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James Gualtieri
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Perhaps I'm overly cynical of members of the House, but the current way districts are drawn seems like the perfect equilibrium for representatives whose chief priority is re-election.
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I think a great remedy would be to make universities partial guarantors on the debt of their students (i.e. you can default on some fraction of your debt through bankruptcy). This aligns university incentives with those of students: providing students with a skill set that is valuable. One might say that these incentives are already aligned, I don't think that is necessarily the case. With loans easily available for prospective students, universities play a balancing act with respect to their current students and attracting future students. I think this would result in schools devoting more energy (and money) to career services and reduce the amount of students studying so-called "soft" majors. One drawback is obviously that universities would then prefer students with no debt. But, I think this is such a small part of the total student population that any effect would be very small. Alternatively congress could pass a law requiring admissions decisions be blind with respect to financing. I like this idea because it is somewhat market oriented. If schools provide value above their cost then they will remain open. The likely results would be: a reduction in the amount of universities and a larger fraction of a school's resources going towards majors they expect to provide value in the job market.
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Dr. Becker, You mention in the article that the returns to college have increased from about 40% to 80% over the past 25-30 years. I'm assuming in that time span the average percentage of workers with college degrees has also increased. So the question is, are those percentages adjusted for the likely decreased treatment effect? That is, the control group of high school degree only workers now represents a much less skilled group of workers relative to the college degree group.
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May 14, 2013