Why I think Mike Bloomberg’s $1.8B donation to higher ed is a waste of money
A $1.8 billion gift is certainly worthy of headlines, and my general feeling is that it’s far better for philanthropists to try things than hoard their money. I also had personal interaction with Bloomberg when he was mayor of New York, and it feels like he was in education for all of the right reasons. That said, here’s why I think he just wasted his money:
1 — $1.8 billion in scholarships sounds like a lot, but it’s not. There are $250 billion in student financial aid issued per year in the U.S. so if all of his money went for just one year of financial aid (which it won’t), it would move the needle less than 1%. The general point here is that in areas like education and health, spending is so vast, that private augmentation is unimportant. As a gift to Johns Hopkins, great, but not meaningful to the overall ecosystem.
2 — Giving money to universities extends a business model that is vastly too expensive and risky for students. Many years ago, Purdue came up with a much better concept called an Income Share Agreement (ISA), which was a loan which only came due once a student got a job. This aligned incentives between students and their schools. All students in Australia are on income share agreements now. Sadly, the university world has been perfectly happy with their old model, where all of the risk is saddled by the student. The old model may work for the traditional elites, but has been very harmful to low-income students, saddling them with tremendous debt. Mr. Bloomberg would do far more if he created a new program at Hopkins to fund ISA agreements with students for the school in a pilot program for 10 years to prove the value, and then transition that back to Hopkins to finance, moving them to ISA’s for good.
3 — He’s investing in higher education at exactly the wrong time. Believe me, when I was running Rocketship Education, we were all about college, and they still are today. College has always been seen as the gateway to a better life. But the combination of massive college cost increases and a disconnect between college degrees and jobs has brought that dream into question. Now, schools like Lambda School, an eight month computer science school, free to students until they get a job, have helped more low income students find meaningful jobs than traditional colleges like Hopkins. This trend will increase significantly because Lambda and many others are completely online, attracting students from around the world. Lambda’s goal is to train 1 million students per year for computer science jobs. It’s current make-up is 40% students of color and 80% from the interior of the country. Hopkins will never match that, even with 100x the philanthropy.
Mike Bloomberg is an amazing person and if he ever runs for President, he has my vote, but this gift should be seen as a gift to his alma mater, not as a significant means of improving education for low income students.
