Students are forced to get student loans and grants from the federal government and get personal loans and/or credit cards to cover living expenses and books. According to Nellie Mae's 2002 national student loan survey, those who used credit cards to pay for part of their education reported a median credit card balance of $3,400, but the average undergraduate debt is $21,200 after all four years. Students attending graduate school borrow, on average, an additional $31,700 beyond their undergraduate borrowing. Law and medical student borrowers report an average accumulated debt from all years (undergraduate and graduate study) of $91,700. Graduates with a median credit card balance of $1,600 at an interest rate of 15 percent -- not unheard-of for young people with a limited credit history -- would have to pay $78 every month for two years in order to retire the balance. If the $78 monthly payments were instead invested in a money market account yielding 2 percent, a savings cushion of $1,900 would result after two years.
4 comments:
Honestly, I think we are in pretty good shape as far as tuition goes. Here at SUU, we should be the last people to complain about tuition. Hundreds of other schools cost thousands more than SUU, and I feel that we are getting every bit as much for our dollar as they are. Sure not everyone agrees on where all the money should be spent, but they never will.
College education is no longer an option in our society. College attendance has increase dramatically in the past decade. With the increasing student body, there also comes a need for and increase in facilities, services, and faculty. Couple that with the ever changing technical world and the need to upgrade, and it's easy to see why costs are rising.
If you ask me, we are getting a heck of a deal. The value of a college education far outweighs what we are paying for it.
What Micah said in his post is correct. But again, no one is holding a gun to someone's head saying "charge this". In fact, I think the whole tone of the post could be changed if every where you saw the word debt you substituted the word investment.
My reply to Jules is really long (and informative), so let me get Jack's comment out of the way first.
1) Jack's comment points out that there are opportunity costs associated with how school's spend their money. Personally I agree with what he says about most school services not benefitting most students, but I'll be the devil's advocate and point out that no one said that they should benefit the majority at all. One of the reasons organizations exist is to pool resources so that items that benefit smaller groups become possible.
2) I am very dubious of the idea that students will spend money better than administration does. Nothing against the students, but I think the critical factor is which group has rules and institutions that govern its behavior more efficiently. My experience is that student governments usually don't have a lot of checks and balances. University administrations sometimes don't either, but I've worked at 5 different universities, and this is hands down the best managed.
3) Lastly, Jack is exactly right about Dr. Baker and Craft's work, its implications, and the results.
Jules comment this time around is rich with economic ideas.
1) Students are not forced to incur debt, and there is a laundry list of possible alternatives. Economists would argue that the choice between these alternatives is made optimally and rationally by each student, depending on their constraints.
2) Is tuition too high? Compared to what? The appropriate metric is whether students are leaving because tuition is too high. There just isn't any evidence to support this. Students will go where tuition is cheaper, but they are still choosing education.
3) Do students get out of tuition what is intended? This is harder to debate, but remember that the majority of the costs of a school like SUU is picked up by the state. So, you are already buying a product that is heavily subsidized. You can actually see this by looking around a typical class at the people who really are not taking it seriously. Very few of them are working outside jobs. They are consuming extra education because it is cheap.
4) We get into more of a micro topic when we start asking questions about whether we get our money's worth out the library or some other facility. A library has big fixed costs (e.g.,buying the books) and low marginal costs (e.g.,checking out the books). This isn't the sort of operation that can typically be supported by buyers paying the going price. This is why there are no university sized libraries outside of universities. So, the choice is really between paying a price higher than your marginal benefit, or not having a library at all.
5) There is always talk on college campuses of students being charged in proportion to their use of services. This doesn't happen because of politics. There are certain units that would not be able to support themselves this way, and others that would (business schools and their faculty are often unpopular on college campuses precisely because they are flush with cash from offering a high quality product at low prices). Many would argue, and I tend to agree, that the idea of a university (from the root word universe) implies some cross-subsidization from units that make money to those that don't.
6) Lastly, it is true that people don't think they are getting good value from their purchases of higher education. But, this is one of those bizarre urban myths that won't die. There are two defenses for my argument. First, there is a ton of evidence that the lifetime value of a higher education is considerably higher than the cost. Second, people are not flocking to some other better alternative than going to college. What makes this even more surprising is that almost no one anywhere is paying the full cost of their college education. The vast majority are paying something that is discounted 75% or more. So, someone is picking up the tab and yet people are dissatisfied. What gives?
Having said all of this, there are alternatives to the conventional college. There have always been vocational schools and now there are places like the University of Phoenix. These places are thriving. And they do that by cutting out all of the things that universities "waste" money on: libraries, computer labs, athletics, landscaping, and degrees that don't lead to jobs (e.g., dance or sociology). On the other hand, none of those alternative schools exist in a vacuum. The students who go there end up being heavy users of those money wasting efforts put forth by conventional schools. Did you ever notice that University of Phoenix never sets up shop far away conventional schools? They could be really cheap if they were in Kanab or Beaver. Bigger cities, that are thick with higher educational choices, usually have a whole lot more places like University of Phoenix.
The bottom line is that a university education is a big product, with a whole lot of inputs, whose production isn't solved perfectly by the market. But it is addressed in a way that is adequate.
Well if you have such a problim with tuition, join the Nation Gaurd. On top of my school being paid for, I end up making 7000 dollars a year. If you join the R.O.T.C. program they pay you 1200 dollers a month, and pay for your school. So instead of complaining maby you should be all you can be and join the army.
Sorry Lizzie. Your grousing will still get you credit though.
Just to clear up C-Dizzle's comment, it is true that both college costs have risen and that students are paying less. What's happened is that the list price of tuition has been rising, but not as quickly as sources of alternative funding.
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