US College Costs
US College Costs
Introduction
The cost of college education has risen with tremendous pace in the last few decades. Studies estimate that cost of education rose by 500% in the last 30 years. This increase is much higher that the rise in the rate of inflation. Meanwhile, the level of income for average American families has been declining in recent years. This has reduced accessibility to college education to a majority of American. Many American students are now relying on grants and loans in order to get the college education. This paper has explored some of the reasons that have played a role in the increase in cost of college education. These factors include; increased demand, inflation, governance, price momentum, government loans and scholarships.
Rising Cost of College Education
College education fee has been on the increase over the last 30 years. Over this period, the cost of college education has increased faster than other essential commodities. Soltas (2012) notes that the price of college education has had an increase that is three times higher that the Consumer Price Index since 1978. During this period, the inflation rates rose by 108% while the cost of college education rose by a massive 498% (Soltas, 2012). This means that if a student paid $5,000 to attend college in 1980, it would cost the same student an average of $11,000 to attend college in 2010. The cost of food rose by only 244% during the same period. The only essential commodity that experienced a higher increase than the cost of college education is medical cost. The cost of healthcare rose by 601% during this period (Soltas, 2012).
The annual tuition cost for public schools in 2012/ 2013 was $8,655 while the cost of tuition in private colleges was $29,056 (The College Board, 2012). This amount only caters for the learning aspects of the student. The students incur extra costs for accommodation and board. These inclusive fees totaled to $ 17,860 for public colleges and $39,518 for private colleges. However, these amounts are only calculated averages. Tuition and other fees differ from one college to another. There are costly private colleges that charge tuition fees of up to $43,990 for a four year degree program (The College Board, 2012). Public colleges are slightly cheaper than the private colleges. Accommodation and board costs are mainly driven by the cost of living in the areas within which the colleges are located.
The rise in college cost has also exceeded the growth in the income of average families since 1980, (Ehrenberg, 2010). As the cost of high education continues to rise, the average income of American families is on a decline. The economy of the country has been on a slowed growth in the last 5 years leading to diminishing economic opportunities. Statistics indicate that the median income dropped to $49,777 in 2009 from a peak value of $60,746 in 2000 (Shierholz and Gould, 2010). This has taken college education out of reach for scores of average American households.
Shierholz and Gould (2010)
Another sad situation is that the cost of education in some private colleges has surpassed the entry level salary for most graduate jobs. In 2012/ 2013, the average cost of education was slightly less than $40,000 (The College Board, 2012). This amount is significantly high as compared to $30,000 paid to the graduate employees at the entry level (Soltas, 2012). This has raised questions on whether it is worth to go to college.
Student Debt
Many students have been compelled to take up loans in order to meet the soaring cost of education. Fulltime students pursuing 4 years programs at private institutions receive an average grant of $15680. This is a small amount compared to the average $29,056 annual tuition fee. Fulltime students pursuing a 4 year course in public institutions receive an average grant of $ 4,350. This amount is also hardly enough to cater for the more than $15,000 annual price of going to college. Taking loans has remained the only option for many students. However, loans must be repaid once the education term has ended. Consequently, many persons begin their working careers with heavy debt burden. Wadsworth (2007) estimates that an average bachelor’s students graduate from school having accumulated a debt of $ 20,000 in the form of students’ loans. The situation is even worse for medical students who accumulate a debt burden of over $96,000. The national education loam debt is now at $ 1 trillion.
Reasons for Increased Costs
- Increased demand for college education
Economic principles suggest that demand propels the prices of commodities up wards. This is because; if more people want a certain commodity, there will be increased competition for this commodity. This is prevailing situation in the American high education system. The demand for college education has risen significantly. The number of full time students pursuing undergraduate education in American colleges increased by 45% between the years 2000 and 2010. The number of part time students has also increased by 27% during the same period. Increased demand for college education is mainly due to the opportunity that comes with having a college degree. Statistics indicate that many college graduates have higher income than the persons without a college degree. These statistics indicate that the average annual income during the advanced years of college graduate career stood at over $100,000. This is close to double the average income of person without a college certificate.
Apart from the financial incentive, the increased demand for college education is also driven by the increase in population. The first people of the baby boomerlet generations entered their college years in the last decade. This generation is one of the largest in the nation’s history. This has led to a soaring demand for college education. Apart from growth of domestic students, there is also an increase in the number of international students within American colleges. This has also led to increased cost of education.
The increase in demand for college education has stirred up fierce competition for this commodity. Today, students have become aggressing in searching for college admission. Some have adapted aggressive approaches in terms of paying for the education. Colleges have responded to this trend by increasing their college fees. The colleges understand that many students are willing to pay the high prices of college education. The colleges welcome the high fees since it enables them to invest in the development of education resources.
- Inflation
Inflation is the normal increase in cost of commodities with time. Inflation is accepted element in life. Prices of most commodities are bound to rise as society progress into the future. The cost of college education is also subject to inflationary pressure. The average inflation cost of college education ranges between 4% and 6% per year. This implies that in every 12 years, the cost of education increases two folds. College education has inflated faster that other cost. This is because the cost of education has components that are more sensitive to inflationary pressure than the household expenditures.
College cost increased by 35% between 1993 and 2007 (Wadsworth, 2007). Colleges are under pressure to enhance the quality of education. Colleges are investing heavily in research activities and development of education facilities. The cost of undertaking these projects has also soared over the last 15 years. However, salaries and benefits for college staff are the most significant cost elements for colleges. In the last few years, the cost of paying salaries and benefits to college staff has soared significantly. Wadsworth estimates that during the 15 year period college administration cost increased by a massive 69%. This is one of the components that have led to the increase in the cost of college education.
- Governance
The approach of managing the college institutions has also contributed to increased costs of college education. According to Ehrenburg (2010), the administrative power of college institutions is shared between administrators, faculties and trustees. The shared structure of governance makes the college institution least flexible. The colleges cannot react to changes in the external environment fast enough thus exposing the organization to increased costs. Thus, the education institution resort to increasing expenditure rather than promoting efficiency when confronted with increased costs.
- Price Momentum
Wang (2009) suggest that college prices have gone up due to price momentum. Wang (2009) argue that the forces of demand and supply cannot explain the continued increase in college prices. If college prices adhered to this market principle, it would reach a point where parent withdraw their children from school. Alternatively, the high cost of college tuition would attract more players into the field thus increasing supply. However, this has not happened. The cost of college tuition keeps on rising. Wang (2009) explain that this is due to the perception that the price is equivalent to superior value. Many parents have a perception that costly colleges offer high standards of education. This has perpetuated the continued increase in prices.
- Government Loan
Increased availability of government education loan has also perpetuated the rising costs of college education. In the last decade, the government made access to student’s loan exceptionally easy. Thus, it became exceptionally easy for students to borrow massive amount of money in order to finance their college education. In 2012, an undergraduate student could receive up to $20,000 in student loan. Almost 75% of all students in American colleges receive some form of loans or grants to support their education. People may argue that the availability of the government has made education cheaper. On the contrary, this has motivated colleges to revise their fees upwards. The availability of loans meant that more people could obtain the loan thus motivating the colleges to increase the fees. Colleges become least afraid that higher fee would drive away students.
- Scholarships
College scholarships have become prevalent in the modern education system. Colleges establish these programs so as to assist students from low social economic background to access college education. While the programs have assisted in making education cheaper to a few individuals, they have made education services expensive to the majority of students. This is because colleges raise the scholarship funds from the fees paid by other students. Thus, the need to maintain large scholarship program has resulted in increased cost of college education.
Conclusion
The cost of college education has increased by over 500% in the last 3 decades. This rate is only second to increase in the cost of healthcare. Studies estimate that the annual cost of keeping a child in private school stood at $39,518 in 2012 while that of keeping a child in public school stood at $17,860 in 2012. Many Americans are now dependent on loans and grants in order to access college education. This paper has evaluated some of the factors that have led to drastic rise in the cost of college educations. The paper reveals that; increased demand, inflation, governance, price momentum, government loans and scholarships are some of the factors that have contributed to increased cost of college education. Thus, the government needs to address these factors in order to make college accessible to the majority of Americans.
References
Ehrenburg R. (2010). Tuition Rising. December 5, 2012. http://net.educause.edu/ir/library/pdf/ffp0005s.pdf
Shierholz H. and Gould E. (2010) Poverty and Income Trends Paint a Bleak Picture for Working Families. December 5, 2012. http://www.epi.org/publication/a_lost_decade_poverty_and_income_trends/
Soltas E. (2012). Why College Costs Arent Soaring. December 5, 2012. http://www.bloomberg.com/news/2012-11-27/misconceptions-101-why-college-costs-aren-t-soaring.html
The College Board (2012). Trends in College Pricing 2012. December 5, 2012. http://trends.collegeboard.org/sites/default/files/college-pricing-2012-full-report_0.pdf
Wadsworth (2007). The College Trap. STL Distribution
Wang P. (2009). Is College Still worth the Price?. December 5, 2012. http://money.cnn.com/2008/08/20/pf/college/college_price.moneymag/
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