The Dream of Becoming an Ivy League Drop-Out Dominic Basulto on July 23, 2011, 9:52 AM with about 17 links
Through the launch of his 20 Under 20 Fellowship initiative, billionaire entrepreneur and hedge funder Peter Thiel is engaging in one of the most radical experiments yet about the future of American higher education. He is, essentially, paying 20 of the best and brightest students in the country to drop out of college and, instead, to move to Silicon Valley to pursue their personal entrepreneurial passions for two years. He is bankrolling each of the students to the tune of $100,000 each, hoping that the combination of youth, passion, genius and a significant amount of capital backing will result in truly world-changing innovations. Instead of getting tied down with tens of thousands of dollars in student loan debt, these college students will have two years of freedom to pursue their entrepreneurial passion. Is this the new American dream?
It's hard to ignore that we're currently in the middle of a fundamental change in the way that we think about higher education. A number of significant trends - like the skyrocketing cost of a college education and the emergence of new, distributed models of learning across the Internet - have led many to challenge the conventional wisdom of plunking down $100,000 or more for a four-year college education - especially if that pricey college education means that you'll basically have to become an indentured servant on Wall Street if you ever want to pay off all your student debt. (This assumes, of course, that your last name is not Rockefeller or Forbes or Gates)
But perhaps the most significant factor has been the emergence of a new entrepreneurial zeitgeist in America. The reigning poster child of that zeitgeist, of course, is Mark Zuckerberg of Facebook. Even if you haven't seen the movie The Social Network, you know the basic story: genius computer kid drops out of Harvard, moves to Silicon Valley to launch Facebook and becomes an overnight billionaire. All while wearing a hoodie, hanging out with the Cool Kids and having a chance to deliver a raised middle finger to the expectations of the Establishment. (The R-rated pajamas scene is especially priceless) The latest example from the zeitgeist is Reid Hoffman's new book, The Start-up of You, which basically argues that the old career rules no longer hold, and you'd better start approaching your life as a startup entrepreneur if you want to get anywhere in life.
PAW cover What's interesting is how universities like Princeton, Harvard and Yale will respond to the potential threat posed by Thiel's controversial 20 Under 20 initiative. These are institutions that have existed, literally, since before the founding of our nation. Do they even feel threatened? The latest issue of the Princeton Alumni Weekly features a half-page write-up on Eden Full, a star Princeton student (Class of 2013) who is dropping out of the Ivy League school at age 19 to accept Peter Thiel's offer and pursue her dream of developing a world-changing solar energy solution. (You can even watch her TEDx speech on the Princeton Alumni Weekly website) Princeton gives Eden Full the full star treatment - playing up the role that it played in supporting her solar energy initiative in Kenya last summer - and treats the Thiel Fellowship as simply another fellowship to win, like the Rhodes or Marshall or Fulbright. Just as the top Ivy League schools jostle over the number of Rhodes Scholars they have each year, will they one day compete over the number of Thiel Fellows? (Hint: only if it affects their annual college rankings)
Which is why earlier exclamations about the "appalling" nature of the Thiel Fellowship may have been initially exaggerated. When Peter Thiel first announced the Fellowship it did, indeed, seem like one of those appalling little experiments that billionaires like to play on the world, a little bit like that famous Trading Places bet featuring the homeless Eddie Murphy and the uber-wealthy Dan Aykroyd. Ultimately, the Thiel Fellowship may be just another symbol of the changing zeitgeist in America, in which each and everyone of us are judged not so much by the quantity of our achievements, but by the quality of our latest "venture" or "start-up." It used to be that anyone with a creative urge was also an "aspiring actress" or "aspiring writer." In a world where 21-year-olds make $100 million seemingly overnight, it may now be the case that we'll all have to add the line "aspiring entrepreneur" to our resume, while moonlighting at night on our latest world-changing start-up.
OVER the next few weeks, millions of Americans will be heading off to college, and despite the promise of need-blind admissions, more of them than ever will be struggling to pay for it. It’s not just the economy’s fault: even as they publicize lavish financial aid packages, colleges and universities are making it harder for average American families to afford higher education, while making it easier for the wealthy.
In the past, families and students covered their tuition with lump payments at the beginning of each semester. To ease the burden of such large bills — recent data shows that tuition and fees have increased 439 percent from 1982 to 2007 — many colleges have instituted monthly payment plans, while charging zero interest. Even many families that could afford to pay an entire semester upfront find such plans appealing.
Though such plans have undoubtedly allowed a greater number of modest-income students to go to college, they can actually end up unintentionally raising tuition costs. While the plans typically don’t charge a fee for payments made by check or direct deposit, they tack on a hefty charge for credit card payments.
Why? Because most institutions outsource the management of their plans to private companies, which have to make a profit. They charge universities a fee for processing credit card payments, and the schools pass those costs on to students and families, amounting to over a thousand dollars or more per year in some cases.
For example, some of the top liberal arts colleges in America, including Williams, Amherst and Wellesley, use a company called Tuition Management Services, where the fee is 2.99 percent for each payment made by credit card. At Amherst, where tuition, room and board cost $53,370, that’s an extra $1,595 if all payments are made by credit card. Even at Swarthmore, which runs its plan in-house, the fee is 2.6 percent, or an extra $1,330 a year.
This hits the middle and working classes particularly hard. Struggling families often face rough patches during which they don’t have enough cash on hand to make such payments, and so have to go to their credit cards — and pay the fees. Meanwhile, wealthy families that can afford to simply write a check upfront each month avoid both credit card fees and interest payments.
To be fair, monthly payment plans intend to help lower-income families afford college. But they have also had the unintentional consequence of creating bonuses for the wealthy and added impediments to the less well-off.
Another way colleges and universities stack the deck is by allowing students or their parents to front the costs of two, three or even four years of school, thereby locking in current tuition prices; some schools even offer discounts for prepayment. Families receiving financial aid are typically excluded from prepayment options.
Of course, only the wealthy can afford to pay even a single year of college upfront, let alone multiple years. And yet, with annual tuition increases running between 4 percent and 10 percent, those who can afford to pay early end up paying significantly less.
Why do colleges and universities, which promote themselves as need-blind, even have programs like this? The original justification was to bolster their revenues quickly, so they could invest them in the stock market. But with the current economic malaise and unreliable financial markets, colleges can no longer depend on consistent or high returns.
Monthly payment plans, and prepayment plans, thus pack a double punch. On one hand, they make it more expensive for struggling families to send their children to college. On the other hand, they make it cheaper for wealthy families to do so. And given how long it takes these days to pay off college debt, these disparities will have ramifications long after students have graduated from college.
Our institutions of higher learning cannot continue to offer their best deals to a privileged few. Our country needs colleges and universities to recruit and cultivate talented young people from diverse backgrounds. To do so, we must ensure that children from working families have the mechanisms not only to obtain college admission and afford to attend without compromising their studies, but also to be free to enter the economy relatively unburdened by debt.
Noah S. Bernstein is an education program associate at the New World Foundation.
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