Driving The Cost Of Higher Education - 1063 Words

Driving the Cost of Higher Education It seems as though the correct step for young people to follow after high school is college. We are constantly told that if we wish to be successful, then we must get a degree. However, with the rising costs, it’s seeming like fewer people are willing or able to take the next step into higher education. Cries about the sheer insanity of the rising costs blur into a cacophony of anger and frustration. The discussion of whether it’s even worth the cost have also begun becoming popular, though this is its own discussion and shall not be explored here. What is of interest here is the underlying motor of the cost increase. Since 1978, the first year that the Bureau of Labor and Statistics included college†¦show more content†¦Perhaps this is because their costs do not react as fast to market forces as does the private sector. Prices are normally set, and then remain relatively stable regardless of the day-to-day changes in the ma rket. A private business can, and will, change its prices in order to maintain an equilibrium of supply and demand. During a recession, this means lowering prices in order to combat the lowering demand for their products. Colleges and Universities on the other hand react differently to a recession. They raise their prices to combat budget cuts from the State and Federal levels. They still have their costs for teaching their students, and these costs do not normally change as quickly as the overall CPI. This would lead to the belief that college prices would fall again at the end of a recession, but colleges and universities are always hesitant to lower tuition. Coupled with the slower reaction time of colleges from market forces, the price stays at its elevated level far into the economic recovery. It would seem that the Economics 101 story around higher education for the past few decades would go something like this: for various reasons, government has decided to increase demand fo r higher education massively, via increased subsidies, and in particular student loans; meanwhile, supply has not kept up. This is because non-profit universities get paid in prestige and therefore have an objective