Calculated Decisions Factor into the Economics of a College Education: Students and Institutions Study Their Checkbooks, Particularly in a Recession

Article excerpt

The current recession may be rewriting the fiscal ground rules for higher education, as the economic transaction between students and their parents and the chosen school assumes costlier consequences for all parties involved.

The former weigh even more carefully than before the benefits of postsecondary studies against the substantial financial outlay necessary to obtain them. Students and families want more bang for their hollower buck. This poses a threat to the latter, which base monetary success partly on examining, understanding and predicting student behavior. Schools may need to revise practices to adapt.

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Philosopher Eric Hoffer, in his 1963 book The Ordeal of Change, wrote that "in times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists."

Indeed, in 2006, prescient Charles Miller, chair, and Cheryl Oldham, executive director, respectively, of the federal Commission on the Future of Higher Education, identified economic stress as one of the transformative forces in higher education and concluded that "the need for a comprehensive national strategy for postsecondary education ... has never been greater." (1)

Higher education pays off

No doubt, the economic benefits of a college education are substantial, even in--maybe especially in--a downturn.

As measured by the U.S. Census Bureau's latest "Current Population Survey," (2) workers with a college degree average $25,756 more in salary than high school graduates. Over a lifetime of employment, say 40 years, that amounts to upwards of $1 million more for college graduates.

Other findings:

* In 2004, six in 10 jobs in the U.S. were held by those with some postsecondary education, compared with two in 10 in 1959. (3)

* Jobs requiring advanced skills are growing twice as fast as those requiring only basic skills. (4)

* 90% of the fastest-growing jobs in what's termed the new knowledge-driven economy call for some postsecondary education. (5)

As a result, the rate that high school graduates attend college has risen steadily since 1980, according to the National Center for Education Statistics (NCES), the main federal entity to collect and analyze education data (6):

* In 1980, about half of high school graduates went to college: 1,523,000 of 3,088,000.

* In 2006, that number had risen to about two-thirds: 1,776,000 of 2,692,000.

Higher education bills mount up

The costs of a college education are substantial as well--all the more so in a recession.

A main reason: Higher education continues to outpace inflation. The NCES reports that in constant 2007 dollars (7) between 1997-'98 and 2007-'08, prices for undergraduate tuition, room, and board at public colleges and universities rose by 30% (from $6,813 to $11,578), and at private counterparts by 23% (from $18,516 to $29,915). (8)

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Meanwhile, household income that pays for student tuition in higher education--a sum that contributes 18.3% of the operating budget of public universities and 29% of private universities on average (9)--remains in a decade-long slump. While the median household income rose from $41,620 in 1970 to a high of $50,641 in 1999 (in 2007 constant dollars), since then it has remained below its 1999 level. (10) The Pew Research Center, a Washington, D.C.-based "fact tank" about American issues, reported in March that "the eight-year period from 1999 through 2007 is the longest in modern U.S. economic history in which inflation-adjusted median household income failed to surpass an earlier peak ... (and) the current recession likely kept this key indicator below its 1999 peak." (11)

Stagnant or falling incomes, of course, amplify the cost of a college education.

Even so, students whose families are generally less able to carry the escalating charges are being asked to pay a growing share of their higher education anyway:

* Public school tuition costs shouldered by students and their families have increased from 31. …