Author: Mayuri Hebbar, Graphics: Bella Aharonian
The BRB Bottomline:
Are you planning on going to college but worried about the cost? The cost of education has increased significantly in the past couple of decades. Continue reading to learn more about this increase as well as ways to mitigate the potential future financial burden of attending college.
Exploring the Cost of Education
In the United States, attending college is usually perceived as a huge financial burden. But was college always this expensive? Not really. In fact, since 1980, the average cost of college tuition has increased by 1200%. What happened? In the past couple of decades, education has transformed into more of a profit-maximizing industry, and society has placed more cultural emphasis on attending college.
Historically, education was primarily only accessible to wealthy, white men. This problematic restriction systematically furthered the cycle of poverty by requiring applicants of higher-paying jobs to have a college degree—thus effectively barring non-white, non-male members of the workforce from pursuing high-powered, high-paying careers. As a result, members of minority groups were largely held back in a perpetual cycle of poverty and restriction to higher education. Today, social progress has resulted in a drastic reduction of race, age, and gender, negatively impacting access to higher education.
Education in the United States Versus Other Countries
As expected, developing nations sink less money into further education than does the United States. In contrast to America, gender inequality in education still creates major setbacks for female students in areas of poverty and “geographic remoteness.” This inequality is largely driven by fundamental issues, such as a lack of public transport to educational institutions or dangerous travel conditions, which makes parents less willing to send their daughters to school due to safety concerns. Therefore, without the prerequisite primary and secondary education, many girls in these nations cannot attend college, driving down the demand and thereby the market price of further education.
However, more developed countries also spend less on higher education compared to the United States—countries that have consistently outperformed the U.S. in terms of literacy rates and other metrics. The U.S. spends more on education at the post-secondary level than does any other country. In fact, the U.S. spends approximately $30,000 per student, while the average spending across other countries, according to the Organisation for Economic Co-operation and Development (OECD), was just over half of that, at $16,100 per student. This seemingly counterintuitive disparity can be explained by the fact that individuals in other countries are able to more easily access education—and therefore, those countries outrank the U.S. in education-related metrics.
So why does the United States relegate itself to a counterproductive system of pricing up its college tuition? There are a number of factors at play in the U.S. that have resulted in a high cost of education. The $30,000 that students spend on average for post-secondary education includes any publicly-funded loans or grants that the student receives. Additionally, students are more likely to attend college away from home, and the added living expenses increase the total cost of going to college. Tuition for out-of-state and private colleges is more expensive than in-state tuition, so selecting out-of-state or private colleges can also raise the cost of education.
In other countries, there are substantial government initiatives that help subsidize the costs of education. Likewise, the U.S. government offers financial aid through the Free Application for Federal Student Aid (FAFSA) program. However, FAFSA provides less relief from hefty college tuition compared to analogous programs in other countries. There are a few reasons for this discrepancy. Firstly, the size of loans given out is not enough to fully cover the cost of education. On top of that, complex paperwork that needs to be accurately filled out in order to be considered for a loan makes financial aid harder to receive. Lastly, most colleges do not offer financial aid or accept FAFSA for international students. With all of these factors being considered, there are not enough financial support resources within the U.S. to meet the increasing demand for higher education, and as a result, the price of education continues to skyrocket and become increasingly unaffordable for many students.
Why is the Cost of Education so High?
The cost of higher education has increased by over 100% in the last 20 years—a much higher rate compared to most other industries. This increase in the cost of tuition is paralleled by the increasingly widespread mentality that you need a college education in order to earn a good living. While this may generally be true across many industries, a college education does not reap the same value for every individual. The cost of education is not always proportional to income earned after graduation; this ratio differs across different majors, professions, colleges, and individual circumstances at the end of the day. So while a college education may pave the way to more opportunities—generally speaking, it is not the end-all-be-all answer to success. In more recent years, most students see college as the final destination after high school; therefore, families are willing to pay a premium, and students are willing to take out loans and work multiple jobs to afford an education. This mentality contributes to more and more students seeking out a college education, increasing the demand for a college degree, which thereby raises the price of college since educational systems are aware that families are willing to pay such high prices for a college education.
Preparing to Pay for College
College is expensive, which is why if college is on a student’s radar, they can work with their families or caregivers to come up with a plan that would reduce potential financial burden. For example, there are different savings plans, including mutual funds, Roth IRAs, and 529 plans, that can be set up before a student heads off to college. There are pros and cons associated with each, but in general, most of these different accounts are tax-sheltered, which means that money can be deposited into the account without being taxed and will grow until the student needs that money to pay for college.
The 529 savings plan is one of the most popular forms of savings accounts for college as it offers tax benefits if the money is used specifically for college. Additionally, all money earned from interest rates is completely tax-free and is not taxable upon withdrawal to use to pay for college expenses. There are different sub-plans within the 529 savings plan, which have high maximum amount limits for the account and also allow for larger deposits. Investing early into these types of savings accounts is really beneficial as it allows money to grow over time, making paying for college a lot less stressful.
Additionally, much of the U.S. population is made up of the middle-class, who make enough money to not receive financial aid but still cannot comfortably pay for college, especially when multiple children in a household are going to college at the same time. From a policy standpoint, increasing aid and scholarship opens more opportunities for middle-class families since oftentimes their financial struggles are overlooked. Offering loans, grants, and scholarships specifically geared towards middle-class families could help to somewhat subsidize the cost of education for these families, making higher education a more attainable reality. In doing so, the government is also playing a part in actively giving these students the chance to achieve financial independence and move higher up in the socioeconomic ladder. An increasing demand for a college education doesn’t have to correspond to unsustainable costs. There are measures in both the form of personal investments and government policy that can be taken to help mitigate the cost for those interested in going to college.
So the question remains: what can the student from an average household do to help alleviate the financial burden of college tuition? Students need to ask themselves if college is even right for them and figure out why they even want to go to college in the first place. Will a college degree facilitate the process of getting them to their dream career, or are they going to college simply because everyone else is and they do not know what better to do with their time? This question cannot be answered easily until students are one or two years away, but that does not mean that families need to wait until that point to start saving for college. Good financial planning always accounts for the “financially worst case” situation, which in this context would mean needing to pay for college. Therefore, planning for college should start much sooner, preferably as early as possible. Investing a little bit every year into a college savings plan, like a 529 savings plan, will help alleviate the burden of paying for college if the student decides to attend in the future.
- In the United States, attending college is usually perceived as a huge financial burden. The average cost of college education has drastically increased in recent years, but it wasn’t always this expensive.
- Historical gender and racial barriers to education have furthered the cycle of poverty, resulting in minimal access to minority groups pursuing high-powered, high-paying careers.
- In developing countries, there is a lesser demand for higher education which results in lower prices for higher education in comparison to the U.S.
- Less developed foreign countries spend less on education, which makes it more accessible for students.
- American students are more likely to attend college away from home, which results in more expenses.
- FAFSA provides less relief than in analogous foreign countries for several reasons.
- The cost of education is also so high due to the mentality that you need a good education to have a successful and high-paying career.
- There are several ways to pay for college such as Roth IRAs, 529 savings plans, and mutual funds.
- While going to college is expensive, with careful financial planning, the burden can ultimately be mitigated.