, Harrisburg or whatever. So it didn't signal the same thing. So it neither fulfilled the function of education, which is to learn stuff or the function of education, which is to signal the kind of student you are as well as an in-person classroom. Now, I don't see that as inherent to the model though. They set it up that way, arguably in part because most institutions of higher education have a successful model already. I mean, it is built around the residential experience. It's they don't want to disrupt what they're currently doing. So these kind of courses are add-ons, if I want to be ungenerous, a cash grab. But they don't want it to compete or truly replace the actual model that's been very successful for them for a very long time. So, I mean, I saw that same kind of thing in person at Penn State. So we're talking about some of the problems with online ed and kind of MOOCs in general and online ed in general MOOCs specifically. Where do you see some areas of success, Neil? Well, I don't know that I see a whole lot of ultimate success, but largely so far, largely for the reasons that you talk about is because I think that especially in higher education, we see this problem of a stigma being attached to anything that isn't old. So the top universities, you can you can tend to draw a line between their age and how prestigious there are. They are. I mean, there are a few that are a little younger to get in there, but age has a lot to do with it. Traditional models has a lot to do with it. And the real, it strikes me, value of online education is that it would be an inexpensive way to get education to non-traditional students who don't have a lot of time, who don't go can't go to a four year, you know, on campus experience, which often has a lot to do with partying and many things that have nothing to do with education, who want sort of the strip down, just give me the education, the knowledge and the skills that I need. The problem is that carries a huge stigma because the schools that do that best are for profit colleges and they do it because they have the greatest incentive to try and reach as many people as they can. Now, yes, they want money, but that desire to make sure they turn a profit has made them by far the most nimble sector of higher education to go out and produce programs that meet the needs of the people who use them. And by the needs, I mean, in particular, they go to where those people are. So it used to be they'd have campuses and quotes, which were in strip malls, you know, the nearest strip mall to wherever you live, they'd set up their courses at night so that people who work could go to them. And they are the schools that most quickly adopted online learning because the people they were working with, they had families, they had jobs and they didn't have time to go to the local, could be a community college, could be a four year college and spend a whole lot of time commuting, parking, sitting through lectures that they didn't have any control over how fast they got through them. But the flip side is those for-profit schools have a terrible reputation. If you get a degree or credential from a for-profit school, people often see that name and say, well, that's a lesser school than the local, even the community college, but especially some four year college people have heard of. And so the power of online education, the value would be, in particular, reaching people who don't have time for that traditional model. But because it's attached to for-profits and because those nontraditional students are going to, because they have so many obstacles, are going to get the, probably the, in general, the worst economic outcomes, the whole idea of online education has been sort of tarred. And it doesn't help also that at the K through 12 level, there's been a move to online education. But in many cases, there's been very little accountability for how you make sure kids are actually attending those schools, and very little fairness, I think, in saying, yes, they get worse test scores, and they have lower graduation rates. But as we do in higher ed, people never look to see, well, who are the students they're working with, and what are the obstacles they're facing in their lives? So this bias towards what's old and what's always existed and what we accept as being the norm makes it very hard for online education to kind of break in and be accepted. It's frustrating because from our perspective, and from the kind of perspective we take on the Building Tomorrow podcast of, you know, if we free things up and we allow innovators and technologists to do their thing, we can, you know, how can the world improve? I mean, if we step back, the goal of education is to produce learning. We want people to know stuff, to develop skills, to be enriched in the way that education can deeply enrich your life. And in all those ways, the technology and the internet have been a phenomenal boon to learning. And the amount that, you know, if I want to know about some topic interests me, I routinely just search it on YouTube and find dazzlingly smart people who are putting together incredible content that can teach me a ton. And on everything, you know, from like basic skills, like, you know, you want to learn how to, the techniques of doing X to, you know, the humanities, to science education. You also have, I mean, it tends to be focused on coding, because that's the interest of a lot of the people who are building the technology, but these tools that gamify learning and give you interactive stuff that you can do online, you know, or in language learning, Duolingo and tools like that, to just Wikipedia, which we don't really think of as online education, but is, you know, maybe the best resource for online education that's ever existed. All of these things are incredible, but they're detached from the model of education as we think about it, which is tied to credentialing and is tied to this education as you listen to someone talk to you, which has been the same model that we've had as long as we've had education. And so we end up looking, I fear we end up kind of getting pessimistic in the way that you've been expressing pessimism, or at least, you know, like this hasn't worked out as well as we thought, because we're basically this perspective of education as a model has blinded us to all of the learning that actually happens and is now possible and is only going to get better. Yeah, the pessimism isn't really about the technology, though. The pessimism is about our education system. And I think there is a solution to this. And it's the solution I always offer for education, and so I sound like a broken record, but it's because it's true, or should I maybe I should say a broken iPod or something, because it's technology. Of course, that's old, too. I'm kind of a Luddite in any event. Do they even make iPods anymore? No, I don't think so. What? No, I was going to go get one, finally, in any event. So the problem with the education system is at least what would do a lot to change it. I don't think what I'm about to say is going to cause everybody to think the four-year residential college experience isn't the ideal. But the fact of the matter is we massively subsidize people to go to four-year colleges and to do a whole lot of things that have nothing to do with learning stuff, unless it's how to have a good time, and they're socializing, and that has some benefits. A social network is good, but that's not really what education is for. But if you think about it, it's about $80 billion a year that go directly to public colleges and universities. Most of them four-year colleges. A fair amount is two-year colleges, but a lot is four-year colleges, and it's almost always even framed as, well, we need to get more people to get degrees. Not that we need them to learn a whole lot more. We just need more people with degrees. And then we give a whole lot of subsidies even more than that $80 billion to people to go to college directly through federal student loans and grant programs. And so essentially what we're doing is we are telling everyone, don't follow the incentive to just get the skills and abilities or knowledge that you need or want. Get a whole package that has nothing to do with that. The parties, I always have to mention that there's been an explosion of on-campus water parks, and people always say, well, that's not what drives the cost, and I agree, but sure is a symptom of how much of other people's money people are using to go to college for things that have nothing to do with education. And you can see many studies have shown big decreases in the time people spend actually studying in college, big decreases in the literacy level of people with degrees. All of this shows that we've had massive government incentives propping up a system that has become less and less about actual learning. If we phased out those sort of subsidies, people would be much more focused on, you know, the reason I go to school is to learn stuff that people want. Now, the one downside to that for people who sort of value learning for learning's sake is I actually do think there's something to be said for the small seminar where you get together and you just talk about things you've read and stuff like that, which people might say, that's not all that efficient, and they're right. I'd like to keep that because it's fun, but that means people should voluntarily, as we see them do, donate to a college university their own money to say, let's have that sort of thing. But if we got rid of the government subsidies, I think you'd see much more focus on getting skills and knowledge that people need efficiently, and that's when the technology would finally be allowed to really take off and do its thing. I like the idea of, so we as a society and as a subsidizing government treat the degree itself as essentially totemic in value, like you have the degree and now you're ready to be part of the middle class. It doesn't matter what you have as long as you have the degree and that kind of fetishization of degrees can cut against the idea of education as acquiring skills or self-improvement or even just knowledge, period. Now there are a few cool examples I want to talk about here of startups that are attempting to kind of not, they're not waiting for that change to happen, and notably a lot of this innovation is not happening primarily in the United States, it's happening abroad. They don't have that kind of corrupting incentive, subsidy incentive model that we're describing. One of the startups I have down here is called BitDegree. It's a Baltic startup, I think I'll lift away in your Latvia. Launched last year, I have 100,000 plus students and growing, what they do in a sense it's like a MOOC, it's not unlike Coursera, they have classes that are free that students can sign up and take. Imagine they have some of the natural built-in problems of a MOOC, low student engagement, high student dropout rate, lack of credentialing, but they at least attempt to solve that in some interesting ways. One of the things they do with the issue of student engagement is they've built in a cryptocurrency earning function. If you're a student and you participate in the class, you answer questions, you turn in assignments, you help other students, you're engaged, you literally earn money in the course. So you can take a free course and earn money as you do it. So that helps solve some of the dropout rate issues, helps potentially solve the engagement issues. On the credentialing side, these courses are mostly sponsored by startups. So let's say you are a Silicon Valley startup or you're probably not in Silicon Valley, you're probably in the hot tech scene in a Riga or Helsinki or whatever, you are looking for coders who can help you produce your product. And you say, hey, we'll fund, we're looking for 100 coders in the next year, we will fund the course that will attract thousands of students, we'll fund the creation of that course, we'll actually put money in so there are cryptocurrency rewards for student engagement, then the top students from that class will offer to hire. So it might not be credentialing in the sense of, well, that's an old storied degree from an Ivy League, but it's credentialing in the sense that you take these courses, it could turn into a job for you quite literally and directly. It's a pipeline for the student free course, skill acquisition, the potential of a job at the end, that's very tangible. So I think that's really in the vein, of trying to solve those two related concerns, some of the education side problems of MOOCs and online education, as well as some of the credentialing, what does this mean for me on the marketplace once I'm done with my degree? How does that sound to you, Neil? Sounds nice. A few things I'd say about it. I'm not an expert in every country's education system. I would say, though, that it may be partially part of a way that higher education is delivered, or education generally is delivered in other countries, which is that there tends to be some pretty strict screening about who can go to a university in most countries, because most countries, the university is free for the people who use it, but you often have to pass an exam at a certain age, it could be eighth grade, it could be a little older, but you get put on a track of you're going to a university or you're going to a trade school or something like that. So, part of this sounds like this is a way for people who didn't get into a university to get skills that enable them to get a better job, and we've seen something like that here with the big boot camp movement, which, again, really blew up, it's probably come down to earth a little bit, but the idea of you spend six really intensive months becoming a programmer, and I think that it's particularly valuable that the employers are a part of this, and these are the skills we want people to get. From what I've seen, I haven't studied it systematically, but we actually already have employers do kind of the same thing now. You come out with a degree, then you get hired by someone, and then they spend several months teaching you how to do your actual job, which is another sort of bit of evidence that the bachelor's degree, and increasingly a master's degree, has just been a signal about your basic attributes. Even accountants, you'd think I'm an accounting major, there's so many ways you can account for stuff that once I get out with a degree, an accounting firm would hire me, and I'd go right to work, but it turns out accounting firms. They'll train you after they hire you to say, but this is how you're going to do your accounting. So our system has been, we subsidize all sorts of people to go, and then the employers then pay for you to get trained the way they want to do it anyway. It seems to me, again, the answer then is we need to get rid of this subsidy. And the problem with bachelor's degrees is we haven't exactly totemized it because it actually is really important to get a degree, even though it doesn't mean very much, because at this point if you don't have a degree, you're often looked at as there must be something wrong with you because it's so relatively easy to get a degree. And as long as we keep pumping money into higher education, well, our goal is to get more degrees, regardless of what people learn, we're still going to have that problem. Get rid of those subsidies. We don't want to go to a European model where essentially we just, we cut people off and say we're going to sort of triage access to higher ed. If you don't get a certain test score, you're not going. We don't want to go to that, but we do want to get more to a model where we say, look, college isn't, a degree isn't the goal. The goal is the education, and we need to move away from a system that focuses only on the degree. And the best way to do that is not to subsidize higher education, as opposed to, well, we're just going to cut certain people off and say, you're not allowed to access university. Is there value to the non-education stuff that you get at college? So outside of the signaling value of the piece of paper, which presumably would be the same if you could somehow forge that. I mean, you might get caught, there's all the risks, but if it's just the piece of paper, then you could have just the piece of paper with nothing that was required by it and be the same. But when we send people to college, yes, you party a lot, but you also, there's networking. There may be a maturation process because you're kind of taking baby steps out into the world where you're now not into your parent's roof, but you're also not just like out in a sink or swim environment. And we might say, you know, some schools are better at this sort of thing than others and whatnot, but do we risk in the kind of rush to say, well, we should ideally cut off the signaling value of the credentialing if that's all it is and replace it with, you know, the goal should be skill learning or strict knowledge acquisition. Do we risk cutting off some of that other stuff that we think is beneficial to people from simply the whole of the college experience? Yeah, I mean, I think there's a risk that there's all going to be unintended consequences of anything we do. The general, I think, belief that's accurate is if we value something, though, the way we express it is we are willing to pay for it ourselves. And I do think that there's clearly networking that goes on in higher education. The question is, could it have gone on outside of higher education? And there's a sociologist I'd love to talk about. Are we just replicating and reinforcing class-based networks that we already have so that the people who go to Harvard are they really just sort of solidifying their network as we are part of elites who go to all the best prep schools and then go to Harvard? Georgetown Prep. Well, yes. It's in the news. Trying to keep away from that. But, yeah, I mean, you can see it in New York City, right, in other big cities where it starts in preschool, where people bid, you know, tens of thousands of dollars, basically, if I don't get my child in this preschool, they don't go to Harvard and they're not in the right social network. So there's certainly social networking goes on. The biggest problem, though, is how do we ever assign, especially centrally, well, what's the right amount that we should be paying to make sure people access those networks, especially if they were networks that people probably would have accessed other ways. And then there's also the clear access that I don't think, I think it'd be hard-pressed to find many people who would say, yes, I want to subsidize this of all the excess of the partying, of the water parks, of the college sports, of the time that's just not spent studying. And I would even suggest, I haven't thought about this a whole lot, so I'm not going to argue it one way or the other. I'm not sure that your four years in a residential college is a good way to transition to adulthood, at least based on the behaviors we often see in college. And today, I'll work a little technology into this just because it's an interesting story and you have a Penn State connection. I just saw it today before the most recent, I think it's the Penn State Ohio State football game. There's a big party, of course, as there often is. And apparently it got so rowdy that the state police were patrolling it in their helicopters and couldn't get the rowdiness to stop. I don't know what the danger was. This could be police excess, but it's just reported today, so it's timely. It was so bad that they decided they had to fly their helicopter so close to the crowd that it knocked over all their tents and their grills and all their other stuff because apparently it had gotten so bad now. This police misconduct could be, but it also may be sort of another symbol of college isn't necessarily where we train people to behave in the ways that we would hope they would when they become adults. Another worry one might have about the ending subsidies. Look, if we value it, if we genuinely value it, we'd want to pay for it ourselves. One of the things the subsidies do is they get people to attend college who would not attend college if they had to bear that burden themselves. There certainly are people who simply couldn't afford to pay the full cost of tuition themselves and so couldn't go without the subsidies. Then that bracket the question of how much college cost would drop in the absence of the subsidies. There's also people who could afford that burden but would choose not to because they'd rather spend that money on other things. Education, it seems like, or the kind of education one might get on a college campus feels like it might fit into the category of things where you're glad you paid for it in retrospect. If we put it on students to say, do you want to pay thousands of dollars to go get an education or do you want to, you know, as an 18, 19-year-old or do you want to go and get a job and move out of the house and do all that? At the time, they'll say, no, it's not worth it to me. But in 20, 30, 40 years, if you say, are you glad that you paid for it, they'll say, yeah, I'm glad that like, or are you glad that you went and would you in retrospect have paid for it? They'd say, yes. Or if they didn't go, they'd say, yeah, I wish I had chosen differently. And so does education fall into that category of things? And if it does, is there a way to solve that so we don't get people making decisions to avoid education that they're later going to regret? Yeah, I don't like to bracket the really important understanding that if we don't subsidize, the price will probably go down. But set that aside anyway. I think that the problem is right now we are putting all the incentives of we really think people ought to partake of the residential four-year model and who that helps are people who would already pay for on their own and prepare for the residential four-year model and who are hurting is actually the people we want to help, which are people who don't come from that sort of well-to-do background who've had lots of struggles in their life who probably had to get a job right away and we want them to be able to be upperly mobile by getting the skills and knowledge that they need to do a job that's more advanced than what they qualify for now. And those are the people we're hurting because the sector of higher education that is most going to provide what they need has this massive stigma put on it because it's not that traditional four-year college. And many of these people, many of the people who are using for-profit schools, they wouldn't have gone to a four-year college, they're not looking for that sort of overall enjoyable experience and they're really behind the eight-ball and they're at the point where and for many people, it's just totally unrealistic to say well we should do that four-year model because they need money and they may have a family and they have a job and they can't afford, even if they could get the whole thing through the opportunity costs of spending four years in a residential model where so much has nothing to do with actually getting skills and abilities. That said, I don't see a good reason that somebody with an academic background that shows that they are prepared to do sort of four-year college work and maybe benefit from this whole model wouldn't be able to get a loan from a private lender because that person who's demonstrated that they can do college-over-work, especially in a field of demand, stands to make a whole lot more money if they go to college over their lifetime, which means they're a good investment for a private lender. Right now, one of the biggest problems with student lending is the federal government gives anybody almost any amount of money that they need, regardless, they don't do any meaningful assessment of is this person really prepared and likely to succeed in college? And so I actually think that if we went to a free market, those people who would really benefit from the four-year college and would gain something from it, they'd still be able to access it. But we're hurting so many people by making that the norm that for the sake of those who are on the margins, we need to get away from the idea of sub-sizing college, especially when that means a four-year degree. And it's worth noting that the average person in higher education now is not somebody doing the four-year college degree. We tend to think of the kids who come right out of high school and go to college, but that's not the norm anymore in post-secondary education. So, Neil, you've touched on something that I'd like to expand on a bit. So anyone who has student loan debt, which is, I think, the median student loan debt is somewhere between $25,000 per college attendee. It is $1.5 trillion total as the latest figure I saw. That's double national credit card debt. That's more than auto debt. That's a very large amount of debt that's with you the rest of your life. You can't discharge it in bankruptcy. You're stuck with this debt. It has a lot of ill consequences. I mean, I think, obviously, if you have it, you aren't a big fan of all that student loan debt. I wanted to ask you about something you wrote a paper on, I think, quite a while ago now, that's become kind of in vogue as an alternative to our student loan problem. Everything I did a long time ago eventually becomes in vogue. That's what I've noticed, yeah. Really, you're prophetic. What can we say? Yeah, even though I'm still looking for an iPod. But back in 2002, when iPods were hot, you wrote a white paper about income share agreements. So, and schools are starting to roll this out more and more. It's now hot 15 years later. So, what is the income share agreement? How does that replace it? Yeah, I wish I could take credit for that paper. I didn't actually write it. The Center for Educational Freedom, although it may not even be called that in 2002, released it. A guy named Miguel Palacios wrote it, and he's been doing more work on that. But, Cato education people were, of course, prophetic. And it was the very beginning of this idea of income share agreements. The first problem was we were calling them human capital contracts at the time. And people like, oh, that sounds like slavery. Yeah, yeah. Right. Which is not what it is. In dentureship contract. Yeah, we probably should use that term. No, that's not a good fear. But I think the first thing we should say is that student debt sounds bad when you're like, ooh, it's $26,000 and it's more than credit card debt. And there's education is complicated. Again, mainly because we call stuff education that's really credentialing. But the fact of the matter is, it's a good investment to get a degree. You may not learn very much. But getting that degree and that signal lots of debate about how much you gain from that. But it's generally thought still that you make about a million more dollars over your lifetime if you get a degree than if you don't. Which makes that $26,000 in debt seem kind of bad. It's still way more than the debt should be because higher education costs a lot less. Costs a lot because it's so heavily subsidized. But it's not, it's I don't like when people get the impression that it's just a crushing burden that you should never take on to take on debt for education because education even if it's in the name of education could still have a big payoff. Is it problematic? I mean, so we're talking big picture, meta level stuff here. I mean, it depends what kind of degree you're in $26,000 of debt for. I mean, if you went to med school and you now have a really large debt burden, that's okay because you're going to make a lot of money as a doctor of your career. But if you went and got a master's in puppetry and got into a lot of student loan debt, you're in a bad situation. Oh, absolutely. One of the reasons that it's so, it should be so upsetting to so many people that the lender, there's still a little bit of private lending, but not very much. The lender in higher education is the federal government and they will give you a lot of money to pursue that puppetry degree even though there's very good reason to believe that it's going to be a huge burden for you even if you finish and many people won't finish. So, absolutely it's important to know what people are studying, but this is something that's sort of surprising to people, but it's not the person with that $26,000 of debt or even the person who goes to medical school and gets $80,000 or $100,000 who's most likely to default. Who's most likely to fall to somebody who has a relatively small amount of debt, $6,000 or $7,000 in debt, who should not probably have pursued post secondary education or at least a degree but did because that's what you've got to do. They took on debt, they paid for classes and they didn't finish. And so they don't have that all important credential that helps to increase their earnings and they're the ones then who are struggling to pay off their debt even though it's relatively small because they haven't gotten that pay off and these tend to be the people who would be best served by online courses. Again, these sort of non-traditional students with jobs and families and all sorts of obstacles in their way that you know the 18-year-old from a good, you know, from a sort of well-to-do family in a good high school or whatever they don't face even though they go to the four-year college. So for the human capital contract though there's only I think really one major benefit versus student loans. The human capital contract is essentially instead of you get a loan somebody invests in you so it's treated differently under the tax code but basically the arrangement is this person says here I'll give you $30,000 and then you will agree to pay me X amount of your income for 10 years or whatever. Like 5% is a pretty normal number I see out there. Yeah, it doesn't have to be I mean you could arrange in any way you want I don't think most people like, sure take 100% it would be relatively small but what that the main benefit is if you have a loan and even loans have changed but the norm for a loan used to be as soon as you're out of college or you're at a six month grace period but you have to start paying that loan off and it doesn't matter what you're earning it doesn't matter whether you have a job and that was the major reason we saw a lot of defaults the human capital contract says look if you're not making anything you're not paying anything back if you're making $100,000 you're paying that investor not lender that investor a fair amount of money. Again it properly aligns the incentives of both the I can't say lender or borrower the investment I guess is what the student is but the real benefit versus the loan was that people who aren't earning much don't get suddenly socked by these payments that they have trouble making because they haven't gotten a job that pays a lot or any job yeah no so it removes some of the aligns the incentives that remove in a sense acts as a bit of a safety net for folks who it doesn't work out for who did a year and then didn't end up reaching a degree it's it prevents that kind of catastrophic situation but for what it's worth the student loan programs federal student loans have now moved to a lot of income based and income contingent repayment where if you're not earning a lot you're still not paying a whole lot back so trying to build that yeah so there's trying to work with this and if the government the federal government were to say well we're going to go to to income share agreements but they gave it to anybody without any assessment of what that person was studying and whether or not they seem likely to be able to complete college it's not going to be any better than the system we have now so it's better than a loan as a vehicle but if the government starts providing it it's not going to do much to deal with the underlying problem it still lacks the price signaling function of when you go buy a house loan your interest rate varies based on the quality of the house based on your income based on your career like the interest rate goes up and down to assess for risk and if you're too much for risk you don't get the loan at all there's a signaling function built into the loan but with federal student loans or if the federal government decided to switch over to income share agreements they would remove that price signaling so it would not adequately signal supplier demand for those degrees it wouldn't adequately signal risk you basically strip the market function any lender or investor who doesn't whether they're loan or investment is a good one that they're likely to get repaid if you don't have that then it doesn't really matter you're not getting that sort of filtering that you need to make sure that there's a good vetting of the people who take on this money and that is really a problem and unfortunately what we've seen at the federal level is there's something called a plus loan which a parent or a grad student can get and there's some credit worthiness that's involved in the assessment of somebody and interestingly they increased how stringent they were on your credit worthiness for a little while in the Obama administration and then the Obama administration said this doesn't shouldn't do this because there were some schools that were disproportionately negatively impacted by it and it to me I don't want any of these loans but if the function of the loan is to make sure that people who may not have the economic or financial ability to go to college but have the academic ability to go to college the purpose of the federal government being involved is to make sure the people at academic ability can access college not the financial ability and so at one point we're saying well let's assess on your credit worthiness and that's not one of these federal loans and now we've instead moved to this idea of well the way federal lending should work is we kick certain institutions out of federal lending again without ever assessing who those loans are going to or who the students are that are using those schools and those courses and again that is disproportionately affecting for-profit schools and online education because they're saying well those schools are getting bad outcomes and it's ignoring that the federal government said we're going to give money to people who are on the margins of being able to do college well it also doesn't do a favor to those students who they're not receiving you know adequate signaling about what careers they should pursue if it's the same cost for you to get a degree in puppetry as an engineering you're not getting good signals about what is in demand it discourages them from doing the thing that's best for them in their own career prospects as well it doesn't do anyone people should want private lenders are involved and you do need to make it easier to discharge debt, student loan debt and bankruptcy so that the lender has the incentive to really scrutinize somebody but you do that and we should want private lending because we should want people who think maybe they should go to a four year college or a two year college or take on some sort of higher ed and take on debt we should want them to have somebody who is incentivized to really scrutinize them and say objectively this is a good idea, this is not a good idea instead of having sort of the candy man that the federal government is just throwing whatever they ask for at them even they know in the long run that's going to hurt those. That's a good thought Neil, thanks for coming on I mean I think we're getting pieces and if I had to construct a kind of fantasy higher education scenario, I'm not saying this is likely to happen but you can get the bits and pieces here, some kind of degree granting system accredited, you'd have to have a completely different accreditation system where students could take courses that are very cheap even free provided by, I mean they could do it from multiple providers so you want to learn coding, you get a bit degree, take some courses earn some cryptocurrency you get an internship with a startup, you take some courses on Corsair you take some courses from some of the MIT classes or Ivy League MOOCs, together you cobble that together into something that is both you've learned skills that you need and desire that you want to take into interesting and innovative careers that we can't even imagine right now, I mean let's be honest half of our jobs are going to be automated over our lifetimes based on estimates about automation and artificial intelligence, so we can't even imagine what some of these careers look like right now, you see this flexible student driven degree that's accredited that is cheap and then students are better prepared for a brave new world that we can't predict at this moment, so you can get folks are trying to develop alternatives to our current system, alternative ways of financing, alternative ways of acquiring skills in education and I think that's an encouraging thing even if there's still obviously a lot to be done, so Neil thanks for coming on and talking to our audience and until next week, be well