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Pity the American parent! Already beleaguered by depleted 401(k)s and gutted real-estate values, Ponzi schemes and toxic paper, burst bubbles and bear markets, he is now being asked to contend with a new specter: that college, the perennial hope for the next generation, may not be worth the price of the sheepskin on which it prints its degrees.

As long as there have been colleges, there’s been an individualist, anti-college strain in American culture—an affinity for the bootstrap. But it is hard to think of a time when skepticism of the value of higher education has been more prominent than it is right now. Over the past several months, the same sharp and distressing arguments have been popping up in the Times, cable news, the blogosphere, even The Chronicle of Higher Education. The cost of college, as these arguments typically go, has grown far too high, the return far too uncertain, the education far too lax. The specter, it seems, has materialized.

It’s no surprise, given how the Great Recession has corroded public faith in other once-unassailable American institutions, that college should come in for a drubbing. But inevitability is just another word for opportunity, and the two most vocal critics are easy to identify and strikingly similar in entrepreneurial self-­image. In the past year or so, James Altucher, a New York–based venture capitalist and finance writer, has emerged through frequent media appearances as something of a poster boy, and his column “8 Alternatives to College” something of an essential text, for the anti-college crusade. The father of two young girls, Altucher has a very personal perspective on college: He doesn’t think he should pay for it. “What am I going to do?” he asked last March on Tech Ticker, a popular investment show on Yahoo. “When [my daughters are] 18 years old, just hand them $200,000 to go off and have a fun time for four years? Why would I want to do that?” To Altucher, higher education is nothing less than an institutionalized scam—college graduates hire only college graduates, creating a closed system that permits schools to charge exorbitant ­prices and forces students to take on crippling debt. “The cost of college in the past 30 years has gone up tenfold. Health care has only gone up sixfold, and inflation has only gone up threefold. Not only is it a scam, but the college presidents know it. That’s why they keep raising tuition.”

Like Altucher, Peter Thiel is a venture capitalist with strong misgivings about college. Unlike Altucher, he’s a billionaire and Silicon Valley royalty. In 1998, Thiel co-founded PayPal, and six years later, he made the first angel investment in Facebook. (In The Social Network, he is the imposing figure who conspires to oust Eduardo Saverin from the company.) A passionate libertarian—he was a generous supporter of Ron Paul in 2008 and is the main funder of the fringe Seasteading Institute, which aims to establish experimental political communities on offshore platforms—Thiel is deeply skeptical of top-down R&D and anything that smells like groupthink. At PayPal, he hustled $100 million in venture capital just ahead of the dot-com crash, which he anticipated, and he made another well-timed bet for his Clarium Capital Management hedge fund against the housing market in 2007. In higher education, he believes he has identified a third bubble, with all the hallmarks of a classic speculative frenzy—­hyperinflated prices, investments by ignorant consumers funded largely by debt, and widespread faith in increasing returns.

When I asked Altucher what his aim was in railing against college, he replied that he wanted to “reduce demand so costs go down”: Persuade enough kids not to enroll and colleges will be forced to change their ways. When I spoke to Thiel from his home in San Francisco in late February, he offered much the same justification for his major salvo in the fight against college—a philanthropic initiative called 20 Under 20. The program, also known as the Thiel Fellowship, will award twenty students 19 years old and younger $100,000 each and the mentor­ship of some of the most prominent entrepreneurs in Silicon Valley. The catch? The winners have to stay out of college for two years. They are to be announced this month.

Their advocacy has made Altucher and Thiel no few enemies. Jacob Weisberg, of Slate, has called the Thiel Fellowship a “nasty” and narcissistic idea that will retard the participants’ intellectual development and funnel whatever altruistic energies they have into getting rich, like Thiel. Altucher has received voluminous hate mail as the result of his media appearances and blog posts, including one from a fan who threatened to murder him and then eat his remains.

Photo: Bettmann/Corbis (Rousseau, Thoreau); Corbis (Hubbard, Dewey); AP Photo (Bloom

But the skepticism is spreading, even among foot soldiers on the academic front lines. In March, “Professor X,” an anonymous English instructor at two middling northeastern colleges, published In the Basement of the Ivory Tower, an expansion of an Atlantic essay arguing that college has been dangerously oversold and that it borders on immoral to ask America’s youth to incur heavy debt for an education for which millions are simply ill-equipped. Professor X’s book came out on the heels of a Harvard Graduate School of Education report that made much the same point. The old policy cri de coeur “college for all,” the report argues, has proved inadequate; rather than shunting everyone into four-year colleges, we should place greater emphasis on vocational programs, internships, and workplace learning. Then, last month, a front-page article in the Times delivered striking news: Student-loan debt in the U.S. is approaching the trillion-dollar mark, outpacing credit-card debt for the first time in history. With all that debt, more and more are asking, what are we buying?

James Altucher is a self-made man. A onetime New Jersey high-school chess champion, he was raised in a middle-class home and taught himself how to invest by preparing for the role as if it were a do-or-die match, obsessively studying the ways of the established masters. (He claims he read every letter Warren Buffett wrote to shareholders and investors from 1957 on.) Yet unlike many of the figures associated with the view that college isn’t needed for success—Gates, Jobs, Zucker­berg—­Altucher didn’t find his fortune young, and he didn’t drop out of college to pursue it. He holds a bachelor’s degree in computer science from Cornell, and he did two years of graduate work in the subject at Carnegie Mellon.

Not surprisingly, Altucher’s detractors often cite his credentials as evidence that he would like to deprive others of a privilege from which he’s benefited. To this, Altucher responds that his college experience is exactly what gives him the knowledge to criticize the institution. “People come back to me,” he says over lunch at a crowded restaurant in Union Square, “very smart, intelligent people, and say, ‘Look, college teaches you how to think, college teaches you how to network, college teaches you how to write.’ Personally, I didn’t learn how to do any of those things in college.” What Altucher learned to do in college, he says, is what all young men—“with almost no exceptions”—learn to do: drink and talk to women.

Altucher has a very personal perspective on college: He doesn’t think he should pay for it.

That training didn’t come cheap. By the time Altucher enrolled, in 1986, private-college tuition was already so high that he had to borrow heavily to attend. “Except for the first semester, I paid for my whole education,” he says. “I borrowed every dime.” He did everything he could to mitigate the expense. He took six classes a semester, stayed on for summer sessions, worked 40 hours a week at the computer lab. In the end, he managed to graduate a year early and still wound up about $40,000 in the hole.

Altucher’s views on higher education aren’t always consistent. “College is like the best thing in the world,” I was surprised to hear him say when I first called him. “It’s idyllic.” Indeed, he sometimes suggests that college is so idyllic it’s wrong to populate it with the young. Instead, he urges students to take time off and take advantage of their youth—to start a business, travel around the world, work for a charity. “What everyone asks then is, ‘How are they going to pay for that?’ Well, it’s one fiftieth of the price of college to do any of those things.”

This isn’t just a matter of harnessing people’s resources more productively, Altucher insists. It’s a matter of harnessing the country’s resources more productively. “Let’s take a step back,” Altucher says. “What’s the other American religion? Owning a home.” For years, the government encouraged home ownership for all citizens. “So we got more and more loans that were considered subprime, and look what that did. The idea, the religion of home ownership for all, turned into a national nightmare, a national apocalypse instead of a religion. The same thing’s going to happen here.”

The economic recession that began at the end of 2007 has had numerous, cascading effects: a decline in property values, retirement savings, birthrates, geographical mobility; an increase in the national deficit, political rancor, ­mental-health complaints. One effect the recession has conspicuously not had, however—despite what economists say may be the worst job market for graduates since the Great Depression—is on the number of American families who send children off to college each September. Fifty years ago, 48 percent of recent high-school graduates enrolled in a college or university. In 2009, that number was more than 70 percent—a historic high.

What is perhaps even more striking than these figures is that in the opinion of the vast majority of Americans, they’re too low. A 1999 survey sponsored by the Educational Testing Service found that 87 percent of Americans felt the lack of a college education to be a disadvantage in life. Ninety percent of high-school seniors expect they will go on to college, with seven out of ten of those believing they’ll progress from there into a professional career. “Education has been central to the American Dream since the time of the nation’s founding,” Drew Gilpin Faust, the president of Harvard, wrote in 2009. But in the decades since World War II, it has been college—not just elementary or high school, as before—that has become “fundamental to cherished values of opportunity.”

Social scientists and historians long ago identified this transformation in American educational expectations as the “college for all” movement, and public leaders and private philanthropists enthusiastically rallied support for it. But the data gathered in recent years on the value of college has been mixed at best, blunting the moral edge of “college for all” and turning some higher-ed advocates into skeptics like Altucher and Thiel.

This new criticism of higher education comes from three main sources. The first is the reality that, while all parents want their kids to complete college, little more than half of those millions who haul their laptops to campus each fall actually end up with a bachelor’s degree. The United States now has the highest college-­dropout rate in the industrialized world, and in terms of 25-to-34-year-olds with college degrees, it has fallen from first to twelfth.

The second source is the quality of the education available on campus. Nearly half of all students demonstrate “exceedingly small or empirically nonexistent” gains in the skills measured by the Collegiate Learning Assessment, even after two years of full-time schooling, according to a study begun in 2005 by sociologists Richard Arum and Josipa Roksa. (Many education reformers have focused their attention to gains from investments on the other end of the spectrum, in pre-K schooling.) In 1961, the average undergraduate spent 25 hours a week hitting the books; by 2003, economists Mindy Marks and Philip Babcock recently found, that average had plummeted to thirteen hours. In a typical semester, one third of the students Arum and Roksa followed for their recent book, Academically Adrift, did not take “any courses that required more than forty pages of reading per week” and half did not take “a single course that required more than twenty pages of writing.”

If college is neither a luxury good nor an investment, what is it?

But it is the data on the economics of college that is most disturbing. It’s bad enough that our colleges are under­performing, one can’t help thinking—but do they have to charge so damned much? In the past 30 years, private-­college tuition and fees have increased, in constant 2010 dollars, from $9,500 a year to more than $27,000. Public-college tuition has increased from $2,100 to $7,600. Fifteen years ago, the average student debt at graduation was around $12,700; in 2009, it was $24,000. Over the past quarter-century, the total cost of higher education has grown by 440 percent. “Like many situations too good to be true,” Louis Lataif, the dean emeritus of Boston University’s School of Management, wrote in February for Forbes, “like the dot-com boom, the Enron bubble, the housing boom or the health-care-cost explosion—the ever-­increasing cost of university education is not sustainable.”

This analysis, of course, takes a purely utilitarian view of college—higher education, as its many defenders hasten to point out, has a significance for students that defies the cost-benefit ratio. Last year, in response to a Times article titled “Plan B: Skip College,” The New Yorker’s Rebecca Mead published a rousing defense of college’s ability to, among other things, “expose individuals to the signal accomplishments of humankind.” In an essay published in March in The New York Review of Books, critic and professor Peter Brooks dismissed the swelling discontent with college as cranky and ­narrow-minded. The university is, he wrote, “one of the best things we’ve got, and at times—as when reading these books—it almost seems to me better than what we deserve.”

“What kind of an economic good is college?” Peter Thiel likes to ask. One answer is that college is a luxury good—a high-end commodity whose appeal, like a designer handbag, grows in direct proportion with the size of the sticker price. This is the answer given by such recent polemics as Higher Education?: How ­Colleges Are Wasting Our Money and Failing Our Kids—And What We Can Do About It, by the Queens College sociologist Andrew Hacker and the Times science writer ­Claudia Dreifus. Higher Education? contends that American colleges have transformed from rigorous scholarly communities into corporate-minded youth resorts, where some presidents command salaries of more than $1 million and competition centers on outdoing one another in acquiring high-end amenities (duplex-apartment dormitories, $70 million gyms).

Another possibility is that college is an investment—an expenditure on which one can expect high future returns. This answer is one to which many mainstream economists subscribe. When I spoke to Stephen Rose, a research professor at Georgetown’s Center on Education and the Workforce and the author of Rebound, an optimistic forecast of the postrecession economy, he pointed again and again to what he calls the “totemic number”: 74 percent. That is the financial benefit—the so-called B.A. wage premium—that economists calculate college graduates can now expect to reap relative to their peers with high-school diplomas. It is a number that has nearly doubled over the past 30 years.

Still another possibility is that the primary role of college today is to serve a “signaling” function—like an elegant business suit, an impressive B.A. advertises talent, pedigree, and ambition employers can use as a hiring shorthand. Thiel, for instance, received both an undergraduate and a law degree from Stanford, credentials that he was able to parlay into a clerkship with a federal judge, an associate position at a white-shoe Manhattan firm, and a job trading derivatives at Credit Suisse before he returned West to join the Internet rush.

But of course, Silicon Valley is a mecca of countersignaling—witness the super-status Zuckerbergian hoodie—and it’s no surprise to discover that in the land of the billionaire dropout, an Internet entrepreneur like Thiel sees evidence that higher education inhibits innovation. All he has to do is look around to see a new model university—the college of innovation and pluck.

Thiel does not dismiss those who say that higher education is a luxury good or that for some it might be a worthy investment, but he finds neither account adequate to explain the college bubble. It’s undoubtedly true, he said, that “it’s a lot more fun to go to college than to work.” And yet the fact that college now costs so much, and requires so much debt to complete, “probably leads people to be a lot more stressed out than they otherwise would be, so it’s probably a lot less fun than when it cost less.” His hunch is borne out by a comprehensive 2010 survey of freshmen that found emotional health to be at a record low—in large part because of financial worries.

“Not only is college a scam, but the presidents know it. That’s why they keep raising tuition.”— James Altucher



“College debt means getting stuck on a particular career track for the next twenty years.”—Peter Thiel

As for college being a good investment, Thiel believes the 74 percent wage-­premium figure to be as inflated as tuition prices. A Clarium report Thiel commissioned in 2009 analyzed government data to argue that, while the return on a college diploma indeed increased markedly between 1978 and 2000, that’s only because the return on a high-school diploma decreased markedly during that same period. “Relative to the past,” the report stated, “students who go to college do better than their peers who do not, but this is simply a mathematical result of their peers doing worse than in the 1970s.” At the same time, more college debt means it takes students much longer to pay back their loans—a consideration Thiel thinks economists are wrong to omit from their calculations. “It’s not just a question of if you get [a degree], you make more money,” he says. “It’s also a question of how many options you’re precluding for the future.” Just as during the real-estate boom people bought more house than they could afford, trapping themselves in burdensome decades-long mortgages, “lots of college debt means that you’re maybe stuck on a particular career track for the next twenty years.”

But if college is neither a luxury good nor an investment, what is it? For Thiel, the commodity college most closely resembles is the humble insurance policy. Americans have become terrified, he says, of what will happen to their children if they don’t send them to college. The recession, widening income inequality, growing job insecurity, the uncertain future of the welfare state, the increasing costs of health care—all have deepened the anxieties that made college such an attractive option for a rising middle class in the first place. “I think that’s the way probably a lot of parents think about it. It’s a way for their kids to be safe, to be protected from the chaos. You’re paying for college because it’s an insurance policy against falling out of the middle class.” The larger question this raises, he says, is, “Why are we spending ten times as much for insurance as we were 30 years ago? And does that tell us something has gone really badly wrong with our country?”

At the core of the Thiel Fellowship application is a pair of open-ended, Miss America–like prompts: “Tell us one thing about the world that you strongly believe is true but that most people believe is not true” and “How do you want to change the world?” Within weeks of the applications going out, responses began to appear ­online—on Facebook, on student blogs, and on YouTube in the form of PowerPoint and HD-video presentations.

Among the first responses I came across, in February, was on the website of Dale Stephens, a freshman at Hendrix College, in Central Arkansas, which routinely shows up on rankings of the best liberal-arts schools in America. Stephens’s answer to the second question was to propose a new airline that would utilize a single aircraft family, secondary airports, and a single-class seating system to provide inexpensive transatlantic flights. This was no mere daydream: He had already forged contacts with Boeing, Southwest, and several major airport authorities, and he’d devised a business plan that, with adequate seed money, he was convinced could be brought to profitable fruition.

After I read his proposal, I tried to schedule an interview with Stephens. This proved harder than expected. He told me to check his online calendar for an opening; he was booked solid for weeks. When I finally did get through, a couple of days later, it became clear why he was so busy. Stephens’s 19-year-old life is crammed full with intellectual and creative ventures. He is writing a book. He participates in workshops, seminars, conferences. A month before we spoke, he put his airline idea on ice in order to launch an organization that applies the methods of “unschooling”—the self-directed brand of homeschooling with which he was raised—to the realm of higher education. UnCollege, as Stephens calls it, has already garnered coverage from The Chronicle of Higher Education, the Huffington Post, and ABC News. Then, of course, there was his classwork—though he’d already resolved to jettison that distraction. Whether he was awarded a Thiel Fellowship or not, he said, he was going to drop out. He did, at the beginning of last month.

I spoke to a half-dozen applicants, and nearly all offered the same lament: College is impractical. The liberal arts are hazy, its lessons inapplicable to the real world. “The best way to learn is through purpose-driven education,” Max Marmer, a Stanford student who also dropped out recently in favor of entrepreneurship, told me. “Taking classes in itself is worthless.” Listening to these kids—these inordinately gifted, monumentally confident kids—was at once inspiring, intimidating, and a reminder of just how limited in reach the efforts of the anti-college leaders have been. Inevitably, perhaps, both Altucher’s rhetoric and Thiel’s philanthropy have appealed most to that segment of the college population that is bound least by the college system. With their sophistication, self-motivation, and autodidacticism, these students don’t truly need college. Lock the gates of the campus behind them and you can be reasonably certain they’ll do just fine—maybe better.

Attending to these outliers has been a PR boon for the Thiel Fellowship, which is intended, Thiel told me, “to reset the values all the way down the system”—a program of trickle-down entrepreneurship aimed to launch us out of our great stagnation. As Thiel and Altucher surely understand well, now is precisely the moment, with all its uncertainty and anxiety and instability, when systems as stalwart as college seem most in need of reconfiguration. But it is also the time—with all that uncertainty and anxiety and instability—when the millions reliant on a system as stalwart as college are least eager to do any real reconfiguring. The vast majority of undergraduates are in a peculiar and as yet unresolved bind. On the one hand, a college education will likely saddle them with crippling debt and consign them to four underwhelming years in classrooms with fluorescent lighting and drop-tile ceilings. On the other hand, opting out will likely consign them to a lifetime of unsatisfying, low-wage employment. What’s an average kid to do?