The Student Debt Crisis Points to Fundamental Flaws in Higher Education

by Danny Iny

Seth Frotman, the Consumer Financial Protection Bureau's student loan ombudsman, recently resigned in a letter citing "sweeping changes" that harm students already struggling with massive amounts of debt. Since then we've seen story after story on the dismal state of student borrowers who now have no "watchdog" to protect them from predatory lenders.

Frotman's departure is a symptom of a larger issue: Not only is student debt out of control, but the education it's buying is riddled with serious problems.

We all know that student debt has crippled college graduates and their families for years. Recent statistics show that graduates carry an average debt of more than $30,000. The higher education bubble will burst, and soon. And the real travesty is that many of these degrees have almost no market value.

Once students graduate and start looking for work, they often find they have little earning potential to pay off this debt. Just ask the huge numbers of unemployed college grads living back home with Mom and Dad—and also the underemployed ones who are serving up coffee, waiting tables, or driving for Uber while they look for jobs in their field. Consider the following points:

The problem isn't necessarily a shortage of jobs. There were 6.7 million job openings reported by the U.S. Bureau of Labor Statistics (BLS) over the summer. And he notes that this number exceeded earlier BLS data that showed 6.1 million job seekers back in May.

The elephant in the room is this: Colleges just aren't preparing graduates to compete in today's marketplace. They're good at imparting raw knowledge, but they're not helping students master the kinds of skills employers are looking for in new hires. There's a huge disconnect.

Many degrees are useless to employers. Non-vocational degree programs, like liberal arts and even business degrees in the absence of a career track headed for accounting or consulting or investment banking, simply aren't designed to make their students valuable in the workplace.

Using them to accomplish that objective is like using your shoe to hammer in a nail—it might work, but it's definitely not the best tool for the job. And employers know it.

It's not just a lack of technical know-how. College is also failing to develop higher-order cognitive skills in students. Studies show young people are graduating without ever having mastered the life skills a solid education is supposed to provide: critical thinking, complex reasoning, problem solving, and written communication.

Higher education is ripe for disruption. The lecture format doesn't work for most students. Curricula is overdue for reengineering, but accreditation and tenure serve as roadblocks to change. And a bigger problem is that most university programs were designed by and for academics, or in the case of MBA-type programs, by and for big business. Both have very different needs from the small and mid-size companies that make up our job market. These issues, among others, mean that colleges are unlikely to disrupt themselves.

Once the bubble bursts, America's current higher education path will change dramatically. I believe it will be replaced by a lifelong path that begins with one or two years of foundational and niche-focused "last mile" education—either taken separately or bundled together—with four more years spread over the rest of our lives and careers.

Top universities will likely play a role in the education system of the future, though they will probably consolidate. Staffing firms may join them. And the third player in this impending disruption will be comprised of the vast numbers of experts on the front lines of their respective fields. They're the only ones who will have the knowledge and skills to provide the short, focused courses that will deliver what learners need, right when they need it.

Businesses have a vital role to play in reshaping how we train tomorrow's employees. The business world as a whole, and the individual professionals who make it up, will be perfectly positioned to reinvent higher education in a way that makes sense for today's world. In fact, they can get started on the transformation process now.

Employers can stop judging job applicants by the long-accepted yet often worthless "degree" metric. Companies can start developing the culture of learning and growth that promotes continuing education. They can also launch training to fill the gap between what colleges didn't teach employees and what they really need to know. Organizations as well as individual professionals can explore how their own expertise might be useful in shaping the education landscape of the future.

Make no mistake: change is coming. The global economy moves quickly, and American industries can't stay competitive if companies have to train every employee on skills they could have (and should have) already learned in college.

Our students deserve better, too. They shouldn't have to settle for overpriced “education” that prepares them for nothing but a lifetime of soul-crushing debt. Seth Frotman's departure should be a wake-up call alerting us that it's time to transform higher education.

Everything about our economy and workplace has changed over the last few decades. How we prepare students for the future needs to change, too. And when we put our minds to it, we can reimagine an education system that works for everyone. iBi

Danny Iny is the author of Leveraged Learning: How the Disruption of Education Helps Lifelong Learners and Experts with Something to Teach. He is a lifelong entrepreneur, best-selling author, and CEO of the online business education company Mirasee. For more information, visit www.mirasee.com

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