Term Paper: Education Higher Education Is the Foundation

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Education

Higher education is the foundation for growth within our global economy. Students, who properly utilized the system to its fullest extent, garner life altering skills and abilities. These skills, which are often transferable from industry to industry further, enhance the quality of life for society. Many of the world's brightest students help create, lead, and establish many of the world's dominant organizations. These organizations, in turn, create goods and services that provide a compelling value proposition for the consumer. Without the aid of higher education, and the subsequent benefits derived from participation, many of these individuals would not have made the significant contributions to society that they have. It is therefore logical to continue to preserve the higher education system so that the next generation of students can further enhance the quality of life for society. Opportunities abound, particularly within the millennial generation, predicated on the ubiquitous nature of information sharing (Veblen, 1918). The ability to gather, analyze and disseminate information has never been as robust as it stands today. Higher education has a very bright and prosperous future ahead (Ewell, 1999). Therefore people believe the subsidization of higher education is warranted. I believe that ultimately, the individual student should finance their own ventures.

First, the nature of government is that taxes subsidize much of the higher educations needs of students. Pell grants, financial aid, scholarships and so forth are used to finance the education of promising students. The justification for such behavior is that society benefits through the pooling or resources to aid in the overall educational efforts of society. This activity ultimately allows the nation to generate smart, productive members of society irrespective of their social economic status. However upon further inspection, the middle class profits disproportionately more than those in the upper and lower class. The lower and upper class often pay a fair amount of taxes to subsidize the nation's educational efforts. The wealthy, on an absolute dollar basis, pay disproportionate more than any other income group. However, it is the middle class that utilizes these incentives the most. For one, the rich are often not eligible for many of the grants, scholarships and benefits that those in the middle class are. Therefore, they are simply paying to help finance the educational efforts of those in the middle class, without being able to participate themselves. The lower class is in a similar predicament as they often do not attend college, but work instead. The average age for a lower income individual to begin working is roughly 18 years old. The average beginning working age for an individual in the middle class is roughly 23. As such the lower class worker is paying taxes for 5 years to finance the middle class tuition and college costs, while also not participating in the program. The middle class individual however begins working 5 years later. During these five years, they are not paying taxes. In some cases they are only working minimally. As such, both the upper and lower classes essentially pay the fees and tuition of middle class citizens that participate predominately in these programs.

This system therefore is biased towards one particular class over another. Society is believed to be benefited by having amply supply of smart, intelligent, and productive members of society. This concept I believe to be true. However, why can't the individual pay themselves for this privilege? The upper and lower classes, who do not participate nearly as much as those in the middle class, should not be forced to subsidize such behavior. As such, the individual entering college should finance the venture themselves. This abates the tax burden of the middle and lower classes. These taxes could ultimately be allocated to purchases further stimulating the economy and encouraging economic growth.

To properly propel the future of higher education forward, many issues plaguing the system must first be addressed by letting the user pay. Issues such as rising costs, the supply of university degrees within the market, and the relevance of course material, all have plagued higher education institutions. No issue has been more contentious then that of the rising costs of education. This area is particular contentious given the high levels of student debt within the overall economy. Rising costs are particularly burdensome to society at large as these debt burdens ultimately inhibit economic growth. As more money is allocated towards paying student loans, less money is allocated towards discretionary spending. 70% of the nations GDP are garnered through consumer spending. As such, as fewer consumers spend, there could be a corresponding decline in the growth of GDP within America. Figure 1 in the appendix is shown depicting the rising costs of the tuition as it relates to the general rise of prices throughout America. Notice that overall inflation for all items mentioned, adjusted to 1978 levels rose only 3.9%. The cost of tuition however has risen nearly 8% a year for the past 25 years. This equates to a nearly 1000% increase in tuition costs over the subsequent period. The costs of textbooks have had a similar rise with costs average in an increase of 7% per annum. What is alarming in regards to the consumer's ability to handle tuition increases is that median household incomes have fallen over this period. Adjusted for inflation, data shows that the median household income has fallen from a roughly $51,000 level to a now more modest $48,000 level. Therefore, consumers are having a tough time handling the increasing costs of tuition as it relates to their household income. This is a very profound issue plaguing higher education as the costs to attend college are beginning to erode the potential salary increased garnered from the degree. Figure 2 within the appendix depicts the overall price increases of a 4-year university. Notice the steady rise in the overall price of tuition, which corresponds almost identically with figure 1 above it. As such, college students are taking on massive amounts of debt to circumvent these rising costs. Student debt has now become a very contentious issue as the ability to repay these debts is coming into question. Higher education, due primarily to its rising costs, is indirectly forcing students to take on more debt. This increase in debt creates a financial hardship on both the student and their immediate family. In some instances these students elect to not go to college due to its high costs.

By allowing only those willing to pay to participate in higher education, costs will decline. This is due to the fact that a government subsidy is not inflating education costs. As noted in the appendix costs are rising, due to the fact that the government is the one paying the bill, not the consumer. If the consumer was paying fully, they would weight the value of a degree with its cost. Eventually, the market would set the price of tuition as they will be unwilling to pay a price overly excessive. What is occurring however is that rising costs are simply being paid primarily by tax payers? The overall public market has very little ability to maintain price integrity in this market with predominate government intervention. Access to these activities should therefore be based on those willing to pay to participate. This is how a market economy works. If an individual does not see the value in a $30,000 car, he or she will not purchase it. Likewise if the student does see the value of a $100,000 degree, then the student should pay for it, not society. This will allow those who see value to pay while those who do not will elect to participate in another activity. This behavior will ultimately lower the costs of education as supply and demand elements begin to interact.

Strict user pay rules do have consequences however. Minority students in particular face this burden as they are simply unable to afford the more prestigious and rigorous schools. Lower income families attempting to improve the quality of life for their children are finding it increasing difficult to finance their child's education. In many instances, children are going to less prestigious and often unaccredited universities in hopes of obtaining a degree of any kind (Forest, 2002). Believing simply that a degree will provide a prominent life, these students take on debt that ultimately will be difficult to repay. This is because; the quality of the degree is more advantageous to income growth then the actual degree itself. Therefore employers are unwilling to hire the degree itself but instead, look for the skills, abilities and reputation that are garnered through the degree (Finn, 1998). Students failing to recognize this concept are subsequently underemployed, with massive amounts of debt, both of which our economy is currently realizing. Recent higher education graduate have an unemployment and underemployment rate of nearly 20%. Meanwhile as indicated in figure 3 of the appendix, student loan debts have increased substantially. In fact, due to rising costs, student loan debt is the only debt… [END OF PREVIEW]

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