By Jerry Creasy Business and Economics Club President
ARTWORK CREATED BY Carly Fister
The continued rise in inflation-adjusted college tuition over the years has been a systemic problem, creating huge financial burden for students across the country. On average, tuition increases more than it should when adjusted for inflation. Inflation occurs when the average price for all goods and services increases from what they were the year before. This would also include wages, which hypothetically should be going up along with inflation. However, this has not been the case, but that is another matter altogether.
Between 1994 and 2003, inflation-adjusted tuition rose by about 4 percent per year, meaning that compared to all other goods, it increased 4 percent more than everything else. This is astronomical and leaves a devastating burden on the country’s educated workforce.
Educated people are often the most productive, and creating such a disincentive for people to pursue a higher education will have a negative impact on the country as a whole. If it doesn’t stop them from getting a college degree, then it will leave them financially strapped afterwards so that they will not buy a house or consume as much as they would have otherwise, thereby hurting the economy due to less aggregate consumption.
In addition to the economic cost of tuition, the impact is also felt emotionally. Students are often left stressed out and unhappy in their daily lives due to the financial burden that they are required to take on in order to receive an education in the first place.
The next question we need to ask, and probably the most important one, is: why is tuition going up so much? As with most problems facing social scientists, and especially economists, there is usually more than one simple answer. Unfortunately, the real world is not a math equation.
This question is rather hard to answer and is not as simple as many might think. There are a few different theories as to why this has been happening. Historically, many have thought that a decrease in state funding over time has caused students to foot more of the bill than they would have otherwise. However, this does not fully answer the question because in reality, public funding has grown, but the overall cost of education has also increased, and it is felt by a wider audience than just college students.
Another explanation is that increases in student loan limits have caused more demand for education than would have normally occurred in the market. This causes universities to justify raising tuition since students can pay for it with loans.
Under this theory, universities charge more for tuition than they otherwise would have because they know students can afford it. Increased competition between universities may also be another explanation. When one university builds a nice new building, other universities feel inclined to do the same. This causes costs to spiral as they compete to outdo each other with little real benefit to students’ education.
Also, administrative costs continue to increase due to constant expansion. According to a recent article by Paul Campos of The New York Times, between 1993 and 2009, administrative costs expanded by 60 percent. Over time, more administrators have been hired and salaries have increased tremendously. Tuition then must go up in order to pay for rising costs in both of these sectors.
Still, others argue that education is a bubble that has been expanding because people overvalue the benefits of higher education. Everyone wants to buy it, which then causes prices to escalate over time. High demand for anything can cause prices to increase because supply struggles to meet demand.
This concept would be similar to the housing bubble that we all experienced a few years ago when everyone wanted to buy and sell a house, thereby causing prices to go up drastically. These are just a few educated guesses as to what is causing tuition rates to rise so rapidly. There are still other theories up for debate.
It is almost impossible to say which of these theories is driving tuition up. It is more than likely a combination of them all with some playing a stronger role than others. It is hard to say what can be done to solve the problem.
Reducing competition between schools might be detrimental to education. In addition, it is difficult to say how any reform might take effect without actually implementing it. One thing is for sure though: making it harder for people to get an education and thus reducing the percentage of the population holding a bachelor’s degree is probably more harmful than it is beneficial.
In an economy so bent on knowledge and skill rather than brute strength or endurance, we can see how a more educated society will be a more productive one. In developed countries across the world, having a well-educated workforce is strongly associated with having a sturdy economy. Knowing this, it may be inadvisable to do anything except encourage higher education, but the cost must be lowered if we want to see a more educated society.
