The economics of education

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Rebecca John (Courtesy Photo)

A bubble. An eruption. An explosion. 
These are some of the words used this past year to describe college costs and higher education loan debt. 

Ironically, it’s because of the significant benefits of a college education that concern about the cost of college has become such a heated public topic. Today, the difference between having a college degree and not having one has become significantly more pronounced. According to the U.S. Census Bureau, high school graduates earn less than 70 percent of the income of college graduates. The Georgetown University Center on Education and the Workforce predicts that 63 percent of jobs in 2018 will require some form of postsecondary education. 

So while rising tuition costs are often cited as the cause for concern, the larger societal issue is that the required investment-and, therefore, the benefits-of higher education may be out of reach for a growing portion of our population, no matter how promising the return. 

Part of the challenge is that state support typically covers a smaller proportion of college costs, leaving a larger portion to students and their families. In Minnesota, for example, the proportion of college costs that families cover has gone up faster than the overall cost of college.

As a result, borrowing has increasingly become a necessary part of how families of all socioeconomic backgrounds pay for college. Average U.S. undergraduate student loan debt for 2010 graduates was $25,250, according to the Project on Student Debt, an initiative of the nonprofit Institute for College Access and Success. 

To offset some of these costs, many students receive financial aid directly from their colleges or universities. The amount of aid depends on numerous factors and can significantly affect the net tuition cost for a student. So it is increasingly important for students to understand their financial aid package at each institution before making a final choice or assuming that a certain college is financially out of reach. 

In the end, the challenge for every higher education institution is to find a sustainable balance among state and federal government aid, institutional support, and student or family contributions-and to do so in a way that keeps higher education within reach for students of academic ability from all backgrounds. 

Rebecca John is vice president of marketing and communication at Augsburg College in Minneapolis. 
Editor’s Note: A longer version of this essay was published in “Augsburg Now” in July 2012.