In response to Madison Phillips--"Higher Education and the Economy: The next bubble to burst?"
In response to Madison’s “Higher Education and the Economy: The next bubble to burst?” I would like to first say that it is an extremely well written and well thought out piece. However, although it is strong and I truly enjoyed reading it, I think there’s some room for more economic connection. Many significant numbers are presented in her post in regards to debt. Here, Madison provides that “Grubb continues in saying that the 2008 reported average debt of graduating seniors was $23,200.” Economically speaking, if we have graduates fresh out of college in double-digit debt as presented here, that is going to decrease confidence in spending and probably increase uncertainty. In my opinion, graduates are going to be less likely to make long-term investments—such as buying a house or car or even putting significant amounts of money into savings or the stock market—because they are worried about their debts and unwilling to risk falling further into debt. Recent graduates may also hesitate to make purchases to furnish their houses or apartments, and may shop for cheaper groceries and other necessities for the same reason. Ultimately, I see graduate debt as a decrease to the product demand curve and I wonder if that will also raise prices and have a negative influence on product supplied.
Earlier in her post, Madison wrote that, “The New York Federal Reserve Bank places the total amount of debt due to higher education costs at $550 billion, and even suggests that this number could be underestimated. It has been said that the total amount of outstanding debt from higher education could surpass $1 trillion in the near future.” The values presented here frighten me because we are talking about billions of dollars in debt. However, it is important to remember that this number is a compilation of everyone’s debt due to higher education. After a quick search on Wikipedia, I was able to find that the United States had than 18,248,128 students seeking higher education in 2008, according to the US Department of education. If we divide the estimated $550 billion total for graduate debt by the estimated number of students seeking higher education in 2008, the number is $30,140, which is only slightly more than what Gibbs presented in the first point I mentioned. Moreover, Madison pointed out that, “’The 2008 census reported average earnings of those with advanced degrees, (a master’s professional or doctoral degree), totaled $83,144.’ Those with bachelor’s degrees made $58,613, while people with high school diplomas had average earnings at $31,283. These numbers show that education really does, or can, pay off in the long run.” Madison is right to say that in the long run, the pursuit of a higher degree does indeed pay off. Clearly people pursuing these professional degrees are, on average, better off than those who choose otherwise. The students who seek a professional degree, who may average about $25,000 in debt, are making the money to pay it off. Therefore the argument that says that the amount of debt is too high for the degree earned to matter is false.
When the New York Federal Reserve Bank or any department releases numbers like the one presented above (“$550 billion”), as a total, it makes matters seem so much worse than they are. As Madison also pointed out in her post, the media makes reference to many schools with higher tuitions when they report average debt. The reality of the matter is that many graduates have less debt then they report but their reports make the readers or viewers feel like education, and the pursuit of it, is not all it used to be. Economically speaking, it is not ideal that these reports are coming out and making education look too expensive because education is very important in ensuring economic growth and advances in technology. If the media keep making education look like it isn’t worth the investment, people are going to stop seeking higher degrees. While higher education is not the only way to ensure technological advancement, it would not be beneficial to our nation to have people pass up higher education just because it is an investment.
In response to Madison’s title “Higher Education and the Economy: The next bubble to burst?” I’d like to call attention to her statement that a bubble is something that is overpriced but has great support. I’m not so sure that education is really a bubble because I think it is priced where it needs to be to allow demand not to overhaul supply. If we made education cheap and everyone pursued a higher degree, there would be no distinction between the “higher” piece of higher education; because everyone would receive the “higher” education degree. The price of the schooling is supposed to help balance out the supply and demand of a higher education. That is why the prices keep rising. Not everyone can pursue the degree or they’ll be nothing “higher” about it.
Ultimately, I think the only concerns I have in regards to higher education and the economy are that graduates have low confidence and high uncertainty of where, how, and when to spend their money, so as not to plummet further into debt; and how the media portrays educational debts. I think higher education is priced where it needs to be to maintain its title of higher education, therefore I do not think it is a “bubble” waiting to burst. Finally, I think higher education is a necessity to promoting economic growth and technological advancement so I think it is important to keep up the number of students pursuing higher education. And great job Madison! I really enjoyed your original post!
http://en.wikipedia.org/wiki/Higher_education_in_the_United_States
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