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Tackling the 'high debt-useless degree' problem
At the recent convocation ceremony of Shiv Nadar University, Reserve Bank of India Governor Raghuram Rajan spoke briefly about private universities, noting that good quality education was expensive and it was necessary to find ways “to make degrees affordable”. More importantly, he said: “We also should make sure that unscrupulous schools do not prey on uninformed students, leaving them with high debt and useless degrees.”

Rajan’s statement could not have come at a better time. Hundreds of thousands of young women and men will be applying for college admissions in the coming weeks. A good number of them will unwittingly join predatory institutions that will charge high tuition fees but provide subpar education.

Many will borrow and incur high debt to eventually obtain worthless degrees. It was quite necessary for someone of Rajan’s standing to talk about this important issue because the ‘high debt-useless degree’ problem is quite widespread in India.

Useless degrees

National Assessment and Accreditation Council ratings as well as college and university rankings published annually by a number of magazines, and since this year by the National Institutional Ranking Framework, are perhaps moderately useful in helping prospective students decide which institution to study at and what discipline to take up.

But neither is particularly relevant for determining whether a degree in X at Y institution improves one’s employment prospects.

This is where employability reports come in. They are one of the more reliable – perhaps the most reliable – indicator of the quality of higher education offered at our academic institutions.

According to a recent report by the Associated Chambers of Commerce and Industry of India, with the exception of the top 20 business schools (mostly Indian Institutes of Management), most of the 5,500 such institutions produce only 7% employable MBAs, with the rest earning less than INR10,000 (US$149) a month. Similarly, according to the Aspiring Minds National Employability Report, 80% of engineering graduates are unemployable.

Overall, across disciplines, the employability of those with college degrees is quite low and this is exactly what Rajan was drawing attention to in his convocation address.

Most institutions in India, whether public or private, offer poor-quality education. Public institutions are in a bad shape due to poor funding, rabid politicisation in the appointments of key officials, faculty shortages, nepotism in faculty hirings, lack of autonomy and other factors.

The government’s policies have done precious little to address these shortcomings – and in fact have added to them – and raise the quality of education.

Private universities are even worse than public institutions in many ways since they cost much more to obtain the same useless degree. Indeed, most private institutions are predatory in nature and exist solely to maximise profits for their investors. The government’s regulatory institutions are clearly to blame for allowing such institutions to exist and flourish.

High costs

As noted above, while both public institutions and private universities hand out worthless degrees, there is one important difference between them – the latter charge substantially higher fees.

What this means is that many students (and parents) have to borrow money to obtain a piece of paper that does very little to enhance their career prospects.

While the average cost of a two-year MBA programme is said to be in the range of Rs3lakhs (INR300,000) to Rs5 lakhs (INR500,000), a typical graduate barely finds employment in the range of INR8,000 to INR10,000 per month, approximately the same as that of a driver or a cook. Of course, a driver or a cook does not have to borrow a few lakhs in order to become employable.

Rajan’s concern with high student debt and unscrupulous academic institutions is understandable because students often borrow from banks to study at such institutions to earn degrees that do not help them in any way to earn a decent income and repay their loans.

For a large number of students obtaining college degrees, especially in professional disciplines, the scenario of high debt-low employability is very real. Those obtaining worthless degrees from the relatively cheaper public institutions are somewhat better off in this respect since they have to incur lower levels of debt (if any at all).

However, it is a matter of grave concern that an increasing number of students, already in excess of 60% of the total, now attend private institutions. The total student debt and loan defaults can be expected to rise over time.

In theory, there is nothing wrong with the government supporting the growth of private universities. The state is not in a position to address the higher education needs of young Indians by itself and needs the private sector to step in.

However, when the government’s regulatory institutions are not designed to properly monitor and penalise predatory engineering colleges and management schools, it is in effect betraying the trust of young Indians and worse, participating in their exploitation.

Of course, everyone knows that one of the main reasons why predatory institutions flourish is because many of them are run or managed by political leaders or by business groups with close ties to them.

An uncertain future for young Indians

India has a large and growing young population. The 2011 census reported that over 40% of our population is below the age of 20. The 15-34 age group is in excess of 400 million, the largest in the world. More and more young people are looking for a college degree to improve their career prospects. The gross enrolment ratio is rising at a steady clip and we are set to become home to the largest student population in the world by 2025.

There has been plenty of talk that India stands to benefit from its demographic dividend. However, if current conditions, especially the poor-quality primary and higher education system, persist or do not improve, we will likely head into economic difficulties, social unrest and political instability. It is still not too late for the government to do right, among other things, by cracking down on unscrupulous universities.

Pushkar (@PushHigherEd) is assistant professor in the department of humanities and social sciences at the Birla Institute of Technology and Science or BITS, Pilani-Goa, India. This article was first published in Braingainmag.com.
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