A 2019 study [PDF] by Federal Reserve economists found that although a college education still provides a boost in earnings, the increase in wealth a degree provides has declined significantly over the past fifty years, due to the rising cost of college and the increase in other forms of consumer debt.
By lowering college tuition prices, communities across the United States can attend college much more easily, find a stable job once graduated and not have to worry about debt for their whole lifetime. Despite these changes being a longshot, it never hurts to try.
Key Takeaways. Compared with individuals whose highest degree is a high school diploma, bachelor's degree holders are 24 percent more likely to be employed, 3.5x less likely to impoverished, and nearly 5x less likely to be imprisoned.
Decades of research confirm that increased investment in education leads to increased economic growth. This includes higher salaries for individuals, greater workforce effectiveness, and higher gross domestic product.
The Economic Impact of Holding a Degree
While the cost of college is a consideration, the return on investment (ROI) usually outweighs the initial expenses. On average, college graduates earn nearly double the annual salary of those with just a high school diploma. Degree holders also experience greater job stability.
A population that is better educated has less unemployment, reduced dependence on public assistance programs, and greater tax revenue. Education also plays a key role in the reduction of crime, improved public health, and greater political and civic engagement.
California's community colleges generate $128.2 billion in economic activity, an amount equal to approximately 4.2% of California's total gross state product, according to a new study that examined a wide range of factors such as payroll, job creation and alumni's improved standard of living.
Thus, while the benefits of college still outweigh the costs on average, not all college degrees are an equally good investment. The economic benefits of a college degree can be thought of as the extra wages one can earn with a college degree relative to what one would earn without one.
Increased Earning Potential
According to the U.S. Bureau of Labor Statistics, workers whose highest level of education was a diploma earned 25 percent more than those who didn't finish high school. This shows how your academic progression can lead to significant financial benefits over time.
Soaring tuition costs have resulted in increased borrowing and, prior to the federal payment pause, alarmingly high delinquency rates. Americans owe a total of $1.75 trillion in student loan debt. The average undergraduate student with loans now graduates with nearly $25,000 in debt.
Advocates argue that free college can reduce social inequality, eliminate student debt burden, produce a stronger workforce, reduce social problems, and drive economic growth. They believe that higher education benefits both individuals and society, and making it free will increase access and completion rates.
State financial aid programs are focused mostly on tuition, so students must cover costs that add up to thousands of dollars. And these costs are rising: taken together, housing, transportation, and book costs have increased 24 percent since 2012.
More Educated Population: If more people could afford college, more people would probably attend. This leads to a more educated population. It has been shown that a more educated public results in higher political participation.
Student loan debt can prevent you from making major purchases like a home or a car. An economy may see fewer new businesses when there is more student loan debt. Student loan debt also limits consumer spending. Economic recovery can be more difficult when there are many people carrying student loan debt.
One of the biggest impacts of rising tuition costs is the burden it places on students and families. Many students are forced to take on significant debt in order to pay for their education, and this debt can have a long-term impact on their financial well-being.
More People Could Go to College
By negating the large cost of a college education, we could see an increase in the number of students able to attend college. Students who previously hadn't thought about attending college due to the cost may now be interested in attending.
Societal benefits include: Higher levels of education correspond to lower levels of unemployment and poverty, so in addition to contributing more to tax revenues than others do, adults with higher levels of education are less likely to depend on social safety-net programs, generating decreased demand on public budgets.
The average cost of attendance for a student living on campus at an in-state public 4-year institution is $27,146 per year or $108,584 over 4 years. Out-of-state students pay $45,708 per year or $182,832 over 4 years. Private, nonprofit university students pay $58,628 per year or $234,512 over 4 years.
Economic Growth and Innovation
Investments in the education sector, especially when free college is offered, can have an exponential impact on a country's economic structure. A workforce with a strong foundation in higher education always increases productivity, resulting in total economic prosperity.
The benefits of free college include greater educational access for underserved students, a healthier economy, and reduced loan debt. Drawbacks include higher taxes, possible overcrowding, and the threat of quality reduction.
The University, as an income-expenditure flow, has positive effects in local economic development. These effects can be classified into two categories: supply effects—related to human capital and research—and demand-side effects—related to expenditure and its multiplier impact on local economy.
Why Is Education Considered an Economic Good? Education tends to raise productivity and creativity, as well as stimulate entrepreneurship and technological breakthroughs. All of these factors lead to greater output and economic growth.
Globally, investments in education underpin social cohesion, economic growth, competitiveness, and innovation. In a time of rapid social, technological, and economic change, investing in education is also important for building the resilience of countries.
Firstly, it can lead to a lack of skilled workers, which can hinder economic growth and development. Without a well-educated workforce, businesses may struggle to find qualified employees, resulting in reduced productivity and innovation. Secondly, an uneducated population can contribute to higher poverty rates.