Running head: AMERICAN HIGHER EDUCATION EXPENSES

American Higher Education Expenses

Joel Rivas
University of Texas at El Paso

AMERICAN HIGHER EDUCATION EXPENSES

Abstract
This Higher education cost literature review will analyses sources that explain: the cost of
higher education in the United States, the opinion/view-point of experts on higher education
economy, the effects of tuition costs on the nation and solutions to improve higher education and
its cost in the United States. To analyze the cost of education in the United States compared to
the world we will be using graphs and facts obtained of the research that the sources reviewed
provided. Then I will compare the different opinion the authors, journalist, professors and other
experts have about the cost of higher education in the United States. From the opinion of this
experts I will analyze the viewpoints they have about the effects that higher education cost have
in the nation and in the people that are closely related to the topic (students, graduates and tax
payers), finally I will compare the solutions that the sources offer.

AMERICAN HIGHER EDUCATION EXPENSES

American Higher Education Expenses

The higher education in America is expensive compared with the one of other countries,
independently of whether it is from higher quality or not, this is something that affects the
students from the nation and it is leaving important quantities of debts because of the loans that
people has to borrow in order to pay school. Some experts states that the cause of this problem is
due to supply and demand phenomenon, other say that is the states fault for not supporting
higher education with enough funding. Certainly we can agree that the most affected are the
students since not being able to pay for school the will not pursuit a professional career leaving
the nation with important vacancies for doctors, engineers, etc.

What are the costs of education in other countries versus the United States?

AMERICAN HIGHER EDUCATION EXPENSES

In the United States the annual household income was $26,990 dollars according to the
reports of the OECD (The Organization for Economic Co-operation and Development) in the
2008. In the Global Higher Education Rankings 2010 the President of Higher Education Strategy
Associates, Alex Usher and the Policy Associate at the Mowat Centre, Jon Medow reported that
the educational cost in the United States is $13,856 dollars being the most expensive in their
survey that covered 15 jurisdictions. Usher and Medow also estimated the living cost of those 15
jurisdiction, with $9,759 dollars per year for student made the United States the third most
expensive county to live in comparison to the other 15 countries, Latvia the cheapest one with a
cost of $2,924 (Table 7: Living Costs 2008, pg. 14) and the average cost living $7,784.33. This
information can give us a good reference of where is the cost of higher education in the United
States standing in comparison to the world. For better understanding Usher and Mowat provide a
more complete table (Global Higher Education Rankings 2010, pg. 12):

[Figure 1]

AMERICAN HIGHER EDUCATION EXPENSES

This table shows the annual average education cost of education plus living cost (Total Cost), the
annual Median Income per household, the percentage of total cost of median income, and finaly
the rank at which each country stands in dordability (1st most afordable, 15th less afordable). This
table (Figure 1) proves that the education in the united states is one of the less afordables and
most expensives. Usher and Medown coments about this table is that generally, coutries with no
or low tuition are clear winners in the total cost ranking. (2010, pg. 16) and by this comment we
can assume that contries like Germany have a low cost tuition, and countries like the United
States have a high cost tuition. Although we still have to consider that this table does not includes
things like taxes, grants or loans in the total cost of education. If we add these last items (loans,
grants, taxes expenditures) we would have the Out of Pocket Cost After Tax Expenditures, giving
the US a figure of $13,692 dollars lowering to nuber 12 (on place lower) in the table of
afordability. It is estimated that the US gives more than 40 percent of total Aid to pay education
to their students acording to the figure 3 in page 31 of the research of Usher and Medown.
For the over all analysis of the research of Ucher and Medown we can conclude that the
cost of education in the United states is one of the most expensive in the world just after japan,
but it does not makes it the less afordabel since factors like 40 percent aid in grants, loand, and
its high income help it to balance the cost and afordability, and yet it still is one of the less
afordable educations in the world.

What are the view points of the experts on higher education cost?
In th book Why Public Higher Education Should Be Free the writer Robert Samuels states the
average cost of higher education in the united states increases twice the rate of inflation
meaning that education is becoming more expensive than in the pass. Roberts points out that this

AMERICAN HIGHER EDUCATION EXPENSES

does not makes sence since the cost is going up and the money used on undergraduae education
is not and rhater it is decreasing. Samuels gives an example of this the university decided to
rise students fees (tuitions) by 42 percent, increase class size and decrease the number of courses
ir offered the unibersity increased the cost of education, the students had to share class with
more alumns and they were offered less courses; getting less for more. Samuels then proceeds to
explain the Financial Aid, an aid by the government for students to pay for college, but Samuels
then point how this system is not really helping those who needed lower- and middle-class
students actually en up supsidizing the wealthiest students. (2015, pg. 9) this happens when
universities give their aid based on based on grade rankins instead of need. Samuels explains that
this has to do with the fact that is shown in studies that say students with the highest SAT scores
also have the wealthiest parents that are able to sent their kids to better high schools and there
fore get a better education.
Annother expert gives us the analysis of Supply and Demand Analysis in the honors
thesis The Rising Cost of Higher Education submitted by Helen Li. Li definces the supply and
demand framework in education as diferent from any other goods market in the way that
universities care about who are their customers. Li belives that the reason demand is increasing
in universities is that the earnings of people with higher education is increasing more over those
who only have a high school diploma. Li states a worker with a bachelors degree earned 1.5
times a worker with a high school diploma; by 1999, that number had soared to 1.8 times. This
wage differential gap continues to grow today. In consequence more high school graduates are
applying to universities pursuing those improved salaries.

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What effects does Higher education cost have in The United States?
The high costs of higher education in the united states have negative effects on the
economy as the longtime business journalist Kelly Holland states in her report, The high
economic and social costs of student loan debt The high levels of student debt are also serving
to perpetuate and even worsen economic inequality, undercutting the opportunity and social
mobility that higher education has long promised. This means that the students that are not able
to pay their education will have less oportunities to achive a high incomes in comparison to those
that have enough income to pay their school and will have a higher income after achiving a
higher education degree. In less words this makes the high class richer and the mid class poorer.
The report from the strategic consulting and researching organization Ithaka The Effects
of Rising Students Cost in Higher Education: Evidence from Public Institutions in Virginia.
Shows that some of the effects Almost every state saw declines in state funding for public
higher education since 2008, accompanied by significant increases in tuition and other student
charges. Every time the state cuts education spending the universities force themselves to
increase tuition, at the same time this trends will inexorably lead to lower retention and
persistence rates for students across the nation, particularly among the poor and near-poor
(2015, pg. 63) this causes that the rate of completion for the lower and mid-lower class to
decrease then the state losses their goal of closing the opportunity gap in higher education
meaning that the lower classes have even less opportunities to acquire a better education, making
this a circle since those students would not have the education to earn enough money to send
their kids to college.

AMERICAN HIGHER EDUCATION EXPENSES

Should the universities lower their costs?

In Samuels Robert book, Why Public Higher Education Should Be Free : How to
Decrease Cost and Increase Quality at American Universities, the idea of low cost education
and/or free education is pursued as the autor states It seems that the more money research
universities spend, the higher their tuition and the lower their quality of instruction. (2013
pg.115) Samuels explains that as the tuition increases the spent also does the spenditure, this is
nor related to the intructional purpose of spending but rather other things like research and
making the school more apealing to atract more students and justify their higher costs making
them look more prestigious.
The conclutions of the invetigatons of Li show that the solution is not in lowering tuition,
but rather in increase the aid from the government Many point to increasing financial aid or
subsidies to students who need financial assistance to attend college (2015, pg. 48) the she
proceeds explaining that this will help students that need it. Li concludes her investigation
pointing out her solution which demands to increase professors productivity and total
enrollment.
The report of Mulhern, Spies, Staiger and Wu, analize three different solutions: Increase
public funding and improve distribution of funds, committing to more efficient public system
and institutions, and Allocating a significant portion of any increased public funding and savings
achieved through greater efficiency to need-based financial aid. The first solution proposed has
been proved in some states that had increased their funding to public schools Moreover, at least
some of these increases have been tied explicitly to improvements in student retention and
graduation rates. (2015, pg. 64) explaining that the result of this solution number one is mainly
reflected in the retention of students due to students being able to stay in school since they are

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now able to afford it. The second solution demand that schools do their best to keep tuition cost
reasonable in order to cooperate with the state to maintain low cost tuitions ; school may be able
to do this by re-engineer their system. The last solution basically consist in prioritize need-based
financial aid, since this tool has not been taken seriously in some states some students ignore this
possibility and therefore they do not enroll to college.
Conclusion
Most conclusions from all the investigations agree that there is no one simple solution,
but rather a combination of many different strategies to keep low tuition cost, maintain it this
way in the future, and keep it realistic since it is not reasonable that the government pay for the
education of every one because this could bring future problems. This solutions suggest that the
state and schools should work together to improve funding expenditure and also make financial
aid a need-based priority.

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10

References

Holland, K. (2015). The high economic and social costs of student loan debt. CNBC. Retrieved
from: http://www.cnbc.com/2015/06/15/the-high-economic-and-social-costs-of-studentloan-debt.html
Li, H. (2013). The Rising Cost of Higher Education: A Supply & Demand Analysis, (Bachelor's
thesis, New York University, New York, New York). Retieved from:
http://www.stern.nyu.edu/sites/default/files/assets/documents/con_042986.pdf
Mulhern, C., Spies, R. R., Straiger, M. P., Wu, D.D. (2015). The Effects of Rising Student Costs
in Higher Education: Evidence from Public Institutions in Virginia. Retrieved from:
https://www.luminafoundation.org/files/resources/effects-of-rising-costs-virginia.pdf
Samuels, (2013). Why Public Higher Education Should Be Free : How to Decrease Cost and
Increase Quality at American Universities. Rutgers Universiy Press. Retrieved from:
http://0-site.ebrary.com.lib.utep.edu/lib/utep/reader.action?docID=10773707
Schoen, J. W. (2015). Why does college degree cost so much?. CNBC. Retrieved from:
http://www.cnbc.com/2015/06/16/why-college-costs-are-so-high-and-rising.html
Usher, A. Medow, J. (2010). Affordability and Accessibility in Comparative Perspective. Global
Higher Education Rankings 2010. Retrived from: http://www.iregobservatory.org/pdf/HESA_Global_Higher_EducationRankings2010.pdf
Vasel, K. B. (2014). College is too Expensive, But How Do We Fix That?. Fox Business.
Retrieved from: http://www.foxbusiness.com/personal-finance/2014/02/25/college-is-tooexpensive-but-how-do-fix-that/