Tuition Costs

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Case Study:
How do rising tuitions impact students, local employers, and educational institutions?

Executive Economics

Outline

Thesis: How do rising tuitions impact students, local employers, and educational institutions?

I.Tuition Costs
A.Enrollment Supply
B.Enrollment Demand

II.Economic Theory
A.Impact on Students
B.Impact on Educational Institutions
C.Impact on Local Employers

III.Higher Educational Costs
A.Advantages (Pros) of Higher Tuition Costs
B.Disadvantages (Cons) of Higher Tuition Costs

IV.Conclusion/Recommendations

This case analysis will be based on the question, “How do rising tuitions impact students, local employers, and educational institutions?” Economists state that this is due to declining external funding, insufficient subsidies to public institutions, and insufficient contributions to private schools. Schools argue that it is due to quality improvements. In answering this question, an evaluation of enrollment demand and supply needs to be addressed in order to determine why tuition costs continue to rise (Fortin). Tuition Costs

On the enrollment demand side, potential students request acceptance to a university or college which increase tuition costs. On the enrollment supply side, universities/colleges supply placement which in turn increase the institutions revenue. When the demand escalates in relation to supply, tuition costs rises. As the supply shifts left, the demand shifts right and costs soar. In order to reach equilibrium on supply and demand, institutions utilize price and grades (see chart below).

The demand is geared to individuals wanting higher incomes and earnings potential to be greater between high school and college graduates. But to some degree, rising costs can also be due to growth in government loans and grant programs as well as the tuition tax credits. The amenities such as Pell grants, Stafford and Perkins loans, and work-study programs all serve as one way to get a college education at any given outlay (Fortin). The demand and supply sides can be affected by the institution being private or public. For instance, admission to a private institution is restricted by very high tuition and/or very high grades. For public institutions, a combination of prices and grades which requires average tuition and limits entrance based on aptitude with even less restrictions for entrance into public community and technical colleges (Fortin). In essence, as stated in “Trends in College Pricing – 2007” published by College Board, tuition and fees constitute about two-thirds of the total budget for students enrolled in private four-year colleges, but are just over a third of the total budget for in-state students in public four-year colleges and less than 20 percent of the total budget for public two-year college students. The following statistics are based on information gathered from the above publication: •Average published tuition and fees at public two-year colleges in 2007-2008 are $2,361, $95 (4.2 percent) higher than in 2006-2007. •Average published tuition and fees for in-state students at public four-year colleges and universities in 2007-2008 are $6,185, $381 (6.6 percent) higher than they were in 2006-2007. Average total charges, including tuition and fees and room and board, are $13,589, 5.9 percent higher than a year earlier. •Average published tuition and fees for out-of-state students at public four-year colleges and universities in 2007-2008 are $16,640, $862 (5.5 percent) higher than they were in 2006-2007. Average total charges are $24,044, 5.4 percent higher than a year earlier. •Average published tuition and fees at private four-year colleges and universities in 2007-2008 are $23,712, $1,404 (6.3percent) higher than they were in 2006-2007. Average total charges,...
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