College Ready or Credit Worthy?

In a previous article I brought up some of the issues with judging schools based on standardized exam scores.  The obvious question is why we use them still.  College readiness (highly suspect) and public accountability are the two reasons most often given.  The public wants their money’s worth, which is totally appropriate, but individuals, seeing/hearing about the problems of the national standardized testing movement/culture typically get that it’s a bad idea.  Yet we continue.

When I was teaching economics, one of the basic principles instructed was that “people respond to incentives.”  In other words, there are reasons (people) that things are the way they are.  I am reminded of a photo I saw once.  In it was Sal Kahn (creator of Khan Academy), a high school leader, a Citibank executive, and a high ranking exec from the College Board.  So Kahn Academy, the College Board, Citibank, and High Schools….which of these doesn’t fit?  It’s Citibank, correct?  Three educational institutions and a bank….we’ll come back to this.

Not long ago I saw a College Board presentation about the redesigned the SAT. The logic was that they were concerned that too many students, particularly minorities, were not "college ready.  This made them re-examine the exam and realize the test wasn’t aligned with what kids need to know in college.  Nice they finally figured that out, but it’s sad they put it on minority students, not the inappropriate use of these exams—which they’ve peddled, pushed, and lobbied.

Thus, they redesigned it, “taking out words like ‘loquacious’ and replacing them with words like ‘dedicated.’” They also formed a partnership with Khan Academy. Any student that takes the SAT is now automatically set up with a Khan account that's customized with videos and practice where they need it.  This sounds well and good, especially if you believe that high SAT scores = college readiness (they don’t). 

Enter Citibank, a major underwriter of federal and private student loans.  The more kids go to college, the more loans they make. Most important: student loans survive a bankruptcy, so this is a largely risk-free market for them. They set it up like that because 18 year old college bound kids don't exactly have the credit profile that banks like to see...no history, no job.

SAT/ACT scores are therefore credit ratings as much they are college readiness indicators.  This system will get kids further into student loan debt.  And worse, since the College Board has been quick to point out that they're specifically hoping to help minorities, one should conclude that this increased student loan debt will be disproportionately borne by students from those groups. It's unavoidable: Any plan to increase "credit" is a plan to increase debt. This also will to debt with no degree in many cases.  If student scores increase, but are void of real learning and a host of soft skills, we’ll merely be pushing marginal students into postsecondary institutions where they will not matriculate.

This is obviously cynical and not the intent.  Sal Khan, whose goal is to make education accessible, is not in Citi's board room scheming.  And of course, borrowing money to further an education is often wise.   That said, the above are completely likely outcomes and are even expected by the proponents: They want more low SES kids to go to college, but by definition, they don't have the money and must borrow.     

All the more reason we need to emphasize the importance of understanding the relationship between the cost of college and their likely future earnings. In my experience teaching personal finance, students' are in a disadvantaged position when it comes to making decisions about massive loan debt, etc., even if the law permits.  Surely, all of the advice we here about investing young making all the difference applies in reverse to starting out with debt young.  The gains foregone are invisible, but they’re forgone nonetheless.