According to the most recent
(2015) PISA scores which measure the basic skills (reading, math and science)
of 15-year-olds, the US ranked 30th in Math among the 38 OECD
countries – nothing to write home about, right? We need a sea change in the way
our colleges work. Also, we need to rethink the qualification criteria for
student loans. Here are some remedies:
1. College
Accreditation must require Local and Regional Business Participation –
One of the perennial complaints of the US college education is that it’s too
theoretical. Despite the rising trend of internships, only a small percentage
of the graduating students are blessed with this fortune, mostly in
highly-sought-after disciplines like the STEM. College accreditation must require
local and regional business participation (including representation on the
board), allowing meaningful access to the business, science and technology
community. Ideally, college charters must stipulate that at least 33% of all
credit courses be taught by external experts so the students get to learn how
the theories are actually being implemented in ‘live’ environments. Of course,
it must be a simultaneous process, meaning teaching theories and practice must
take place during the same quarter or semester. For example, students
specializing in real estate finance must learn from the top mortgage
professionals as to how the various mortgages are originated, including the
full array of the paperwork involved (industry standard forms, etc.). Likewise,
the STEM students who are considering a career in technical trading must learn
from the renowned hedge fund managers and (program trading) algorithm
scientists. Colleges and universities must therefore offer majors in line with
the availability of the aforesaid local and regional industry experts. Needless
to say, there will be no dearth of successful industry people who would be more
than willing to teach such classes. This joint venture is a necessity today.
2. New
Professors must have at least 3-5 years of Verifiable Business Experience –
Colleges must look for qualified professors (US PhD) with actual hands-on
business experience. They will rise above the “canned” case studies as they are
often antiquated and out of sync with the marketplace. These new crop of
professors will also make better liaison with the industry experts, thus
vetting and selecting the most fitting ones (with outstanding technical
expertise) to teach applications. These technical experts will be able to
explain and demonstrate the pieces that comprise the black box. In other words,
these professors would know how to avoid walking into the old trap – inviting
generalists. Exposing the young students to such generalists tends to be futile
as the missing link becomes more elusive. On the other hand, all professors –
new and existing – must be allowed and encouraged to work as consultants so
they remain thoroughly conversant with the ever-changing industry standards and
practices.
3. Interest
Rates on Student Loans must be tied to SAT Scores and APs – Obtaining
student loans should be no different than obtaining home loans. Let’s face it:
Two prospective homebuyers (mortgage applicants) with 600 and 800 FICO scores,
respectively, will be offered vastly different mortgage interest rates, down
payment requirements and origination fees (points) by the same bank. Similarly,
interest rates on student loans (to pay for college education) should be a
function of the SAT and AP scores (these are comparative metrics while the general
academic records aren’t). For example, the student who scores 1,580 (out of
1,600) in SAT and completes six APs with all 5’s must be eligible for a much
lower interest rate than his/her counterpart who scores 1,300 in SAT and
completes three APs with all 3’s. This merit-based system will incentivize
everyone to do well academically from the get-go. By the same token, those who
fail to do well in SAT and AP may consider other avenues: community colleges,
vocational schools, etc. Simply put, we need an incentive-based school system
where performers are greatly rewarded. The current system is backward-bending
and requires significant overhaul.
4. Sallie Mae must publish
SAT/AP-based Student Loan Rates to provide Transparency – Sallie Mae,
the largest student loan provider, and other large providers like Citi, Nelnet,
Wells, etc. must develop and publish SAT/AP-based rates to educate and entice
students of the advantages of the high scores. If the high school students
(starting in sophomore) are taught that high score equals low rates, they would
be working harder, thus gradually bumping up the curve making the system
globally more competitive.
Of course, unlike mortgage rates that
change daily, the proposed SAT/AP-based student loan rates would be revised
annually on the basis of the new data trends (i.e., changing scores).
Hopefully, the rate chart would be prominently displayed in all high school
cafeterias as a constant reminder that a little extra push would go a long way.
Here is an example. Actual rates must be derived from the recent loan data from
Sallie Mae and other major lenders in the field.
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| (Click on the image to enlarge) |
5. Interest Rates on Student Loans must be
Significantly Higher for Lateral education (education for the sake of
education) – When students stay back in schools and continue to
take unrelated courses aimlessly (e.g., 2nd/3rd major
or 2nd Master’s, etc.), lenders must discourage such loans by
charging significantly higher interest rates related to those credits. If
students plan on co-concentrating (e.g., business and economics; social science
and statistics; applied economics and math; finance and applied math, etc.),
they must declare their intention right at the outset while applying for loans,
thus locking in their preferred rates throughout the period, as well as to
avoid having to pay a significantly higher rate down the road for the “co” in
the form of a second major. Oftentimes, the meaningful co-concentrations help
job-seekers narrow the competition down. Likewise, many employers prefer those
graduates as they bring in truly complementary knowledge.
6. Interest-free
Student Loans must be provided to All STEM Candidates – Instead of
enticing foreign STEM graduates with visa adjustments, we must learn to nurture
our own. And, it must start with an awareness movement at the middle and high
school. At the core of this movement lies the marketing of the awareness to the
female students in that they have “equal access” to this career domain. Until
and unless our young ladies are convinced of the equal access, we will have no
choice but to depend on the foreign employees. In promoting STEM education,
teachers and counselors must also explain to the students that 10’s of
thousands of STEM jobs remain unfilled and, as a result, our “volume” employers
are forced to hire foreign employees to fill in those slots. Interest-free
student loans could be a big incentive to entice more students to look into
this colossal and unrestricted career domain. Obviously, once accepted, the
qualified yet economically disadvantaged students, irrespective of ethnicity,
must continue to receive (full) free STEM education, at both public and private
institutions.
7. STEM Students in State
Schools must qualify for Financial Aids ahead of all others – In
addition to interest-free student loans, STEM students must receive financial
aids ahead of their counterparts. Given the urgent need for STEM graduates in
our economy, it does not make much sense anymore to treat all economic needs
equally. At this point, college education must be compared with and treated
like government services, meaning essential education (like essential
government services) must always receive higher weights and protections than
the not-so-essential education (like non-essential government services). Simply
put, STEM education must be declared, protected and promoted as essential
education. Ceteris paribus, the qualified STEM student population must get the
first shot at the pool of financial aids and the residual will then be
distributed to the other disciplines depending on the needs of the labor force.
Of course, it has been assumed that the health and mental care education –
another market area with critical shortages here – is part and parcel of the STEM,
specifically part of ‘S.’
8. Ideally,
a Moratorium on Student Loans is needed for Business and Humanities Majors –
Due to the easy access to student loans, far too many students – relative to
the aggregate market demand – continue to major in business and humanities,
resulting in significant disguised unemployment all across the country,
arguably reaching a point of moral hazard. In order to reduce the incidence of such
disguised unemployment, we need a moratorium on such student loans for a period
of time, at least 5 to 7 years, thus allowing enough time to get the excess
market supply meaningfully absorbed while the wage level rises back up to the point
of equilibrium. This pause will allow Sallie Mae to re-evaluate its existing
debt load, meaning if they could use a meaningful stress test to evaluate if
they might be approaching the "too big to fail" threshold. Meanwhile,
a good chunk of the potential fallout population (business and humanities
majors) would be redirected to the STEM universe. Sadly, if this decline is not
arrested, the possibility of a bailout would be on the horizon in not too
distant future (considering the student loan portfolio in the US has recently
eclipsed $1.5T). Absent student loans for business and humanities, only a small
percentage of the future student population – mostly from the well-to-do
families and foreigners – will opt for these over-subscribed majors. Obviously,
neither group would pose any renewed threat to the US labor force or contribute
to the accentuation of the aforesaid bailout
scenario.
9. Encourage Ivy League and other Renowned
Schools to Eradicate "Legacy" Admission – The legacy admission
system is nothing but a "privileged" quota system. Any quota system
is detrimental to the overall growth and equality. Yes, applicants from the
poorer families must not be discriminated against, but that financial
hand-holding must come in the form of added financial aids. Therefore, the
better way to handle that event is to increase the family income limit from
$60K to $100K for full free-ships. Even a geo-indexed multiplier could be
experimented with (Case in point: The purchasing power of $100K family income
in NYC is significantly lower than that of Wichita, KS, so to say). In a free
society, merit must never be compromised. For instance, if a particular ethnic
group qualifies for 60% of all admissions at Harvard, they must be admitted as
such, unconditionally. Of course, to promote STEM education, Ivys and other
major schools should offer financial aids to qualified STEM applicants ahead of
the other disciplines, for a period of time, until the home-grown STEMs are
well-represented on the labor force.
10. Last but not least, Professors must
be Apolitical in classrooms, leaving their ideology, affiliations and agendas
outside (the classrooms) – Most American students take on huge loans
for college education so they deserve the highest quality education in
preparation for successful careers. Unfortunately, too many professors bring
their political rhetoric and viewpoints to the classroom, in an effort to
brainwash and indoctrinate students to their personal political agenda. This is
totally unacceptable. We must keep our great educational institutions free from
such partisan politics. Yes, the professors are entitled to their political
viewpoints, without commingling with the education inside the classrooms. Going
forward, all new hires must be independently vetted (including all of their
social media accounts, going back at least ten years) and any political bias
must be seriously investigated. Our labor force needs future industry leaders,
not political activists. When our institutions become nonaligned and professors’
non-partisans, our labor force will regain its old glory, becoming the envy of
the world, again! Of course, in order to weed out politics from our colleges,
we must consider one final option: All professors, including the departmental
chairpersons, should be hired and placed on 4-year contracts, instead of career
tracks. Competition is the cure-all medicine!
Again, it’s high time that we
make our college education and student loans more labor-force friendly. Our
students deserve better.
- Sid Som, MBA, MIM
President, Homequant, Inc.
homequant@gmail.com
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