Topic: Government Involvement in Higher Education

Reply 1: S. Cyhaniuk

With the youth of today increasingly interested in attending a four-year university and not a trade school or venturing out to the real world to start working after high school graduation, student loan rates are increasing at the same rate. Student loans are the only option for many high school graduates looking to attend four-year universities. The issues related to these student loans are that students are either under-borrowing or over-borrowing. The price of college has increased drastically over the past couple of decades and that has increased the amount of loans needed by the student in order to complete college. The issue of over-borrowing, as stated by Weidman (2014), is that students are borrowing large amounts of money in order to fund their college enrollment and the availability of these loans are increasing so college students are then motivated to borrow more to allow for consumption smoothing, which will lead to higher level of debt (Weidman p.329). Weidman (2014) also states that many students are not considering the graduation rates for these schools that they are borrowing for, which in the case of for-profit private institutions is very low, which means that there is a higher probability of dropping out and being stuck with large amounts of debt and no college degree (Weidman p.329). On the other hand there are some students who are not borrowing enough, or are under-borrowing. Weidman (2014) states, that one in six college students are not taking full advantage of these subsidized student loans and instead are increasing their credit card debts (Weidman p.337). This stems from the fear of too much student loan debt, but these students don’t understand that the government actually subsidizes these student loans to make them easier to pay off than normal credit card debt. There is a noticeable difference in whether a state should fund a public or private institution. Weidman (2014) discovered that states that are larger share of students in private versus pubic institutions, experience a statistically significant larger negative growth effect on per-capita income used for public higher education institutions (Weidman p.350). While Weidman (2014) also found that states with a higher proportion of students in public institutions rather than private institutions experience a positive effect on pre-capita income of public expenditure on higher education (Weidman p.350). This means that these states with college students who are more interested in attending a public school are receiving more return on investment on their funds that are specifically for higher education. This shows that states should be advocating more for their public schools in order to help their own economy and their own investments; I too believe this.

References

Weidman, J. C., & Yeager, J. L. (2014). Economics and finance of higher education. Boston, MA: Pearson Learning Solutions.

Reply 2: A. Hailey

Student loans have been instrumental in allowing students who cannot afford to pay out of pocket costs to attend college. However, student loans have allowed students to acquire an substantial amount of debt. Total student loan debt rose to over $800 billion in June 2010, overtaking total credit card debt outstanding for the first time (pg. 321). Student loan debt totals at roughly $1 trillion now. As Surowiecki (2011) summarizes, “You can’t flip a college degree the way you can flip a stock, or even a home. But what bubble believers are really saying is that young people today are radically overestimating the economic value of going to college, and that many of them would be better off doing something with their time and money” (pg. 322). With tuition costs rising and entry-level job salaries decreasing, high school graduates are not seeing much of a benefit in going to college. This new trend is merely accumulating debt for students pursuing higher education.

The federal government plays a huge role in student enrollment by offering financial aid. The federal government offers different types of loans for students to be able to obtain their degree. The federal government also grants funding to institutions for things such as research. State governments offers students grants to attend college. They also contribute funds to beautify campuses. A nice campus is something that will attract new students as well.

Public institutions rely heavily on the federal government and student aid for their funding. They use this money to expand programs, build or renovate buildings on campus, and to conduct research. These funds fluctuate based on how many students are enrolled. The government’s funding is mainly based on enrollment. If there are less students enrolled for classes than the previous year, the school will lose money and will be forced to make budget cuts. This could result in programs who have declined in their success being shut down, faculty and staff members being fired, and tuition hikes for students to help bridge that financial gap. Private institutions have much more flexibility. They have something that most public universities do not have, that is a strong alumni financial support system. Often times than none, alumni at private universities donate a substantial amount of money each year, so you normally do not see the crazy tuition hikes, faculty cuts, program closures, and ending of research programs. This allows private universities to continue to be selective in their acceptance process as well.

Reference:

Weidman, John C., and John L. Yeager. Economics and Finance of Higher Education. Pearson Learning Solutions, 2014.