While professors' salaries may be rising, the real rise in
tuition has perhaps come from the huge reductions in state spending on higher
education. The Department of Education has made drastic cuts in subsidies for college tuition,
and because the cost of an education is not decreasing, the students must make
up the difference where the Federal government has come up short.
Another factor to look at is the value of college
education (determined by simple supply and demand aspects). As more students go to college, more people get degrees. With more
people graduating from college and the current scarcity of jobs, the demand and thereby the value of a
college degree has fallen due to a large supply of unemployed college
graduates. Annelise is right to note that while many college graduates are
fortunate enough to go to a university that can deliver the potential for
higher future earnings, other students may not be able to pay off their loans.
To get a scope of things, the amount of student debt is over $1 Trillion (that
is a T), and already ~13% of those who had borrowed money to pay for college
have defaulted on their payments. That dollar amount is bigger than both the debts owed on auto-loans and credit cards.
Defining the "cost" of tuition is difficult
because the government made credit so readily available for financing college
tuition payments. While this originally was an effort to maintain the
affordability of college for the middle class, has this ease of credit gone on
for too long? Have we created a glut of college students who now cannot find
jobs and consequently cannot pay off their loans? More fundamentally, is there a limit to how many college students our economy can sustain?
Looking at Krugman's take on the Asian Crisis in Thailand, it seems we can draw some comparisons...
Q: Is it necessary that we reduce the amount of financial aid for college tuition payments? If so, how can we do it responsibly to avert a real crisis?
Q for You: Romney and Obama have not really discussed the debt burden of college graduates. For the young demographic 18-25, maybe some older, this is probably the most important issue next to finding a job. How are they going to answer the questions above? Look for some answers (given with a mountain of salt) in the town hall debate this week!
Reduction of Government Funding for College and Education (2):
http://moneyland.time.com/2012/01/25/students-bear-the-burden-of-state-higher-ed-cuts/ (Jan 25, 2012)
http://libertystreeteconomics.newyorkfed.org/2012/09/soaring-tuitions-are-public-funding-cuts-to-blame.html (Sept 19, 2012)
Facts and numbers about recent graduates, employment levels, and other interesting points:
http://www.huffingtonpost.com/2012/06/26/infographic-shows-how-us-_n_1628187.html (June 26 2012)
Defaults on Student Loans:
http://www.washingtonpost.com/local/education/concerns-raised-about-student-loan-defaults/2012/09/28/99ba45b8-099d-11e2-a10c-fa5a255a9258_story.html (Sept 28, 2012)
USA Today, College Costs and the Department of Education:
http://usatoday30.usatoday.com/money/economy/story/2012-06-13/college-costs-surge/55568278/1
This post highlights several of what I see to be the most important issues with the current education environment. I would also add that, for the most part, American colleges are not really competitive in regards to price. These institutions benefit from a common mindset among the population that college is worth the cost, whatever that may be. And thus, at least among top colleges, there is little competition as to who can offer the lowest price to "customers." Further, adding to your comment on the value of a college education, we should probably look as a society at the demand for certain skill sets and then attempt to meet that through education. In many ways, meeting that demand might mean fewer history majors (I'm a history major myself) and more technical programs that prepare individuals for high-skilled manufacturing, for example. Of course, not everyone needs to change their educational paths to meet this demand; however, we build incentives into college degrees through both tangible aid (student loans) and public perception (prestige). Perhaps it is time to transform these incentives for a changing market.
ReplyDeleteI agree with you and thanks for the comment.
ReplyDeleteIf you get more time to respond or have the interest in this subject, how would you create those incentives more specifically?
I could imagine allowing financial aid only to certain areas of study such as high-skilled manufacturing or engineering and other hard sciences. Although this would only apply to Federal student loans & Pell Grants (~45% of all student loans), it would definitely make a difference in how many loans the Federal government gives out.
While I believe that for our country to continue growing, higher education should be more readily available, but might determining who gets access to higher education be necessary also?
What in turn does the lack of such a policy imply for our Federal government's current stance on student loans and education for that matter? Are we being too haphazard with our loans? If so, is the federal government to blame?