Observations About IQ, Education, Financial Aid, And Student Loans

Some observations:

* IQ is real and isn't just a sexist or racist construct (and neither are standardized tests). It isn't the only thing about a person that matters or influences their success in life, but one thing that it is particularly closely aligned with is ability to succeed in conventional academic studies. 

* Individual differences in IQ among people are heavily influenced by genetics outside conditions of serious environmental deprivation, which prevent people from reaching their genetic potential, and conditions of extreme environmental favorability which can foster academic ability and realized IQ development that someone with a given level of genetic endowment otherwise wouldn't be able to reach. 

The level of environmental deprivation necessary to seriously damp IQ corresponds to a level a little bit in excess of the poverty, or worse - maybe 20% of the U.S. population. For example, when I evaluated data about school in Denver when my kids were starting to reach various school choice threshold ages, I noticed that even students who were identified as gifted and talented in elementary school in the Denver Public Schools, who attended West High School, the "worst" regular high school in the district at the time, were not certain to even graduate from high school and were very unlikely to go to college without needing remedial work before taking regular classes.

The level of environmental favorability that can allow someone to exceed "par for the course" performance is even smaller, perhaps 5% of the U.S. population are in those circumstances, and those extremely favorable circumstances are predominantly present in families that are very affluent and where at least one parent has very high IQ. 

In the other 75% or so of the U.S. population that has reasonably livable and consistent day to day circumstances and attends schools that are within the normal range, individual differences in IQ are predominantly driven by genetics, which is to say that parental IQ is a powerful predictor of child IQ, with much of the rest of the variation driven by random variation in which genes a child inherits from the child's parents.

Since IQ is a significant factor in socio-economic success, and since extreme environmental favorability is predominantly found in affluent families with intelligent parents anyway, IQ and academic performance are quite strongly correlated with socio-economic status. No amount of education funding will change that disparity which is already strong visible in the correlation of socio-economic status and academic performance of students by 3rd grade if not earlier.

There are some indications that most critical time period of environmental deprivation that can cause a child to not reach their genetic potential of IQ is in utero and prior to about age six, although this evidence isn't unequivocal.

Differences in IQ between a group of people and their descendants, between different ethnic groups, and between different countries, however, are mostly driven not by genetic endowments (although that is a factor, for example, in the case of descendants of immigrants who were pre-selected for high IQ) but by environmental factors. The most striking recent and well documented example of this is the link between lead exposure and IQ.

* Ameliorating the environmental deprivations that prevent people from attaining their genetic potential IQ is an extremely fruitful place to invest public spending.

* The main factors that distinguish between people who graduate from high school and those who don't are anti-social behavior (especially in boys), pregnancy before graduating, and disruption in your personal life (e.g. homelessness). Notably, more than three-quarters of Colorado prison inmates are high school dropouts.

For example, most males who pass the GED exam, rather than graduating from high school, do so because their anti-social behavior caused them to be suspended or expelled from school and to be incarcerated for anti-social behavior, and earn their GED while or shortly after being incarcerated. Yet, a passing score on the GED requires greater IQ than the IQ of the average high school graduate.

A GED is far inferior to a high school diploma as a credential for use by employers, educational institutions, and military recruiters because it is so strongly correlated with a history of anti-social behavior, even though not all people take the GED for that reason.

Still, the factors that drive people to drop out of high school aren't entirely uncorrelated to academic ability, because anti-social behavior and pregnancy before graduating are often driven in part by students not getting much out of their studies because they have fairly low IQs. Low IQ is definitely strongly correlated with anti-social behavior, a factor also illustrated by the correlation between criminal offenses and lead exposure through the mediating variable of decreased IQ when one is exposed to lead.

Also, even when anti-social tendencies including mental health issues like substance abuse aren't closely tie to IQ, they are often heavily influenced by genetics and by cultural environment, and hence hereditary in practice, even when they aren't a function of low IQ.

* An extremely large share of students who start community college drop out, often after a single semester, without receiving a certificate or associate's degree, and without transferring to a four year college. A large share of students who start a four year college, especially for profit colleges and public colleges with open admissions or not terribly selective admissions standards, drop out, often within the first year or two.

* The likelihood that someone will drop out of college is closely related to academic preparation and IQ. Students who need remedial work to attain the college level when they finish high school, students who haven't completed a college preparatory high school curriculum, students with poor grades in high school, and students with poor test scores in high school are disproportionately likely to drop out.

Figuring out where to draw the college admissions line is difficult but not impossible. 

There is a certain level of academic ability above which students only drop out due to rare (for them) circumstances in the personal lives of such students (e.g. illness, pregnancy, physical injury, mental health breakdown, family crisis that needs to be attended to or impacts an ability to attend, conscription, criminal victimization, and committing a crime).

There is also a certain level of lack of academic preparation below which students graduate only through miracle-like perseverance and support from others.

But there is a big middle ground in which there is a non-negligible risk of dropping out, but it is hardly a certainty, with the likelihood of success being closely correlated with academic preparation. Even at moderately selective colleges and universities, six year retention rates as low as 60%-80% are not uncommon, and students who do not graduate within six years are disproportionately, but not entirely, at the bottom of the academic ability pool of incoming students.

Figuring out where to draw the line, and who should bear the economic risks that a student in the gray area will fail, in a way that isn't economically regressive, is a challenging policy decision that doesn't have an easy answer. 

Most Western societies have erred in being too open in admissions with significant public subsidies in a way that is wasteful, detracts from the quality of the higher educational enterprise, and does the students who predictably fail no favors. 

On the other hand, letting students attempt college, while bearing the economic costs through student loans, when the institutions admitting them and facilitating the loans know better than the students who take out those loans do that those students are likely to fail and receive little benefit from their expensive educations, also feels like fraud.

It isn't obvious that allowing students to take out student loans with no ability to have them discharged if the educational efforts aren't successful economically serves any valid purpose.

Keep in mind that students who receive government subsidized educations without loans will still end up paying the government back through taxes on their increased incomes and property values and taxed consumption anyway, which fairly reflects the benefits actually received by particular individuals from their educations.

* Tests measuring the academic and intellectual value added from college attendance show that students who are least academically prepared for college also receive the least benefit academically from attending college, even if they graduate. But, there is also solid statistical evidence that being admitted to college at all, and completing a degree, afford significant economic benefits to students who do so, due to sorting and signaling effects in the eyes of employers, and this benefit is greatest for the students who were only admitted and only graduated by the skin of their teeth without actually learning all that much in the process.

* It is a waste of money to encourage students to apply to publicly subsidized higher educational programs at which they are highly likely to fail.

* We as a society are doing no favors to students who are admitted to community college or four year colleges with little chance of success. They are not receiving value added from the experience, they are merely getting a sorting credential (often a "some college" sorting credential from being admitted and then dropping out) comes at the cost as dramatically demonstrating to them that they are academic failures.

* It isn't that high school graduates who are academically ready for college shouldn't be supported by the government and have a decent life path for themselves, and our society does a very poor job of laying out alternative paths for students for whom their weak academic ability as a result of not high enough IQ makes that a poor choice. But pushing them into a college track which is not what they need or even really want is not the right solution.

* On the other hand, the gender gap in college attainment is an area where pushing more boys to go to college (boys and girls on average have about the same IQs) might be wise.

* Moreover, the push to attend and if possible complete college as the only accepted mainstream route to a decent life also encourages employers to engage in degree inflation in job requirements imposing educational requirements that aren't really necessary for the jobs in question to sort out dysfunctional people generally, and unreasonably delays adult life, including getting married and having children (see also here), for far too many people. 

* People are much less likely to continue and complete their educations when they have children, especially, but not only by any means, women. This also impacts career paths since educated women who have kids are less likely to get high returns from their educations. Most often in societies with more education this means birthrates fall. It isn't clear how much this is necessarily true, and intrinsic to the task of trying to balance parenting and studying which is harder than studying without having other responsibilities, and how much this is just a matter of tradition and custom. See also here on marriage, divorce and education.

* In the case of graduates, part of the issue is that the sorting and signaling effect of a college degree for employers represents not just selection on intellectual ability and knowledge, but also selection on an ability to consistently function in a structured environment without much close supervision for enough years to earn a degree, and to be socialized as a member of college educated class to not engage in conduct that members of that class would consider anti-social.

* The high and moderately predictable dropout rate from college in the U.S. suggests that we have too many community college, college and university slots in our system. 

* But some colleges do a better job of graduating students in the gray area than others and this needs to be replicated widely to target students in this middling range of academic preparation.

* There is another huge factor in who gets college degrees in addition to academic preparation and a certain level of ability to consistently function in a structure environment (what one professor has called the W factor for "work ethic"). This is family finances.

Controlling for academic ability, a student from a non-affluent family is highly likely to not attend college and to not graduate if they do attend college, while a student from an affluent family is highly likely to attend college and graduate thanks to strong financial resources and support resources that family facilitates and to a lesser extent a lack of cultural hurdles, even if they are academically well below the level of someone who usually managed to graduate by the skin of their teeth.

Low income students don't go to college, or don't finish college, not just because they can't secure enough financial aid, but also because they don't want to take on student loans which many of their less academically able peers were unable to repay creating a burden on them and their families.

Probably the single biggest step we could take to make our society meritocratic would be to guarantee 100% grant based financial aid for the full extent of their financial needs broadly defined, for lower income students with high enough academic performance to have a good chance of graduating. And, since socio-economic class is strongly correlated with academic performance, this group of students, while very significant in number, also isn't a huge percentage of all students.

The benefit of financially backing academically able lower income students in their pursuit of higher education isn't just a matter of social equity. Unlike academically unprepared students, the value added from the educational experience to academically well prepared students is great and this translates into great increases in lifetime productivity (at least when the educated people live in places with healthy urban economies) that make our economy as a whole more productive. See also here.

* Most states subsidize all in state college students with significantly lower tuitions than out of state college students. This is a bad policy. 

It doesn't reflect the future benefit that students could provide to the economic of the states where the college is located if they stay after they graduate. Students going to college and leaving college are at one of their most geographically mobile times. But from the perspective of a state's economy, it is in the interest of a state to lure as many people likely to graduate from college to their state as possible with favorable financial terms for obtaining a college education. 

It subsidizes students in open admissions or only weakly selective admissions institutions even when they aren't academically prepared for college and are likely to drop out with little value added, thereby wasting a lot of the money used to subsidize these students. 

It subsidizes affluent students who make up a large share of college students and don't need public subsidies to finish college debt free, in a regressive use of public funds.

Need based subsidies restricted to students who are academically well prepared for college is a much better use of public funds, providing more benefits for the money spent without being regressive in spending on people who don't need to economic help.

* Higher education has grown much more expensive. Some of this is a result of decreased state support for higher education per student. Some of this is a result of sticker prices for tuition, room, board, books and health care being inflated in order to allow a de facto sliding scale based upon ability to pay. Some of this is due to government guaranteed student loans and grants increasing the ability of students to pay. 

But, separate and apart from this, the actual cost of providing higher education has grown.

In general, technological advances and increased productivity and international trade have tended to reduce the cost and increase the quality of goods much more than services, especially services that are not easily offshored to cheaper labor markets, like higher education, since cheaper labor markets typically give rise to more compromises in quality than producing goods in those markets. And, many kinds of higher education beyond introductory courses can't be efficiently provided in large classes without individualized attention to students with a low student to teacher ratio.

Also, colleges and universities have seen administrative expenses crowd out payroll for instructors. This is a truly huge and widespread issue that needs to be addressed.

Finally, at some institutions, a large share of costs are for research rather than instruction, which is also an appropriate function of a higher educational institution, but which shouldn't unduly burden students paying to be educated and instead should be financed by other means.

* Loan based financial aid falls mostly on middle income families. Students from very affluent families who make up a surprisingly large share of college students who ultimately graduate don't need student loans. Students from low income families tend to receive a larger share of grant aid in their financial aid packages than students from middle income families. But, at many institutions (especially for pre-professional degrees in law, medicine, business and the like) most students who are not from very affluent families graduate with substantial student loans. The aggregate amount of student loan debt outstanding has soared and seriously impaired the ability of young managerial-professional workers starting their careers to build wealth, own homes, save for retirement, marry, and have children.

* Student loans are almost impossible to discharge in bankruptcy, despite the fact that they are almost never debt incurred wrongfully. There is reasons for this, since new graduates have lots of debt intended to be paid over time perhaps a decade or so, can't be made to surrender the human capital that they received in exchange for the funds spend, and have few assets. But the current system goes to too far of an extreme in making this difficult even when the human capital purchased turns out to be not worth very much (often through no fault of the students other than being gullible about their prospects, a known cognitive bias), or when other hardships or reasonable life choices make repayment very difficult.

* Student loans that are actually in default tend to be smaller loans (a median of about $11,000) owed by students who attended low quality programs or programs for which they were ill prepared and shouldn't have been admitted, often at for profit colleges. Often these students predictably dropped out, or weren't able to get the occupational license necessary to use their degree if they secured one, depriving them of the economic benefit that the spending on their eduction was supposed to provide, and as noted above, often they had little valued added learning from classes they took before dropping out because they weren't academically prepared enough to receive that knowledge and benefit from it.

* There are quite a few tax expenditures that subsidize higher education and student loan interest. But they don't very coherently distinguish between situations where this is money well-spent on an academically well prepared student or not, only dimly address actual financial need.

Ideally, the tax code would seek to end the status quo strong preference for capital in the form of property over human capital. In part, this is because the macroeconomic theories driving tax policy making have failed to adequately recognize the importance of investments in human capital.