It is difficult for any American to not be a bit worried about college debt and what it might mean to the prosperity of the next generation.  As a professor, a father of three and a guy who paid off his last college debt in his mid 40s, it is a matter of some worry.  So a little thinking on the matter is due.

College education is expensive (mostly due to foregone earnings) but in terms of expenses, paying tuition for state schools is far less than half the cost of going to college.  Most students can receive very large, publicly subsidized loans. This is the source of most college debt, which today averages just over $22,000 for graduates of public universities.

For the average student, a college loan is far and away the single best investment he or she will ever make, but the variation in this rate of return is heavily influenced by the student’s chosen field of study.  There are other factors as well, and certainly the best students in any discipline will do well, but indulge my careful focus on college majors.

Few engineers, chemists, accounting or finance majors will find their college debt onerous or ill considered.  These are difficult majors, much in demand, well compensated and typically more costly to provide.  Many other majors are not in demand and in turn not highly compensated.  The evidence over the past two decades is unsettling.  A growing percentage of college graduates has pursued degrees that offer no employment prospects to match the cost of college.  This, it must be said, is neither the fault of the economy nor in most cases colleges.  The burden falls almost exclusively on the student.  Career information is abundant, free and unambiguous.  Quite honestly, individual mistakes in the choice of college major are not a compelling public policy problem.  It is a sign of abundance that so many young people can borrow money to pursue their dreams and existential joys by taking college degrees in fields with few employment prospects. 

It does not follow however, that taxpayers should subsidize that educational choice, or worry about student debt.  Our federal student loan programs make no distinction between a loan to a mechanical engineering student at MIT and a puppetry major at a community college.  No other government loan program so fully ignores the potential return on investment of individual applicants. That is a luxury of the past for which states typically hold colleges to task.  I recommend a new approach.

Federally subsidized college loans should be linked to the employment prospects of individual majors.  For example, federal student loan programs should offer the traditional ‘full’ loan for the first year or two of college (where the true liberal education resides).  Thereafter, the total student loan should not exceed half the average starting wages for students with that major nationwide. 

This serves two purposes.  First, it clearly announces to students what their degree is likely to add to their employment prospects.  Second, it prevents the accrual of huge public expense on the hobbies of the rich.