Damien Grant: University fantasy traps students in the jaws of debt

Smart people often have degrees and smart people often make clever economic decisions. The driving factor is intelligence, not education. Photo / NZ Herald

Mercedes drivers typically earn more than those who scoot about in Hondas but plunging into debt to own a fancy car won't increase your take-home pay. The same applies to getting a degree. A Bachelor of Commerce won't necessarily make you rich.

It seems obvious that the higher your level of education, the greater your income should be. Certainly, the Ministry of Education believes so and proudly reports the increase of 25- to 34-year-olds who have a degree; from 16 per cent in 2002 to a whopping 30 per cent in 2012. A staggering 142,000 students are working towards a degree with another 448,000 toiling away for a lesser qualification.

Most of them are wasting their time. As a first-semester class in statistics will explain, correlation does not equal causality. Smart people often have degrees and smart people often make clever economic decisions. The driving factor is intelligence, not education.

A degree, by contrast, gives you few money-making skills. Some, like engineering and dentistry, may teach valuable practical expertise but a qualification in law, business or the arts is merely a proxy for talent. The lowest qualification from Harvard is more impressive than a degree from a second-tier New Zealand institute because we think that only the smartest people get to attend Harvard, whereas there is a perception that all that is needed to graduate from some of our tertiary education providers is a certificate of attendance and a pulse.

I know. I have a certificate in business from one of them.

Firms recruiting staff for high-paying jobs use university degrees as a filter, so a good degree from a recognised institution gives a graduate a head start. Equally, a non-technical qualification from a second-tier institution can be worse than having no qualification at all.

Because tertiary education is heavily subsided and there is no premium charged by the first-tier universities here, some claim that with their business qualification graduates can head off to the biggest companies in the world. Which is partly true when you consider that McDonald's is a global brand.

This does not mean there isn't intrinsic value in what young people learn at these places, but promising them that spending three years of their life and getting $30,000 into debt will fast-track them to a better life is dishonest.

Our generous student loan scheme will let a student borrow to pay course fees and up to $174-a-week to cover rent and beer. It is a sweet deal but it has encouraged legions of students to enrol in courses to prepare them for careers they are ill-equipped for.

Many would find there is more money in becoming one of the few people who know how to keep a Mercedes on the road rather than rushing off to study management accounting like the rest of the herd.