Rising college costs…and the economy

In the United States, today an increasing number of jobs require educated people. As the majority of the work force is now required to have a college education, an affordable college education is essential. This demand for educated people plays an important role in the economy and has implications on the nation's well being. Therefore, it is the government's concern to provide a means to educate its citizens at an affordable cost, so that they can enter the workforce and become productive members of the economy.

What, if any, is the causal relationship between the rising cost of college and the United States economic wellbeing?

The cost of education continually rises at a higher rate than the income of an average family and ahead of inflation. For example, in private schools the cost of education has risen 40%. In comparison, the average family income has rise by 4%. In public universities, the rise in cost cannot be pinpointed to one thing, there are many causes. The rise is due partly to the rise in all the resources that are used to run a university. Further affecting the rise in are budget cuts by the government. With less funding provided by the government, the universities have to raise tuition cost to replace this loss of money. Another cause, as it is noted above, people in the United States today have a need to go to college and receive a higher education, as that affects our economy. With this growing need colleges have a "sellers' market", in which they can raise tuition and without fear of decreased enrollment. Students compete simply to receive a spot at the college of their choice, thus colleges can raise tuition and still expect students to pay. With these factors and many others, the rise in cost of education is sharpening.

Barack Obama has many ideas on how to improve the current education system. He plans to reform the No Child Left Behind act by making the standard for improvement not based on test scores. This will help because the large majority of students experience some sort of test anxiety. It places more emphasis on the retention of actual knowledge compared to just memorizing facts to get a good grade. His approach to this situation places more stress on the quality of knowledge than the amount that students receive. Along those same lines, Obama is looking to make college more affordable to college students. The people who go to college are there to gain more human capital and they want to give back to the community. The more college they have, the more money they make, thus the more money they give back to the economy. His plan is to give students a $4,000 tax break for contributing with community service. It is a great idea to help the economy in the long run.

John McCain is looking toward a more pro-choice response to this issue. He thinks that parents should be able to choose what school they want their children to go to and get rid of the confines of geography. He wants the teachers to step up and take responsibility for their students and the amount of knowledge they are getting. He also wants to "devote five percent of Title II funding to states to recruit teachers who graduate in the top 25 percent of their class or who participate in an alternative teacher recruitment programs."
As far as higher education is concerned he wants to make it easier for parents of students to get the tax benefits that are already in action right now. He wants to make the whole process easier and less time consuming for people because there is plenty of money every year that goes unclaimed.

So, what are the implications of the rising cost of college for the economy?

One of the major implications of the rising college tuition costs is an increase in borrowing. As college costs increase, students have to rely on other forms of payment, other than methods previous students used such as grants and family contributions. Students are now taking out loans and increasingly graduating in larger debt than previous students. With more young adults entering the work force and the economy, there are major repercussions. These young people treat these student loans as monthly payments, much as people look at a mortgage or a car payment. Consequently, these loan payments become just one more monthly bill to pay. This doesn't seem like such a bad economic idea, as long as the economy continues to grow. As history suggests, the economy goes through periods of expansion and recession. What if the economy enters a recession and theses "monthly bill" payments become a larger percentage of income? These people would be forced to make sacrifices on other things, or default on these loans. But, what does this have to do with the rest of the economy? These new graduates are waiting longer to buy houses, thus affecting the housing market, which in turn affects the markets which supply materials for house building. Additionally, these young adults are less likely to invest in business ventures, such as small business, which would, in most cases force them to borrow more money. This could have a negative effect on our economy. Furthermore, these young adults are waiting longer to have families, not wanting to take on the financial burden of a family. This undoubtedly will affect other markets in the economy. Moreover, the increasing rise in tuition, which forces students to turn to loans to pay for their education, deters students from entering fields of public service. These jobs traditionally pay less, and make it harder to pay off student loans after graduation.

The United States economy increasingly relies on industries that require college education. Since the economy operates on basic principles of supply and demand, it makes sense that the demand for a college education would increase, which would cause the price for a college education to increase as well. However, as the system of higher education becomes increasingly expensive, people are faced with the challenge of paying for the education that is vital for their success in the economy. As people turn to loans to combat the rising costs, this affects the economy as a whole. Since, the United States competes in a world economy that is driven by innovation and competition, it is imperative that it continues to produce educated adults who can enter the workforce, which today seems to mean earning a college degree. So then, the issue of rising college cost becomes an issue for the economy. But, it doesn't stop there; it is also an issue for the success of the nation in the global economy. How then, should the United States government address this issue of increasing cost for higher education? Should they play a role in this issue at all?