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ConsumerismSupply and demand is a simple concept, yet it has never been more relevant than when looking at the issue of college tuition. The public contributes to the exorbitant prices of college tuition because as high as prices rise, people are still willing to pay a premium for education. Obtaining a degree has been and currently is an important investment in human capital, as a college education prepares individuals for finding a job and excelling in their respective professions. A 2011 report showed that a bachelor’s degree added twenty-six thousand dollars to the average income for men, and twenty-nine thousand for women. That kind of money is a fairly significant difference maker for improving quality of life, and certainly marks a return on investment.
The prevalence of financial aid plays a large role in raising the price of a college education. When a college offers a student a free discounted education, other students must bare the brunt of that decision and may not be offered any financial assistance. Also, colleges know that poor families generally receive aid while affluent families do not, so they artificially raise prices knowing that they can change the costs at will. This practice is called price discrimination, which is generally a characteristic of monopolies which induces economic inefficiency and higher prices. Financial aid also acts as a barrier to the fight for free tuition, because the federal aid is taken directly out of the education budget. This diverts funding from areas where money should be allocated, especially when considering the financial status of middle class families. Criticizing financial aid presents another dilemma, as aid is essential to giving poverty-stricken Americans the opportunity to pursue a bright future. Arguing against a program that boosts overall social well-being is incredibly difficult, and probably not the most logical way to solve the tuition problem. What this issue really comes down to is the power in the hands of colleges. A college degree is such a key part of the pursuit of a successful career that society is fairly willing to spend exorbitant amounts of money, so like any monopolist would, they charge a premium. Since colleges have the final say on how much students pay, they compete for students by offering scholarships instead of lowering the price for all tuition. This price discrimination causes prices to skyrocket, and is quite detrimental to students paying full price. American capitalism allows businesses to charge what consumers are willing to pay, and Americans have repeatedly been willing to splurge on university education. While supply and demand is the foundation of the American economy, it does have an unfortunate effect on tuition prices. |