Hannah George
Economics
Mr. Reuter
6 October 2014
Unfair Tuition
The majority of us taking economics are seniors which means we have all already spent days or weeks filling out college applications, typing college essays, researching scholarships, and dreading the insanely high cost of college. No matter which college a student decides to attend, student loans and debt are a constant fear. The sticker price or initial price of college attendance has risen three times faster than the inflation rate of the American economy. Of course not everyone has to attend college, and thousands of high school students decide not to, because of the insanely high costs to attend college. But like all decisions there are externalities, both positive and negative, depending on whether a student decides to go to college or not.
Many, if not all, students applying for college will also apply to financial aid. Financial aid allows families and students to acquire money from the government to help cover the expensive costs of college tuition. When applying for financial aid, though, the government, or banks, take into account what the parents are making each year, how much the student is making, how much the family is paying for taxes and the other debts or expenditures the family is making. This creates price discrimination, since not every student will be able to afford to pay the same amount for college tuition as other students. Even with this price discrimination, college tuition is still impossibly high for many students, so a loan pool is created. The loan pool between banks and students has expanded to help students pay the higher prices of education but because students are able to borrow more money college’s increase the tuition sticker price because they are able to receive more money from students. As many adults like to brag to their college students that they were able to leave college with no debt from loans, they forget to take into consideration how hard it is to find good paying jobs in our current economy. 
The price discrimination of college prices means that people are willing to pay “much more for any good or service than other people are…” says Kenneth Gould in his explanation of high college tuition costs. He goes on to explain that when “producers,[or the colleges,] no longer need to complete, the prices always rise faster than they otherwise would.”
Over the course of the last thirty some years the sticker price on college tuition has risen roughly 7% while the overall economic inflation rate has only risen 3.2%, this basically means that the cost of college is rising faster than the overall inflation which clearly states that the cost of college has increased greatly.
David Feldman writes, “Most stories about the rising cost of education highlight seemingly wasteful practices at colleges and universities—the “dysfunction narrative.” Frequently cited practices include prestige competition among schools for students and faculty, the system of faculty tenure, gold-plating the college experience with fancy amenities, and administrative bloat.” Feldman is describing that colleges are basically overcharging it’s students in order to label itself as a prestigious school, one that has all of the newest technology, workout complexes, classrooms, dorms, buildings, etc, etc. The reason that students are overpaying for a college education is not for the education itself but for the prestigious environment of the school.
Works Cited
"AMERICAN.COM." The High Cost of College: An Economic Explanation — The American Magazine. N.p., n.d. Web. 7 Oct. 2014. <http://www.american.com/archive/2012/august/the-high-cost-of-college-an-economic-explanation>.
"Nope, just debt." The Economist. The Economist Newspaper, 29 Oct. 2011. Web. 7 Oct. 2014. <http://www.economist.com/node/21534792?zid=316&ah=2f6fb672faf113fdd3b11cd1b1
Obviously it is undeniable that college tuition has soared to ridiculous heights, causing financial pains for every student that wishes to attend. And the sad part is that a college education is a fairly inelastic good. Some kids are set on going to an Ivy League school where the tuition happens to be $50k+/year and they are left no option but to fold and pay the incredible fee. I think it’s kind of illogical that in our country the cost of a higher education is so high, if we actually want to see our nation prosper, but I guess at the moment that is just the way it is.
ReplyDeleteHannah, I love how you focused on the fears of so many seniors right now: the price of college. It seems to be true that we are not actually paying for our education, but rather for the amenities surrounding our time there while we are learning. That being said, some people are willing to give up the tradeoff of money to go to a more prestigious school. There’s really no way to tell which one is a better fit. Also, I agree that the sticker price of college is super scary and inflated, and you have to wonder what would happen if the government regulated the price of education at college institutions, and, if the government passes a law making universities lower their tuition, then one could expect the price of aid would drop significantly, and scholarships may become even more competitive. While price is a key, I think that colleges also are “marketed” to a certain public, whether or not the college is close or far from home, city vs suburban, religious affiliation, programs and degrees offered etc. If the prices keep rising, the scary part is not going to be paying off our student loans, but trying to help our kid’s generation pay their way through college.
ReplyDeleteGoing to college is one of the biggest decisions that a teenager will make, finding the right college is just the start. But when you put the price of going to that school into play, it almost seems as though that school isn’t the right choice. Teens that stand out academically in their grade are usually kids that are going to go to a top level college, but when they look at the price of the school they have to rethink that idea. This causes many of the smarter students to look toward colleges that aren’t very good and could possibly be to easy for them. With the skyrocketing prices of going to college, teens are having to make some very difficult choices.
ReplyDeleteAs Abby said, the potential for the government to intervene in rising college costs is great, especially considering education is regarded as a positive externality to much of society. The more education more people receive, the greater their ability to create something that helps others. With that said, though a price ceiling is tantalizing, perhaps it is not for the best, because it would prevent equilibrium. As the demand for college-educated workers grows, the demand curve for college shifts to the right, rising the equilibrium price. Since so many people are willing to pay for this higher price, colleges are free to charge it. Implementing a price ceiling means that colleges will be less likely to provide the amount of education desired by the students, and shortages could occur.
ReplyDeleteThis was a great topic to focus on, because of how quickly college is approaching. You make a great deal of points as your post goes on, with the same idea in mind; the rocketing price of college. Something that really surprised me was that college tuition has increased by 7%, while the overall economic inflation rate has only increased by 3.2%, proving how expensive these schools really are becoming. But also showing how inelastic they are, because students are still willing to pay for them, despite their increasing prices. Another good point you made was when you were talking about how some schools overcharge students, just to make them seem like a prestigious school. When in reality, all colleges are able to provide students with a good education, no matter what the tuition may be. Yes, their opportunities may differ, but an education is still available.
ReplyDeleteMy opinion is obviously biased considering I, along with the rest of us seniors that plan on going to college, have to worry about coming up with the money for at least four years of college. When talking to parents about the cost of their college compared to ours, how much we need to pay for a college education has definitely inflated greatly since they attended college. Unfortunately for all of us, we’re going to have to deal with it considering college is an inelastic good and most are willing to pay great amounts to experience the college life and expand our knowledge.
ReplyDeleteI already knew that the inflation rate for college costs was higher than the normal inflation rate but I didn't know it was that much higher! Even a difference of a few % can make a huge difference in the overall cost of college, meaning we pay more. This could lead to certain people saying the cost outweighs the benefit and choose to not go to college which will impact then later on. I think it's crazy how tuition has gone up so much in only a few years but we're all still willing to pay because we want the education, meaning that colleges are very inelastic. Overall, I think the prices are very scary and I'm glad you chose a topic that relates to all of us now.
ReplyDeleteAs a senior looking at all of my options for colleges - and college tuition - cost is definitely an important factor. I know that while I would prefer to go to a college with prestige and therefore a higher price tag, my parents are clearly more interested more interested in price and remind me often how it was when they went to college, like you mentioned in your blog post.
ReplyDeleteI agree that colleges are over pricing the education for the prestigious environment. The bigger the campus the more the cost, which is some what understandable because there is more to pay for but what is the difference between Univeristy of Minnesota and University of Wisconsin-Whitewater in terms of education. Honestly there is not one -an education is an education. The real difference in the schools are their strong majors, or number of professors. I really do not think there is a need to pay more for a bigger school. Even the little schools seem a bit overpriced.
ReplyDeleteCollage should be an "on the job" thing. That means when you go to the job you learn all the skills you need to be good at that job. This is a great substitute for collage and costs way less. Although many jobs with this agreement are not the top of the line jobs but, its a start to make money and live independently. Costs of collage are just crazy because, you go and you take classes that you really don't need; a waste of time and money.
ReplyDeleteThis is an interesting read. It's true that college is overpriced but it is very likely that this will never change. At it's heart education is an inelastic good, that is the amount consumed will not change significantly in a price change. This I believe is what has caused college prices to be so outrageous, even though people don't want to pay, they still will because of our need to get a better education.
ReplyDeleteCollege is expensive and it keeps getting more and more expensive depending on what college you plan on attending, but I believe that the price for college will not go down just because this is how college is supposed to be, Just down right expensive. Although if the school has a high price that could mean that the education is elite like Notre Dame for example, it's nearly $60,000.00 to attend and also you have to have a really high ACT and GPA and then you get schools like UW Milwaukee which are about $17,000.00 total which seems a lot better to anyone, but are you really getting the education that you really need?
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