This is an update to a blog topic that I have asked in previous semesters. The topic of higher education is still important since many of our discussions this semester have revolved around education and economic output.
Education was a central theme of last year’s presidential election, and a major issue for current college students and their parents. As college costs have been on the rise (and here), students have demanded more financial aid and this has pushed much of the burden of paying for higher education on federal and state governments. As state governments have cut spending on community and state colleges since the recession began, “for profit” schools had been on the rise. However, due to the fact that more “for profit” students were going into default these schools have been under increasing pressure regarding their costs and standards. PBS Frontline released an episode called “College Inc.” which looked at “for profit” schools in detail.
There are new “free” education opportunities being pioneered by universities like MIT, which has helped start edX, and Coursera (and here) which has recently added courses from institutions like UVa. Also, the Khan Academy was created by former investment banker Sal Khan to provide free education to the masses in the U.S. and elsewhere. The problem with the “free” model right now, is that there are few degree opportunities attached to these courses. Furthermore, you have always been free to borrow the textbook that we use for this course from a local library, where you can read it, take notes on it, and attempt the problems. The same is true for essentially every other course you take in college. So why is it so expensive? What are you paying for? Are you just in college to collect some credential? As an economics student, you can probably understand at this point that the entire education package benefits the average student at least as much as the cost that you, your parents, and the government is paying for it. That does not mean it is the best deal around. Should there be fewer college students in general and should we make a bigger push for vocational training at an earlier age?
There has also been an increased emphasis on the STEM (science, technology, engineering, and math) majors in college which has led to declining interests in the humanities. How does a rising cost of education and/or the online movement of education impact the humanities? Are they going to face further declines in the number of students interested in their programs? Or are the humanities important to students graduating into today’s economy.
Questions you might want to answer:
I would like you to think about the rising costs of education, and how they might be contained. How do we get students to further internalize these costs, leading them to maybe make better decisions. DO NOT try to answer all of these questions, just focus on one topic. Also, try to think about your comment from different angles. To write a brief comment, read the previous comments, compose your thought in a Word document, and paste it in the comment box below. The more original and factually supported your comment, the better your grade will be. Finally, your comment will appear ONLY AFTER IT IS APPROVED. Please don’t email me asking where it is, it often takes a while for me to get to it.
- Do you believe that state schools (community colleges or otherwise) are helpful in containing college costs?
- Why do so many students pay so much more to attend certain non-profit private universities?
- Do you believe that the “free” education system can be adopted to a model where students are willing to pay money to attend online courses? Or do you believe that universities like UVA will be happy to provide these courses and their instructors for free? Why has MIT adopted their OpenCourseware model, and how do edX and Coursera anticipate making money in the future (if they do?).
- Do you believe that the “for profit” education system is worthwhile, or do you think that their students have been duped somehow? Surely some students must have had decent experiences at these schools, otherwise they would likely be out of business. Look for supporting or contrasting evidence.
- What evidence is there that education, especially higher education, affects macroeconomic outcomes. Do increases to education levels lead to higher expected GDP levels and growth rates?
32 thoughts on “GECON200-Topic #2: Macroeconomics and Education”
I believe that community colleges are helpful in containing college costs. The prices are very reasonable for people who uncertain about whether college is right for them and a part of their future. They also help contain college costs for people who want to go to college, but aren’t quite sure what they want to major in. This relieves the high costs of four year universities, money that could be wasted not knowing what you major in, resulting graduation taking longer than four years and costing additional money. Also, the credits you earn are transferable to 4-year universities within the state. NOVA (Northern Virginia Community College) has a partnership with many Virginia schools including: University of Virginia, James Madison University, and Virginia Tech. Students who achieved a certain GPA area able to transfer to these schools after two years. Community colleges also help people who want to go to college, but are unable to afford it. These people can work full time jobs to save up money to pay for college, while at the same time attending community college locally. Federal and state governments can fund only so much of the high and increasing costs of college, as a result community colleges provide a great alternative to containing the costs of college and obtaining a degree.
Many students choose to attend a non-profit school strictly because of the lower cost compared to for-profit institutions. Students who end up attending non-profit schools get out of the higher tuition costs and fees, along with reduced debt in the future therefore lowering their possibility of defaulting on loans. Today, many non-profit schools offer growing opportunities and elective classes that can help students figure out what they want to do with their lives if they are unsure. The highly structured programs that for profits schools offer are helpful for those who are clear on career choices but can become deadly for those who do not succeed and are forced to pay additional tuition and years of schooling. This decision process that students go through choosing a school can also be determined by the trends of the job market. The current demand for STEM majors may very well determine whether a student ends up at a non-profit school or not based on their academic distinguishment. Whichever option students decide to make, I believe that there is always an opportunity cost and today both choices can prove to be beneficial.
For me, college has never been an option. I was taught early on that it follows high school. However, it is not 100% necessary in this day and age. “For profit” education systems are duping hundreds of students a year that cannot afford it. College is currently a want not a need. At the end of a four-year degree college students are leaving with an approximation of just under $27,000 in debt according to CNNMoney. That being said, in April of 2013 there was an unemployment rate of 3.9% for recent college graduates. Unfortunately, the Georgetown University Center for Research noted that 32% of these students are finding initial jobs outside of their major. Debt and unemployment are not the only factors that contribute to education systems duping students. According to “Academically Adrift” — a book based on a study about undergraduate education in the United States — as many as 45 percent of students show “no improvement in critical thinking, complex reasoning or written communication during their first two years in college” (New York Times). As JMU offers critical thinking courses as GenEd’s, not all schools do so. And how effective are they really? The fact that students exit college with so much debt and no guarantee of a job or the proper teaching inhibits students to rethink the importance of a “for profit” education. These students may begin to look into self-directed learning such as Udacity, edUx, Coursera, M.I.T. Open Courseware, or even Khan Academy.
College these days is not an option for one that desires a higher paying job. The Job market is extremely competitive and constantly looks for students with the best credentials. These credentials, however, are what students truly pay for because they serve as a way to get a foot in the door. College prepares a student, more, for learning outside of school, as opposed to being able to recite some formula that was learned along the way. It is essentially an investment that students make to obtain the credentials in order to allow them to be more competitive in the job market. The idea that employers look for certain characteristics drives students to decide how much to invest in their education (state vs. private). The problem is that it cost quite a bit, and is still rising. This year was the lowest increase seen since the mid 70’s, and it was still a 2.9% increase. This increase, combined with shrinking government funding for education keeps many from being able to obtain the credentials needed to succeed in the job market. With the growing need for advances in businesses and technology, it seems more apparent why students choose not to focus their time and money on a subject such as the humanities. Students see that there are not as many jobs in that field and do not want to make their investment in something that they feel won’t pay off.
There are already for profit online education systems like Strayer that help thousands of people get or finish their degree on their own time and at their own pace. Many universities are happy to provide courses for free. “The MIT faculty, in adopting the proposal for OpenCourseWare, made a commitment to fostering social good rather than generating profit.” With social good as the objective, MIT has taught, “each month more than 1.2 million people from around the world…since inception, 125 million people have accessed MIT OpenCourseWare materials.” Because interest in free online education is a popular un-tapped market, edX and Coursera can create a profit by advertising on their free learning apparatus or have an online store where students can purchase course related material or collegiate apparel. Maybe, like Youtube, where before you watch a lecture there is a thirty second add or adds on the extra space on the sides or bottom of each web page. Either way there is money to be made in educating the public.
Education molds effective workers through the valuable information you learn and experiences. Students work their asses off to develop the skills they need to be successful. This is what drives a nation to be more productive, competition. People understand that if they want to be getting paid the most, they need to know the most. 66.2% of 2012 graduates pursued a college education, which is why the United States is top ten in GDP per capita ($51,704). GDP measures the sum of consumption, investment, government spending, and net exports. When a country has a high population of students getting a post secondary education that brings consumption up because with their degrees, they have higher wages and therefore are able to spend more. It increases investment for the same reason; people have higher wages coming out of college and therefore can invest more into the economy. Government spending goes up because they are using their tax revenues to fund public institutions. And net exports goes up because there is more production efficiency due to the increase in skilled workers. There are variables in there like students lacking drive and flunking out and than they are just in huge debt because of all the loans, which absolutely kills the economy. But overall education drives production of an economy and therefore GDP (third link below shows a graph correlating average test scores and economic growth) because of the skills students possess and the competitive nature of the United States.
I believe state schools can help contain college costs whether it be through community college or local non-private universities. State schools for one are already being partly paid for through state tax systems which help give state students an opportunity for lower tuition costs compared to out of state students who aren’t paying taxes to the state to help fund local colleges. Local community colleges are usually a good option as their tuition costs are low, are cheaper to students as they are generally close to where they live (can live at home), generally only carry 2 year associates degrees, educational career training, and even certificates, and students can usually work at a job while attending school. Local non-private state schools also help contain college costs as their tuition is generally lower than private schools. But, they are slightly more expensive than community colleges as they require some travel, room and board fees, as well as longer 4 year degrees or masters programs. For example, JMU a non-private university costs on average $22,740 a year compared to UR a private university in VA costs on average $45,320 a year which is double the amount. Another example, JMU costs on average $22,740 a year for in state students compared to on average $37,218 a year for out of state. You can see why community or non-private state schools can be a lot cheaper and help lower costs than private or out of state schools.
While it is true that gaining a college degree provides young adults with a more competitive job resume, it does not necessarily guarantee them a job. An increase in the amount of STEM majors nationwide may really only be beneficial in the short-run. If an excessive amount of technology majors enter the workforce, then structural unemployment may occur, as there will be less workers available for jobs outside of the STEM job market. It is true that in the modern era where technology is an important part of society, people with strong technological backgrounds are needed. However, jobs in the humanities will always exist, and will always need to be filled. Each job field benefits society in one way or another, and contributes to developing a more well-rounded society and economy. It is in the best interest of major universities and community colleges alike to structure their educational programs, regardless of major, in a way that is relevant to the current economy and job market. For example, basic technology-related skills could somehow be integrated into a humanities course. This would allow college students an opportunity to study in a field of interest while still learning the necessary skills to benefit them in the workforce.
I believe that the social norm for mandatory college attendance in order to succeed in the “real world” is incorrect. Although, attending college has many benefits, personally, I believe the negatives are much greater. In an article by Time: Business & Money it stated that, ““44% of [employers] cited soft skills, such as communication, critical thinking, creativity and collaboration, as the area with the biggest gap.” This is the result because students are spending too much time in the classroom not receiving actual experiences. According to a blog by Uncollege,” most people learn more outside of the classroom than inside of it.” Furthermore, many of the highest financially achieving individuals in today’s society have dropped out of college to pursue their true dreams and passions. According to Times: Top 10 College Dropouts, two of the largely known examples of this is Mark Zuckerberg, co-founder of Facebook and Bill Gates, co-founder of Microsoft who is, “richer than the bottom 40% of all American households” (How Rich is Bill Gates?) Additionally, the cost-benefit of going to college is being proven to show a decline. In a recent study, it stated, “about five million college graduates are in jobs the BLS says require less than a high-school education.” Therefore students are spending more money to attend college because of the incorrectly perceived benefits and thus coming into the “real world” with more challenges and setbacks then they would have if they just entered the work force from the beginning. Young adults need to be doing what they want to do rather than what they should be doing because of the confinements of social norms.
Advances in technology such as the internet and easy to use software have led to a boom in online education. A particularly exciting are the new “free” courses being offered by site like Coursa and edX.By allowing students from all over the world to essentially sit in on the highest level classes that our education system has to offer for free is in some way creating surplus educational wealth at no expense. If a camera is set up in the classroom of a top ivy league professor that is already being paid to teach the students in the classroom and students all over the world are able to watch the broadcast and gain knowledge form it then many would argue that the marginal benefit of that knowledge distributed over the hundreds of online students is greater than the small marginal broadcast costs. Problems arise, however, when that professor has to interact with the online students without compensation or when the students attending the university and paying tuition feel that they would rather save their $200,000 and watch the classes online as well. The free education system can eventually be adopted into a model where students pay, University of Phoenix and other online universities have been extremely successful in the past decade. However, turning these programs into a profit seeking industry completely defeats the purpose of providing high level online education to those who are otherwise unable to attain it.
The college prices that people focus on are not the prices that most students and their families actually pay. For example, Harvard’s full price is $59,800 but the average price for students who qualify for financial aid is only $15,550. The critics of college costs that protest high tuition but do not distinguish between the full list price and the average net price. After all, the only people paying the high, full prices for colleges are the “rich” people who the very same critics believe in taxing so heavily. By charging rich people more than those with less ability to pay, colleges in essence are following the exact same model as the government’s progressive income taxes.
When the government offers more financial aid, colleges then offer less, which ends up keeping the total financial aid package the same size. There really is no savings to students because federal aid basically just reduces the amount of aid a family qualifies for from their college. This is a classic case of the Law of Unintended Consequences. Either tuition will go up or the colleges’ financial aid offers will go down to offset the increase in federal aid. Therefore, in order to truly help students, the Federal government must change the formula used for calculating college financial aid packages.
College Costs Rising more Slowly, but Aid still not Keeping Up
There’s No College Tuition ‘Bubble’: College Education Is Underpriced
Senate Committee Report on For-Profit Colleges Condemns Costs and Practices
There are a number of reasons why some people spend excessive amounts of money to go to private college over the generally cheaper option of going to a public university. One reason is that, it is a natural instinct to be the “top dog”, so when choosing a college you take the “best” option you can get. To many people this means going to a school that is well known and has a prestigious reputation. Unfortunately price doesn’t always determine quality. Of the ten ranked Undergraduate Colleges of Business by US News and World Report, 7 were public schools that were much cheaper then there private counterparts. People often rank a school based on their alumni network, which can be very advantageous when search for a job, but it is seems that the high cost universities have the wealthiest alumni connections. This brings me to a big reason why people pay for private college instead of public, it is because we as humans imitate our parents. If you have parents who are strong supporters of a university you are naturally drawn to attending that college, this creates long legacies in many major universities. An additional reason is that even though you might pay more per year, most private colleges have a high 4 year graduation rate. In California most state schools prepare you to graduate in 5 to 6 years instead of the 4 years that are common for a private university. In the end it is up to the individual to determine if the opportunity cost of going to a private college is worth the outcome later in life.
There is a visibly strong link between macroeconomic outcomes and college graduates. However, theses links are not always positive. According to Forbes in 2013, many students graduate and have trouble finding well-paying jobs, and some graduate with a strong disliking for their major. In order to pay for ever increasing tuition, both students and parents of students are taking out sometimes predatory student loans. These loans can either be through the federal government, or private banks. According to the NACBA in 2012, College seniors owed an average of $25,250 in college loans. Parents have an average of $34,000 in student loans, rising to about $50,000 over a 10 year payment plan. The class of 2005 has found to have a 25% delinquency rate at some point, and about 15% defaulted. This rise in the debts of college graduates is both alarming and detrimental to the economy and borrowers, and is called the “debt bomb.” With rising debt, borrowers will consume less overall, and will put off events such as buying a car, house, or having kids (NACBA.) All these are critical to the American economy. Loans adapted by parents, or middle aged students can carry over into the lower income retirement years. Borrowers are hurting, and students are coming fresh out of college fresh in debt, many without a well-paying job. We should ask ourselves, is all this money really worth it?
“GDP per Capita (current US$).” Data. World Bank, 2013. Web. 17 Nov. 2013.
The Student Loan “Debt Bomb”: America’s next Mortgage- Style Economic Crisis? Rep. National Association of Consumer Bankruptcy Attorneys, 7 Feb. 2012. Web. 17 Nov. 2013. .
Touryalai, Halah. “Student Loan Problems: One Third Of Millennials Regret Going To College.” Forbes. Forbes Magazine, 22 May 2013. Web. 17 Nov. 2013. .
When choosing a college to go to most people always think about community college to fall back and to play it safe. Community college is helpful to students that don’t know what they want to major in, so instead of going straight to 4 year College or University they choose to go to community college to save money, and figure out what they want to do with their life. Where I’m from in New York the Community College cost about $2044.00 for a full-time student. Compared to most Universities and Colleges that is a significantly lesser price than those who decide right away that they are going to go to a 4 year university or all these big private schools such as Syracuse, or Michigan. To only spend $2044.00 to go to a Community College for 2 years to figure out what you want to do or simply because you don’t want to spend the rest of your life trying to pay off those college loans is a smart decision. Community college’s are helpful in containing college costs, it gives you a way to get a higher education without spending a large amount of money on your education.
Education absolutely has a positive affect on macroeconomic outcomes…. but let’s take a step back to microeconomics first. On an individual level, more education means greater opportunities for employment and higher wages. Higher disposable income leads to higher consumption. Here’s the link to Macroeconomics. Therefore, an individual with a higher education contributes more to the GDP. The accumulation of many higher producing/consuming individuals makes a great impact on GDP.
Education is an investment that leads to better equipped human capitol, innovation and therefore higher productivity. Citizens are more flexible in the types of employment they can take on. Evidence from the University College London reports that “increasing school enrolment rates by one percentage point leads to an increase in per capita GDP growth of between 1 and 3 percentage points.” The study notes that this is true of both developed and developing countries (though higher education is essential for developed countries). Another study declares each additional year of schooling raises earnings by about 10 percent for an individual in the U.S. With more disposable income, there is an increase in consumption and therefore an increase in GDP.
There are several positive externalities as well. A more educated population leads to lower unemployment and a lower crime rate as well as an increase in the production of physical capitol investments and technology. If education opportunities are accessible to all, this decreases inequality.
All of this in mind, it is only true over the long term. The implementation of education is costly in the short run. It is, of course, an investment.
I believe that most community colleges do a pretty good job at keeping college tuition costs low for their students. As well as most state schools for in-state and out-of-state students. For example, the community college that is in my hometown is part of a program in New Jersey, called NJ Stars. This program allows all students that graduated in the top 10 percent of their high school class to go to community college for free. If the students keep their grades up for the two years that they attend their respective community colleges, then they have the opportunity to go to an in-state school of their choice at a reduced price. However, if the students who would qualify for this program do not go to community college first, they have to pay the full price for in-state schools which is about the same price as going to an out-of-state school in any other state. New Jersey is one of the few exceptions to most states with keeping their in-state tuition costs low. Many state schools in Virginia are very affordable for in-state and out-of-state students. James Madison University is cheaper for me to attend then an in-state school and I have also received numerous scholarships that have made it even more affordable. This is also true for schools like the University of Virginia as well as schools in other states like, University of Delaware and the University of South Florida. So, overall most states have programs in place for their community colleges as well as universities to make it more affordable for students to attend and further their educations.
Society has proven that those with a college education are more successful than others without a college education. Although that is not the case for everyone, and it is possible to be successful without a college degree, people are more likely to attend college in hopes of a good income and comfortable lifestyle. Those who come out of degrees from private universities are often considered to be more competitive and more likely to get hired than public universities. The certain stigma of coming from a school where you pay more, and that has a better reputation leads employers to think they are more qualified and will be a better worker. This can cause problems for those who may not be able to afford more expensive universities, because they may be less likely to be hired leaving them unemployed, and unable to consume. Because of the subsidies given to state schools the tuition is often lower making these schools more accessible to students. Because of these lower costs these schools become more competitive to get in to which can potentially increase the prices of these schools as well.
Students are willing to pay more to attend nonprofit private institutions because they feel like they will be better off in the long run. Students that attend private universities tend to pay thousands and thousands of dollars more in tuition compared to students that attend community or public colleges. Parents that are willing to spend these high amounts of money on private universities usually have set motives. These motives may include, religious affiliations within the school, smaller student body’s which in turn means smaller classes, and/or the main belief that the university costs more because in the end it will allow their child to make more once they graduate. There is a belief by these parents that since they are paying so much for college now, the education their child is receiving must be better. Since the education their child is receiving is “better”, their child will be much more qualified for higher jobs after they graduate in comparison to students that have attended a state college. Essentially the parents feel as if their child will be able to earn the money they are paying now in tuition back relatively quickly once they obtain a high paying job. Parents may also choose to send their child to a private nonprofit university because of things such as religious affiliation. To many, paying more money to instill religious beliefs into their child is a good enough reason in itself. Parents may want their child to receive some form of religious education that won’t be found at state colleges. When it comes to deciding between state and private universities, it is always going to be based on preference and affordability. There are always going to be parents that are willing to spend incredible amounts of money on their child’s college education.
States is often misunderstood. As the blog post already says, anyone is allowed to borrow a textbook and acquire new skills. However, what really matters in this country is a piece of paper that says you graduated from an accredited institution. The Khan academy is an educational website that is completely free and allows anyone from anywhere in the world to learn just about anything. Salman Khan, a former investment banker created the Khan academy and the videos that are shown on the website, however never reveals himself on screen. An article on wired.com titled, How Khan Academy is changing the Rules of Education, compares Khan to the Wizard of Oz, in that he cares about sharing his sources with others and requires no recognition himself. The article also talks about how the articles aren’t professional or sophisticated, but they may be the secret to solving education’s middle-of-the-class mediocrity. However, like I previously mentioned, this knowledge isn’t always useful because it doesn’t come with a diploma at the end. In developing countries, where skills and knowledge are prized, this might be a more useful tool, but not in the United States and other leading countries. In my opinion, I think that websites like the Khan academy should be used as a supplement to accompany traditional schooling. It is a great resource for people that want free access to new information that could help them while in college or another form of school.
We live in a society that puts a great deal of pressure on people to get a good education. The higher education system is transforming through the emergence of online courses any student can enroll in for free. Coursera and edX are two of the leading free online education systems. The first thing one sees on the Coursera sight is “Take the world’s best courses, online, for free.” Such a promotion makes it hard for students to turn down an opportunity like that; to change it into an education system where students are required to pay would completely change the concept behind the program. 5,514,730 students, or “courserians”, take courses on Coursera. Schools using Coursera may find that a great opportunity to make money, but promoting themselves so clearing as a “free education” makes that a hard thing to pull off. In order for Coursera and other online education programs to be able to charge students the students marginal benefit would still need to exceed the marginal cost. Because currently the cost is $0, any student enrolled already has a higher marginal benefit.
EdX is based on the same free education ideas as Coursera. The president of edX, Anant Agarwal, said “We want to dramatically increase access to learning for students worldwide”. When visiting the EdX page the first three colleges displayed on the home screen are MIT, Harvard and Berkley, three of the best schools in the nation. Giving people the chance to take classes from an Ivy League school for free is a great opportunity. Not only is this beneficial for the student taking the course, it is also beneficial to GDP. As a person becomes more educated they have greater opportunities for jobs and innovation, as well as earning money, which can be then put back out into the economy through consumption. Overall the free education system is still growing. As we watch the results from such programs we need to weigh the cost and benefit to decide if such programs are truly beneficial to students and society.
Though the set sticker price of a non-profit private college or university has risen to a staggering $40,000 over the past two decades the actual cost of attendance has risen at a much slower pace. With the amount of financial aid as well as the amount of grants, work-study funds, and merit- and need-based scholarships the cost of attendance is closer to $13,000. With public institutions financial aid fluctuating because of state budgets, private schools are able to set their financial aid at a more stable and long-term endowment. “According to the Wall Street Journal, this means that even though less than 13 percent of U.S. undergraduates attend private colleges, those schools provide around 70 percent of total undergraduate grant dollars.” Private colleges are able to loan out more money to undergraduates and therefore many students take the opportunity to invest in a private education. Not only are students looking for more financial aid, but see more benefits in attending a private college due to rigorous academics and social stigma. Class sizes are known to smaller with a focus more on the learning rather than curriculum itself. Many students feel the need to attend a small school for the community and family feeling that comes with a small student body. A person can become a big fish in a small pond. While professors at public intuitions are well known, professors at private colleges usually have a more outstanding record and personal experience for the chosen field of study. Many undergraduates feel that their diploma will speak for itself when people see where they earned their degree. For example, undergraduates at Virginia Military Institute feel that after graduation they will have a much high chance of landing a job just because of the name of the school on the diploma. So when choosing a school ultimately students with higher GPA’s and tests score will be able to opt for a private institution carrying a higher price tag, but at a much more affordable net price because of financial aid.
What evidence is there that education, especially higher education, affects macroeconomic outcomes. Do increases to education levels lead to higher expected GDP levels and growth rates?
Earning a bachelor’s, master’s, or doctoral degree is beneficial in terms of job options and salary. According to usnews.com, those with a bachelor’s degree earn on average $2.27 million over their lifetime, those with a master’s degree earn around $2.67 million in a lifetime, and those with a doctoral degree earn about $3.25 million over their time working. However, usnews.com also found that those who simply have a high school diploma only earn around $1.30 million in their lifetime, which is a significant difference. While many young graduates deal with the burden of student loans after they graduate, in the long term, they have many more job opportunities than those who have only a high school diploma. According to Business insider, students graduate with $28,000 in debt, which may seem daunting for many. However, ten years after graduation, those who hold a college degree have a compensation rise of $3,778 a year, while non-college graduates only see $369 increase. While college graduates do have to deal with student loans, it’s clear that college is a great long-term investment.
Burnsed, Brian. “How Higher Education Affects Lifetime Salary.” US News. U.S.News & World Report, 05 Aug. 2011. Web. 15 Nov. 2013. .
“Long-Term Salary Data Shows How Much A College Degree Is Really Worth.” Business
Insider. N.p., n.d. Web. 16 Nov. 2013. .
The evidence showing that education, especially higher education, affects macroeconomic outcomes is and has been widely debated throughout the past couple centuries. Most studies have found evidence of higher gross domestic product (GDP) growth in countries where population has on average completed more years of schooling or achieved higher scores on cognitive tests. A study done by Robert J Barro in 2002 and published in, “Education as a Determinant of Economic Growth,” compares the economic growth of 100 countries from 1960 to 1995. The results showed that if the average number of years of upper level schooling increased by one year then the rate of economic growth increased by 0.44 percent per year. These results showed a strong positive correlation between higher level education and a total GDP of a country over time. Another study done by global partnership and UNESCO found that each additional year of schooling raises average annual GDP growth by 0.37%. Both studies are evidence that increased education is correlated with macroeconomic outcomes.
As time has progressed, a college education has become increasingly more important. Many companies won’t even look at a resume if an applicant is lacking some type of degree. Having a college degree years ago was a rarity and someone with a degree was considered to be well above average. Now college degrees are almost necessary just to keep up with the competition. Whether a student goes to an expensive private university or a community college, how much does their quality of education affect their potential job outlook? Just because someone has a degree from an expensive private university doesn’t necessarily mean that they will have an advantage over someone else that has obtained an equivalent degree from a school that may be of lesser quality. For instance, when someone attends a university that is considered to be of high quality and high cost, what is this high cost exactly paying for? A big part of the cost of this “higher quality” education may be the name of the institution that they can now include in a resume. Now that they have this exceptional school on their resume, what else does this student have to offer? How does this student stand out from another student that attended a mediocre institution? When a student is handed their diploma from any university, many times it is not the name of the university they attended that sets them apart, rather it is what they took away from their experience that helped them stand out from their competition. A mediocre student attending an Ivy League school doing the bare minimum to graduate is not going to have much advantage over another student that did not go to an Ivy League school, but had good grades, stayed involved, and made networking connections that will further them in their future careers. When students are deciding on what path they are going to take with regards to higher education, they have to think about how much benefit they will receive when paying for a higher quality institution. It is important to understand that just because a student is not attending a college that is of “high quality”, does not mean that they can’t get the same benefits from another school that is more affordable, but may not be as admirable.
I do not believe that state colleges community or otherwise helpful in containing college costs. Since the last recession public institutions have prices have increased very sharply and are no longer a very cost efficient option. Since 1985 college tuition and fees have risen 559 percent far outpacing the CPI which barely double in the same time frame. As well as that private colleges have increased in sticker price but are also offering more and stepper discounts with a real price 57 percent of said sticker price. Yet their state counterparts are actually in real and nominal terms increasing faster and faster. the reason behind this increased costs is the fact that during recessions and periods of economic downturn many states cut funding for state schools and end up never returning it so said state schools are forced to take it out of their students tuitions. Showing how the state colleges although cheaper for the moment are rising far more steadily and faster than their private counterparts. This is just accentuating the fact that state sponsored colleges are falling off and becoming more expensive and more costly therefor less helpful in containing college costs
Institutions looking to offer MOOCs to students find that it is an expensive venture. It can cost upwards of $250,000 dollars just for one course to be produced. Once the course goes live there are .additional costs as “someone has to pay for chat feed monitors, glitch repair, and a squad of tutors and administrators” (Dejong 3). These costs can easily .multiply for colleges and have little benefit to them. If they want to create a more interactive class with tutors and office hours then the cost of course production nearly doubles. To the students these classes may seem free, but as usual, “there is no free lunch.” Colleges cannot easily offer the services of programs like Coursera, edX, and Udacity without taking a lot from their pocket. And why spend this money that just can’t replace a classroom setting? Students need the ability to interact with a professor to ask questions and develop a better understanding for the material. These online courses cut out the student to teacher interaction and students are forced to either work in groups or teach themselves. So what college really wants to take on all these costs and opportunity costs?
It has been clear for decades now that college or graduate degrees have a definite economic value. Countless studies have proven that those with advanced degrees tend to earn more on the average than those without. This is especially true of degrees earned at more prestigious educational institutions (Harvard, MIT) and those in very specialized field (medical, coding, etc.). Several questions naturally come up. First of all, what business model should schools use to price out their programs and likewise, how should potential students decide which programs provide the best economic return or bang for the money? Given the fact that a school’s total budget is a combination of tuition income, sports income, privately and publically funded scholarships, endowments, grants and other income including rental income and investment income, it is very difficult to develop a meaningful business model. The task of pricing out various programs in a meaningful way is most likely beyond the ability of most schools. Historically, many schools have used comparable data from other institutions to make pricing decisions. Shortfalls in revenue one year may mean increasing the tuition and fees for the next year, or finding new sources of income as evidenced by annual fund raising efforts. Others have developed alternative “classroom” settings through the internet to bring down the costs to the school and student. Even more have developed joint or collaborative programs to reduce costs. Many have chosen to specialize in certain fields and charge a premium for it. Most can easily identify the costs and revenue of these new programs but meaningful and useful information on what processes and programs drive the total cost and revenue streams remains very elusive. Potential students have had even less to go on in determining the economic value of various programs at different schools. Besides the most obvious facts that indicate ivy leaguers make the most after graduation, and the top ten lists that are readily available, there is not much else to go on to determine the economic value of an education as it relates to ninety percent of people. This knowledge gap is caused largely by cultural perceptions of the value of education. For many if not most, the idea is to study a subject you like, get a job and work hard and success will hopefully follow. In a growing economy with lots of opportunities, this plan of action, (if you can call it that) has historically worked for many people. Recent major technological shifts in the last two or three decades coupled with an extended recession and chronic high unemployment have made the issue of valuing education even more important. With tuition costs higher than ever, it is critical to pick fields of study that result in employment and good pay.
For-Profit colleges are institutions that are profit-seeking businesses. The majority of these institutions respond to a demand for flexibly because of students work and family obligations that other institutions can’t meet. This is a benefit for people seeking a higher education that can work with their schedule. It targets students that have families or need to work full-time jobs. For-profit colleges gained a following because people believe getting a degree is better than not having one at all. Eventually as more people jump on the bandwagon the colleges improve. Even big name schools are experimenting with online courses called “edX”. Although this seems like a good option for people with limited time, the majority of students that default on loans are students that attended a for-profit college. Colleges with consistently high default rates can lose their eligibility for federal financial aid. This is an important change that may save students from entering an institution that is not a good financial investment. People are choosing for-profit colleges based on the convenience, but they may not be getting the best education for the amount of debt they could be entering. If someone seeking a degree has the option of attending a non-profit institution that would be the more economic option.
Many students pay an arm and a leg to attend certain non-profit private universities due to the fact that they are looking for a good return on investment, the prestige that comes along with the university, and the critical networking and job potential that can come from the alumni, even with rising costs and expanding student loans. Research suggests they are wise to invest in private institutions because the economic return to attending a selective private university is large and increasing. According to Kiplinger Magazine, “Princeton has the best value among private universities, noting that the average graduating debt is $4,957, about one fifth the average debt of students who borrow at all private schools.” Not only does Princeton help internalize costs and provide financial aid for students, but Princeton also has thousands of extremely successful alumni donating to the university and networking with scholars to help them attain a highly successful career in the future, making it a beneficial private university even with the initial outstanding cost. Students that can afford to attend such schools will because of the prestige, good return on investment, and networking, and even those that can not will utilize financial aid to assist them in reaping the benefits from private universities.
Obtaining a college education in America in this era is no longer an option for those desiring high paying jobs, but rather a necessity. A college degree is almost always essential if you want to succeed in today’s work force, but the cost of getting that education has become so inflated that it is nearly impossible to do so without loans/debt of some sort. Non-profit schools offer as much, if not more, than for-profit institutions do, and it is becoming more clear to today’s high school graduates that going to a public school may be a better choice than it was when their parents were attending college. At the end of the day, an affordable degree is better than no degree at all. However, it is true that the prestigious title of holding a degree from many for-profit schools is worth it to most people our age. In addition, many for-profit institutions today understand that it is hard to afford college, and if a student is accepted and unable to pay for tuition, the school will offer various loans and scholarships to the student in addition to government assistance in order to guarantee that the student attends. As the schools become more prestigious, such as the Ivy League universities, some even guarantee to pay for all of your costs if you are accepted. Columbia University, for example, will assist any student accepted with early admissions to bridge any gap between funds in order to assure that the student will be able to attend their university. So while an affordable education has become a popular topic, it is true that the name associated with many for-profit schools keeps its merit due to the fact that student know that they can attend if they work hard enough and are essentially seen as “worthy” enough for the schools to fight for them.
I believe there are numerous constituents to why students pay more to attend certain non-profit universities. This links mainly to a basic economic principle of Cost-Benefit analysis. To many students, the basic cost of obtaining an education outweighs the total cost of the education in monetary terms. Some students find that the money invested in the short-run will benefit them in the future by obtaining a higher education, which overall leads to increased income though better career opportunities. This connects to why exactly certain schools carry more value than others. Through reputation of previous accolades, some schools gain a perceived edge to be superior to others. This is mainly due to an idea similar to groupthink. People truly believe through a consensus that one educational program is superior to other, which makes its “value” in terms of education go up.
In regards to the implication of a free education system, as a nation we have the ability to implement this in some form. In todays age of technology where the cost of transferring data is virtually zero, this opens up numerous doors in how we can exchange knowledge and information. Anyone with access to a computer and the internet, which in todays world within the united states is incredibly high, has the ability to access educational information if they are willing to put forth the effort and time to do so. Again, this links with another basic economic principle that relates to peoples willingness to complete an activity or to make a decision. The possibility to receive free education is there, and it is apparent through programs edX and Coursera implemented by MIT, but overall I believe it relies on the people to take advantage of the resources that are presented to them and that are at their disposal.
In recent years, the tuition costs of a college-level education have been increasing at a rate much faster than the rate of inflation. This rapid increase is the reason that many students have been turning to more affordable non-profit public universities and community colleges in order to get their undergraduate degree. These institutions are extremely helpful in containing college costs when compared to private universities around the country. In 2010-2011, the costs of attending a four-year private university averaged at around $32,000 per year, while the tuition costs of a four-year public university averaged at around $15,000 per year. The large difference between these two values adds up over time, especially when considering the amount of debt a student incurs after completing a four-year bachelors program. Still, however, some students wish to attend private schools for the prestige or because of the perceived benefits of attending an education at such a university. For these students, the benefits of attending a private university outweigh the thousands of dollars of extra cost, whereas students who choose a public university are more concerned about the costs and the after-graduation debt.