There is increasing evidence that smart investments in the education of college students from various backgrounds can raise their college completion rates by meaningful amounts. Ultimately, Multi-tiered decision process with economics coming into play at each layer. From the decision to pursue a college degree out of high school, to selecting that college, to settling on a course of study, an underlying thread that is common and critical at each stage is a decision about economics. Moreover, these economic bene ts extend not only to individuals but to the economy as a whole, as college-educated workers spend more time in the workforce and display higher productivity while working. Overall, college can be one of the very best investments that a student can make because of the opportunities and job offers you gain from completion.
High school seniors and their parents have lots to consider as they approach graduation. Depending upon their economic position – how much they have saved for college and how much income they can dedicate to college tuition factors into the college application decisions. Looking at college tuition, going to college can seem nearly impossible for many. Over the past 40 years, the average price of tuition has doubled. In the 1980s, average tuition to a public college used to be around 4,000 dollars, while a private college was about 15,000. Today, the average tuition for a public four-year college is about 20,000 dollars, while the average tuition for a private four-year college is now 40,000 dollars. (Martin, 2017) Ultimately, today, college is much harder to afford. To compensate for the high rise in tuition, schools give out financial aid, so that students can afford the tuition.
Financial aid helps students and their families pay for college tuition. This aid covers all educational expenses including tuition and any fees, room, and board, books and transportation. There are several types of financial aid, including grants and scholarships, work-study and loans. Financial aid awards may include a combination of the various types of aid. When applying for financial aid, students complete the application for federal student aid, even if they think might not be able to apply for it because they are more financially stable than others. Schools themselves typically cannot offer 100 percent of aid, and different schools vary on the amount of aid they can provide. Therefore, during the process, students look to see how much aid each school provides when applying. (O'Shaughnessy, 2011). For example, according to U.S. News, at Lafayette, 30 percent of undergraduate students receive aid, with the average need-based scholarship is 43,000 dollars. While about 55 percent of students applied for aid, only 30 percent received it, but those who did receive the aid, their needs were fully met. But even before that step, there might be a thought about using whatever resources have been saved in another way and foregoing college.
Parents start saving for college as soon as their child is born. Although over time the average amount saved has increased, it is not nearly enough as it needs to be. In 2018, the average amount saved is about 18,000 dollars. Although this is 10 percent more than 2016 and the highest amount since 2013, it just isn't enough to cover all the expenses. (Nova, 2018) These savings are representing a fraction of the cost of the overall costs of college. Parents potentially aren't saving enough due to their income, but also because they do not feel the burden should fall entirely on them. Some parents feel that their kids should chip in for their education. Therefore they do not save as much. (Nova, 2018) Ultimately, every dollar you save beforehand is one less dollar you have to borrow later.
Just like any life decision, going to college carries an opportunity cost. When you go to college, you give up other things – in fact, in some cases, you might have to give up quite a lot. The opportunity cost of college is enormous, and it will probably have a much more significant effect on you than you realize. College costs a lot no matter how you look at it. Whichever college you choose, no one would argue that college tuition was “cheap.” It costs more than you probably think. Tuition is only one part of the cost; the actual cost of college also includes any outside expenses plus the income you are forgoing by going to school instead of work. According to a chart from the Bureau of labor statistics, the more you go to school and learn, the more you can earn in the long run.
Median weekly earnings in 2017 for those with the highest levels degrees (doctoral and professional degrees) were more than triple those with the lowest level, less than a high school diploma. Moreover, workers with at least a bachelor’s degree earned more than the $907 median weekly earnings for all workers. (Torpey, 2018). Those who did not attend college only earn an average of 712 dollars, while those with a bachelor degree earn about 1,713 dollars a week. It is important to note that those who did attend college for only some of the time barely make more than someone with a high school degree, the difference being 62 dollars a week.(Torpey, 2018) When you go to college, the only way it will be worth the opportunity cost is if you finish all four years. Dropping out early will not benefit you in the future even though one has technically gained more knowledge and experience.
Here is also an economic decision to be made about the type of college to consider. Does the college you go to impact the job you later on you get or how much your paycheck will be? The obvious answer would be yes, of course, it matters. Students work extremely hard to get into Ivy- League schools for world-class education and their plethora of job opportunities from networking within the school. On the other hand, where you go might not matter as much as most think. (Thompson, 2018). According to a paper published in the Quarterly Journal of Economics by economists Stacy Dale and Alan Krueger, they both concluded that the salary difference between going to a highly selective school versus going to a school that is not nearly as selective is around 0 dollars.(Thompson, 2018). This indicates that the student is more valuable than people think. Ultimately, regardless of where you go, the person you are has more of an impact on your financial success than the college you go to. For example, if a student who is deciding to choose between paying full tuition at an Ivy-League school or getting a full scholarship at a private liberal arts school, they have an economic decision to make. Would they rather spend money on tuition or have it paid for them? The outcome of the study above reflects that where you go doesn't matter; it is about the person and their impact rather than the schools. Therefore, the student would choose the school that would pay their full tuition.
As an aside, although not the focus of this paper, public universities and private colleges are always fundraising so, they can compete for the best students regardless of their ability to pay. This is also an economic decision the colleges make; if colleges can publish impressive scores and perform better in their rankings that they can generate more interest/applicants/business/tuition income for themselves.
Although getting a bachelor’s degree will make one more financially successful in their lifetime, that does not mean that all bachelor’s degrees are created equal. While the focus of this paper has been on the value of higher education in general, there is a clear connection between specific college majors and specific career trajectories. Certain college majors are preparing students for careers. Average salaries mask very real discrepancies between the economic advantages of different undergraduate majors. While everyone who attends college can expect a significant return on their investment, different undergraduate majors lead to markedly different careers and significantly different earnings. (Carnevale, Melton, 2011).
For example, in a study called "Major Decisions: What Graduates Earn Over Their Lifetimes," by Hershbein and Kearney, they look into what different majors salaries are, comparing them with each other. In the chart above, it reflects median lifetime earnings for specific majors. It includes those with the highest earnings, those with the lowest earnings, and those that are among the most common majors' students choose to study. As can be seen in the figure, lifetime earnings vary widely across majors. Over the entire career, the highest-earning majors will earn about two-and-a-half times what the lowest-earning majors will earn, a range from over $2 million for some engineering majors to about $800,000 for early childhood education. (Hershbein, Kearney, 2014) Ultimately, there is another economic decision to be made here. When a student is choosing their major, they can either choose a major in which they will potentially make the most money or choose a major in which they are highly interested in, but doesn't make as much money in the long run. Students enter college all paying for the same education, but what one chooses to study can affect their lifetime earnings.
Throughout the college process, economic decisions are continually being made. For those who do desire to go to college and want a career that requires a four-year degree, these economic decisions are made to make sure that the benefits of college outweigh the costs. From finding a college that offers sufficient financial aid to choosing a major and ultimately persisting through graduation, the value of higher education will be determined in large part based on the choices you make.