Dropping out: Is college worth the cost?

(CBS News) One of the wealthiest, best-educated American entrepreneurs, Peter Thiel, isn't convinced college is worth the cost. With only half of recent U.S. college graduates in full-time jobs, and student loans now at $1 trillion, Thiel has come up with his own small-scale solution: pay a couple dozen of the nation's most promising students $100,000 to walk away from college and pursue their passions. Morley Safer takes a look at Thiel's critique of college.

The following script is from "Dropping Out" which originally aired on May 20, 2012. Morley Safer is the correspondent. Katy Textor, producer.

These are the days in May, when young men and women are capped and gowned -- their hands clutching diplomas, their ears tuned to some wise person telling them, "You are the future." For many, deep in debt with few prospects, that future looks pretty bleak.

It's enough to make some believe the siren song of Peter Thiel. He's the billionaire venture capitalist who's been beseeching students to drop out of a university system he says is broken -- churning out too many half-educated graduates seeking too few jobs. Thiel put his money where his mouth is and pays selected students $100,000 each to drop out and focus on ideas that will benefit themselves and the world at large. Waiting for graduation, he says, is an expensive waste of time.

Peter Thiel: We have a bubble in education, like we had a bubble in housing in the last decade. Everybody believed you had to have a house. They'd pay whatever it took. Today, everybody believes that we need to go to college, and people will pay whatever it takes.

Morley Safer: You describe college administrators as subprime mortgage lenders, in other words conmen.

Peter Thiel: Not all of them, but certainly the for-profit schools, the less good colleges are like the subprime mortgage lenders where people are being conned into thinking that this credential is the one thing you need to do better in life. And they're actually not any better off after having gone to college; they typically are worse off because they've amassed all this debt.

Morley Safer: You think if the bubble bursts, it's a good thing?

Peter Thiel: I don't think bubbles bursting are ever good things. I think they are inevitable things.

For Thiel success seemed inevitable -- child prodigy, chess champion, arrogantly self confident. He breezed through Stanford undergrad and law schools. With his Midas touch he took the millions he made as a co-founder of Paypal and turned that into billions as the first investor in Facebook.

Morley Safer: And you're a billionaire before the age of 40.

Peter Thiel: I guess that might be correct, yes.

Morley Safer: No, it is correct.

Peter Thiel: Yes. Yes, that is correct.

[Jim O'Neill: Ladies and Gentlemen, I'm honored to present the chairman of the Thiel Foundation, Peter Thiel.]

His 20 Under 20 Fellowship is Thiel's answer in miniature to what he calls the questionable value of higher education.

[Peter Thiel: This will be a fascinating afternoon as we listen to these incredible visions of the future.]

Each year, Thiel will select 20 students and pay them $100,000 apiece to work on their ideas.

[Female finalist: I want to make complexity our new paradigm because only by understanding how our world really works can we hope to make it better.]

These finalists are making their pitches...

[Two male finalists: The effectiveness is inversely proportional to the time of diagnosis.]

The only condition? Drop out of school.

Morley Safer: Your megaphone is saying, "Don't go to college." Is that what you really mean?

Peter Thiel: I'm saying that people should think hard about why they're going to college. If your life plan is to be a professor or to be a doctor or some other career where you need a specific credential you should and probably have to go to college. If your plan is to do something very different you should think really hard about it.

The educational establishment dismissed the idea as dangerous, nasty and misguided.

Peter Thiel: Our thought was, "This is going to be a very idiosyncratic, small program." And the fact that it was controversial was a big surprise to us, but it was because an awful lot of parents are quite worried about the education system. There's a great deal of anxiety beneath the surface.

With only half of recent college graduates in full-time jobs and college debt topping a trillion dollars, Thiel believes college has become just another debt-fueled luxury.

Peter Thiel: I did not realize how wrong-- how screwed up the education system is. We now have $1 trillion in student debt in the U.S. That trillion dollars-- wanna describe it cynically? You can say it's paid for $1 trillion of lies about how good education is.

Morley Safer: That's a-- such a sweeping statement. You're suggesting that people graduate as either dunces or ne'er-do-wells. There's been a huge number of people who've contributed extraordinarily to this society in the last 20-30 years. We live longer lives because of those people.

Peter Thiel: We have a society where successful people are encouraged to go to college. But it is a-- it's a mistake to think that that's what makes people successful.

Morley Safer: But what you're saying suggests a concentration on all of the practical things in life, correct? But some of the impractical things in life are the most valuable.

Peter Thiel: That's not always true. People say that sometimes they are. Sometimes they are just impractical things that are of little value. And you have to look at the cost side of the equation. It costs up to a quarter of a million dollars to go through four years of college today. Unfortunately, you have to think about the practical things and are you actually gonna get a job where you can pay off this incredible debt you take on?

He may have a point about the cost. College tuition has quadrupled since 1980 but Thiel says many colleges are unaccountable, bloated institutions where students are learning less than ever before. He says a degree has little more than snob value.

Peter Thiel: There are all sorts of vocational careers that pay extremely well today so the average plumber makes as much as the average doctor.

By some calculations he's absolutely right and, in terms of successful college dropouts, he has his legion of examples.

Peter Thiel: Mark Zuckerberg from Facebook didn't complete Harvard. Steve Jobs dropped out of Reed College. Bill Gates dropped out of Harvard. When you do something entrepreneurial, the credentials are not what really matters. What matters is having the right idea at the right time, the right place.

Morley Safer: But all of the examples you give are people who had a very serious brush with higher education, all of them pretty much at elite schools.

Peter Thiel: It's not causal. You know, Harvard does a great job at picking the winners, and therefore it should get very little credit for turning people into winners.

Morley Safer: Well, the same could be applied to your program.

Peter Thiel: Yes, but the difference is that my program is not-- does not involve charging people a quarter of a million dollars.

[Vivek Wadhwa: Believe it or not, U.S. education is by far the best in the world.]

Vivek Wadhwa has debated Thiel on the value of higher education.

[Vivek Wadhwa: If you don't even have a bachelor's degree, if you don't even have basic education basically you are beyond hope.]

He is a successful entrepreneur and professor who teaches at Duke and Stanford. When he heard about Thiel's plan he was appalled.

Vivek Wadhwa: How can we now be sending a message to children that they don't need to go to school?

Morley Safer: Did the idea gain any traction at all?

Vivek Wadhwa: In Silicon Valley, it spread like a wildfire. I was shocked. What is going on with this country? Why is there such an anti-education sentiment brewing in this country?

Morley Safer: But what's wrong with a kid who's got a really bright idea and feels, "Why should I waste my time and money going to school?

Vivek Wadhwa: Morley, ideas are a dime a dozen. Everyone has them. What makes you successful is being able to take that idea and turn it into an invention, and then turn that into a company. Those skills you only gain through education. You're not born with them. There might be one Mark Zuckerberg out of a million. But there aren't five Mark Zuckerbergs.

Thiel's fellowship winners seem confident enough to take their chances...

[Fellows retreat: We're going to pretend we are at a networking event.]

...yet are geeky enough to have to take a short course in tough subjects like hand shaking and eye contact.

[Fellows shake hands: Hey, I'm Bun...Dan]

They are skills that winners like Jim Danielson will need to get his idea on the road. He won his $100,000 when he electrified a junkyard Porsche with a motor he says is cheaper and more efficient than what Detroit has to offer.

Sujay Tyle was an 18-year-old junior at Harvard when he won a fellowship with a plan to create cheap bio-fuels.

[Eden Full: I'm developing a device called the Sun Saluter and what it does is rotates your solar panel.]

Eden Full was at Princeton.

She invented a more efficient way to capture solar energy.

Morley Safer: I'm just curious what your parents made of this decision of yours.

Sujay Tyle: My parents weren't that supportive at first.

Eden Full: Both of my parents never had a chance to go to college. So having a kid graduate from an Ivy League institution would have been kind of a big deal. So they were a little upset at the beginning.

Morley Safer: Did you feel that you were being fully challenged when you were at university?

Eden Full: Challenged in the wrong ways. I wasn't challenged in the things that I was interested in and so I struggled a lot.

Sujay Tyle: I was a pre-med student at Harvard. And so I was challenged. But as Eden said, not in the ways I wanted to be.

Alex Kiselev is not a Harvard man. He was at a community college when he won his fellowship with a plan to manufacture scientific instruments more cheaply.

Alex Kiselev: Looking at how my parents went through debt, it's really debilitating for the first five to 10, even maybe 15, 20 years of your life. Especially if you don't find a very high-paying job, as is always promised.

Peter Thiel: Close to half of the fellows have started businesses at this point. A number of them have received funding from outside investors. I think that across the board, the sense is that they are progressing a lot more with their lives than had they stayed in college.

Easy for him to say. He has degrees in philosophy and law.

Morley Safer: There's no question you're a very smart guy. There's no question you're a very successful one. Do you think you could have done this without your educational background?

Peter Thiel: There may have been something specific at Stanford University, but I think if I had gone to any of a number of other universities it would have been actually quite bad. If I would have gone to Harvard, I would have been tracked to become an investment banker. And I would never even have considered anything else.

Instead he chose an even more lucrative career and now lives a predictable pampered billionaire's life -- intensely private, demanding, uncomfortable -- almost mimicking his hero Howard Hughes. The Silicon Valley version of a temperamental prima donna.

Publicly, he puts millions into some outlandish projects like funding labs determined to extend life by centuries and floating sea colonies -- still in the model stage -- that would be libertarian utopias where American law would not apply.

[Stanford student: I just really wanted to meet you, I'm a big libertarian."

Peter Thiel: All right. Thanks.]

His uncompromising belief in low taxes and minimal government has made him a libertarian cult hero.

Professor Wadhwa says Thiel's billions have clouded his thinking.

Vivek Wadhwa: Peter Thiel has made so much money that he's out of touch with the real world. He doesn't meet common people. He doesn't understand their needs. He doesn't understand how important education is for the masses. You can take 24 children and make them successful by giving them on the job training. But that's not a lesson for the rest of America. What I worry about is a message that's getting out there to America that it's okay to drop out of school -- that you don't have to get college. Absolutely dead wrong.

Morley Safer: The current crop of fellows, where do you think they'll be, say, five, 10 years from now?

Vivek Wadhwa: The majority of them will fail. And they're gonna regret not having completed their education.

Already one company started a year ago by a 19-year-old Thiel fellow who had raised a million and a half in outside cash is struggling.

[Peter Thiel at finalist event: So what have you been up to?]

But Thiel says it's still early in the process and getting rich isn't the point.

His fellows say they can always return to college if things don't work out.

Alex Kiselev: Of course we're destined to fail. That's what entrepreneurship is. That's what-- when you try to do something new, the chances are you're gonna fail. And I think that in-- when we're 21 or 22, whenever-- all of our friends are graduating college, I think we'll be far more likely to succeed than they will be.

Morley Safer: I think it's fair to say you're enjoying the controversy you've started, correct?

Peter Thiel: I don't enjoy being contrarian.

Morley Safer: Yes, you do.

Peter Thiel: No, I think it's much more important to be right than to be contrarian.

Morley Safer: Do some of your fellow entrepreneurs think that you're sometimes a little bit nuts for the kind of things that you support?

Peter Thiel: You know, it doesn't matter to me whether people think it's crazy or not. What matters is whether we're doing something to make the world a better place.

Morley Safer: And you really feel that you are?

Peter Thiel: If you could convince me that I wasn't, then I'd stop.

And perhaps move to one of his utopian offshore nation states -- where only big ideas flourish and school's permanently out for everybody.