Why does college have to break the bank?
Perhaps one of the scariest and most important decisions anyone has to make in their lifetime is what to do with themselves after high school. For many young adults, especially here at Prep, attending college is the assumed answer, but this begs a much more complex question: which one? The U.S. Department of Education formally lists over 3,000 four-year institutions high school seniors have to choose from, making their decision, at a minimum, overwhelming. On top of this, the cost of attending these schools seems hardly affordable, as many schools have over $40,000 annual price tags, while the average American household brings in just under $60,000 per year. According to the National Center for Education Statistics, the cost of a four-year diploma has risen by 376 percent since 1984. But why has receiving just an undergraduate degree become so expensive over the last 32 years?
While there are certainly a number of factors that have led such high costs for a diploma, one of the biggest has been the focus on campus amenities. A paper from the National Bureau of Economic Research (NBER) suggests that schools are devoting lager and larger amounts of money into non-academic projects, such as recreation centers, sports teams, and other luxuries. Did your first choice school just put in a $100 million basketball court? You are most likely directly paying for it. This trend is especially present in schools less focused on their academic reputation and more on showing off the beauty or aesthetic attraction of their campus. Schools are tending to brag more about the size of their football stadium than their graduate job placement percent, and the home pages of college websites show Olympic-sized swimming pools while photos of classrooms are several clicks away. This sudden focus on non-academic spending is likely a consequence of a shift in how students view attending college. Instead of strictly being a means to obtaining a better career, attending a university is seen as a four-year, overnight country club or five-star resort and spa. More research by NBER only confirms this loss of focus on academic performance, as dropout rates are only going up. Students are increasingly choosing schools based on football rankings and recreational basketball rather than job opportunities, and as a result, colleges will only charge more and more to improve their teams and gymnasiums.
Another major contributor to the dramatic rise in tuition is government issued student loans. While providing lower interest rates to give more students opportunities to receive a higher education, it has brought with it huge downside. A separate study conducted by NBER points to the increase in the number of loans issued to students as well as a raising of limits on how much can be borrowed. As the government continuously gives more and more money away, universities realize students are willing to use all of the money they received towards college, so it is only rational for colleges to keep raising tuition costs. Because of this, the Pew Research Center now estimates student loan debt to be over $1.3 trillion. This crisis is only becoming worse, but as voter demographics from the United States Elections Project shows, college age voter turnout is significantly lower than any other age group, giving congressional representatives little reason to address the issue. There appears to be no obvious solution to this enormous issue. Although some have called for massive debt forgiveness from the federal government, this would likely have economic ramifications much worse than the current crisis.
As college becomes more and more expensive, many high school students are justifiably discouraged about their future opportunities. While college can be quite costly, a diploma from a university is becoming increasingly necessary to ensure economic stability, and it appears that the benefits of having the right degree still outweigh the extreme costs of tuition. However, students must continue to make important choices about where to attend or if they should even attend college at all, a decision that will have an immense influence on the rest of their lives.
This article was created by the Cathedral Prep Economics Club. Our mission is to create school awareness and spark interest in real world economic principles by breaking down relevant events within the economy. We are always open to committed and interested new members. If this sounds appealing to you, please contact Mr. Pituch for more information.