America / Education / Fiscal policy / U.S. Domestic Policy

Higher Education and Consumerism

According to the State Higher Education Executive Officers (SHEEF), since 2006, the average enrolment in public higher education institutions has increased by 16.9%, with some states, such as Oregon, seeing spikes in enrolment as high as 33.6%.  However, these rises in enrolment have been coupled with relatively stagnant state and local higher education appropriations.  In other words, as more and more students enroll in public post-secondary institutions, the government has not proportionately increased its higher education spending.  Right now, students are seeing the lowest amount spent per student in a quarter century, with the highest percentage of net tuition.  What does this mean for thousands of high school graduates looking to continue their education?  That the burden for paying for college is resting largely on themselves and their families.

This graph depicts the rise in enrolment plotted against rise in the proportion of revenue being generated by tuition, without significant rises in overall expenditure.


The average student in 2011 had $23,300 in debt and that’s just the tip of the iceberg.  In 2011, 10% of graduates had $54,000 debt, while some had over $100,000 in student loans.  The irony of the situation is that with an uncertain job market and economic recession, Americans are looking at college as a vehicle to a financially secure future.  However, they are finding themselves in extreme debt and a college degree that often is no help in a market that is over-saturated in BAs.  Colleges are advertising themselves as investments in the future, while the federal government, through the Higher Education Opportunity Act of 2008 (HEOA) and the Department of Education, is advertising low-interest loans that don’t accrue interest until 6 months after graduation.  Students are biting off more than they can chew in the form of Stafford Loans, without truly understanding the consequences of their undertaking, because the consequences won’t make themselves fully evident until four years later.  Furthermore, due to the debt that financing such loans has imposed on the government, the interest rate has now risen from 3.4% to 6.8%.  Indicating that the average debt of students in the near future could be well over last year’s $23,300.  Many are referring to this situation as the “Higher Ed Bubble”— mimicking the housing bubble of the 2000s.  What do they have in common?  Well for starters, both have a federal government who is over-eager to give out loans to unqualified candidates.  Secondly, both have consumers who are spending beyond their means, not treating choosing a university like what it really is, a commodity.

It has become too common for youth to feel that they need to get any degree, for the sake of getting a degree.  The truth is that choosing a university should be a shrewd decision.  Not all kinds of secondary education are right for all people and having more transparency about costs, potential career paths, and the percentage of graduates who are employed would help create a more informed consumer.  Although, the HEOA has transparency as one of its goals, the administration of this transparency leaves much to be desired.  Their creation of a list of the least and most expensive colleges has a less than accurate formula.  They only pull from the averages paid by those receiving financial aid, which highly skews the rankings.  To read more about the formula for creating the lists you can go here.  A more informative list would be to disclose tuition costs against average salary of recent graduates.  This would allow students to weigh their investment against the average return.  It is very possible that for some students trade or tech schools would be a better option than the traditional four year degree- it is all about picking the right school for the right students.  Furthermore, student’s academic potential (grades, SAT scores, skills etc.) and their economic situation should carry much more weight when determining how much is an appropriate loan that can be reasonably paid off.  Therefore, the solution is to change the public’s way of handling higher education to one of a consumer.  Students should have all the information necessary to accurately assess how great of an investment they are making.  However, more importantly, the government should treat potential collegiate students as anyone else coming in for a loan and not hand out loans that are beyond the students means.