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Tuesday, October 24, 2006

Spikes in College Prices Not So Sharp/College Tuition Increases at a Slower Rate

According to the articles, College Tuition Increases at a Slower Rate and Spikes in College Prices Not So Sharp, printed in the Washington Post on October 24, 2006 and October 25, 2006, tuition is increasing at a slower rate than in the past. Although the rates are increasing at a slower rate, they are still increasing at a significantly higher rate than the national inflation rate. Tuition fees for two-year public, four-year private, and four-year public colleges have increased at 4.1 percent, 5.9 percent, and 6.3 percent, respectively. The national inflation rate for that same period was 3.82 percent. Moreover, financial aid has increased, but only by 3.7 percent (Washington Post).

Although few students pay full price for college, financial aid is still not what it should be. The rising costs of tuition combined with low financial aid are making it more and more difficult for people to attend college. These issues present potential problems for the future of our economy. If fewer and fewer people can afford higher education, our labor force will not be as skilled resulting in less productivity.

Currently, potential students of higher education have opportunities to receive scholarships and take out loans to pay for college. The federal government also provides the Federal Pell Grant to low-income students. This grant, however, was recently decreased by $120 per participant (Washington Post). Should the government provide more support to students to pay for higher education? Yes.

If the government provided more financial aid to students, more students would want to and be able to receive higher education. This would result in higher skilled labor. This would be beneficial to the economy overtime and it would also be beneficial to those attending higher education. This would be a feasible public policy to implement. Although it has already been implemented, the government should find ways to provide more financial aid for higher education.

"Should the government provide more support to students to pay for higher education? Yes."

From the point of view of economic efficiency, if you answer this question with yes, then you must think government policy is insufficient to correct a market failure. Is that correct?

I think your question and answer is specifically referring to the national government and Congress. I'm not sure why, even if I think there is a positive externality associated with higher education, why economic efficiency suggests that national government should subsidize students to attend college. Is there a market failure basis for this suggestion? Could it be that state government would be a more efficient level of government to respond?
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