Tuesday, October 24, 2006

Paying for College

Paul Basken at Bloomberg reports that college tuition is still increasing. While I understand that the yearly increases are obvious fact to anyone, the concerning part comes from the fact that “Pell Grants, the main federal subsidy, fell by an average of $120 per student, or 4.9 percent.”

So, there are two things working against each other right now. On one side, the College Board reported that

The data reported in Education Pays 2006 document increases over time in the earnings gap between high school graduates and college graduates. In 2005, women ages 25-34 with bachelor's degrees earned 70 percent more than those with high school diplomas, and for men the difference was 63 percent. For all full-time workers in this age group, the average earnings premium for a four-year college degree is almost $14,000.

However, the increasing cost in tuition puts obvious strain on those pursuing higher education.

In my own personal experience, I have a difficult time addressing these figures from the College Board. Not because I don’t believe them, but for the reason that I (and my single working mother) tried so hard to put me through college. With hard work, we both succeeded (I got my BS Finance degree in four years, and she’s helped 3 of her children through college). I find it unfortunate that those who are willing to work hard for this achievement may be hampered from doing so, whereas another student might be making it through college completely on his parent’s dime.

Now, a real good question to my feelings on the subject is, “If it’s a free market, then why care if the student who doesn’t give a crap -- and is there because his rich guardians are putting him through takes – five years to graduate?” Well, I think that’s where my argument and worries meet their demise. You see, colleges work in different ways than regular businesses do.

That is to say, if you’re paying a lot of money for college, you’re usually paying for a more prestigious education. And if you are getting a more prestigious education, then the school you attend must also have higher standards. So, obviously you can’t fail your way through. The point that I’m trying to make is that in the end, all the people around me who bullied me and drank a whole lot of alcohol deserve to graduate because of four things: either the education and tests were painfully easy (although I can vouch that they were in fact difficult), they had the knowledge to pass the examinations, they picked a less difficult major, or they cheated.

By the way, let me tell you that at my school I remember two people who did specifically cheat. Unfortunately I can’t out them here because I don’t remember there names due to the fact that I didn’t associate myself with them. Although other than the cheating, they seemed rather harmless. Well, harmless except for the fact that their cheating may have negative consequences on the value of the degree that I and my classmates earned.

So, let’s get back on track. Question: Is the market for college strong enough in the right way to correct itself? That is to say, will the middle class and low income prospects gain more strength to go to college? Or, will colleges simply price their education so that only those with a significant sum of money can go? Right now, there’s a bit of a nice medium because the highest level of education (e.g. Harvard) also has the premium that it deserves. Nevertheless, the College Board looks at more colleges than just Harvard, and it seems that colleges that right now seem attainable in attending, may be impossible to afford in the future even if they’re education quality doesn’t change.

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