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Is Paul Ryan that Dumb?

Posted by Shannon Hill on August 12, 2012 at 4:25 PM

Is Paul Ryan that Dumb?

by Shannon Hill 8/12/2012

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Paul Ryan claims that rising financial aid is driving college tuition costs higher and higher. That is like saying that someone who sells apples can decide to charge more because his customer has plenty of money, it makes little sense what-so-ever. If you would really like to know what has driven the cost of higher education up all you need do is turn to a book aptly titled, Why Does College Cost so Much?, by David H. Feldman and Robert Archibald, who are affiliated with the N.A.S.F.A.A., National Association of Student Aid Administrators. The following is a brief account of their explanation mixed in with some others take on austerity and how it really effects all of us.

Feldman Figure 1 for Perspectives

Technological change has acted on higher education in three ways. The first way is indirect. While technology has served manufacturing and agriculture well in that it has helped increase production and helped to reduce labor cost, it has not done the same for many service related businesses. Service requires time spent one on one with customers. So if your business is a music band with a traveling road show technology is not like to play a huge role in increasing your production or lessoning your labor cost. Likewise, in education, technology has not helped in producing more graduates per hour of class. Most parents and students see the value of low student teacher ratio’s and many schools tout their low ratios to attract better students. In all service related businesses the inflation rate tends to be higher than in a production type business. Thus, this is the first reason for the higher inflation rate among colleges and universities.

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Secondly, innovation, over the last 50 years, has raised the demand for workers with ever more years of formal schooling. However, since about 1980, the supply of educated labor has not kept up with the demand, so the income someone earns with a college degree has grown substantially. In 1980, the average college graduate only earned 45% more than the average high school graduate. Today, a college graduate’s wage is double that of a high school graduate. This change in the labor market pushes up cost in any industry that uses a lot of educated labor. Education is one such industry, thus salaries in higher education has grown faster than most giving us our second reason technology is responsible for the rise in the cost of education.

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Lastly, colleges and universities have no choice but to adopt new technology even if it raises their cost. Faculty members have to teach the most cutting edge technologies to be effective teachers because in order for our students to receive an education that prepares them for today’s labor market, they must be familiar with the current techniques in whatever discipline they study. We live in a time of rapid technological change, and this causes new technologies to be purchased more often in the education system than in the business world. Thus the third reason for higher inflation in education.

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These three technological reason explain part of the reason for the growth in cost and also touches on the second factor in rising cost, supply and demand. As the need for more highly trained people in our new technology driven world has increased so to has the demand for students seeking a college education. High school systems moved away from technical school training also to meet the demand of filling the need for more highly educated students again causing many more students to pursue college as well. There are many schools that may have 10 applicants for each available spot in admissions. Like anything else, when demand is high prices go up. The demand for education has outpaced the demand for many other things giving education another reason for higher inflation.

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However, another factor has thrown even a different wrench in on the supply and demand of education causing prices to go even higher. College Professors became in high demand with the growth in students. With this demand especially to attract the best talent possible, education cost grew with again increasing salaries of faculty. Along with this growth also a growth in the number of facilities and the need for the purchase of even more high technology. All of these things attributed to the growth in the cost of education because of supply and demand.

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While technological advancements have been the driving force behind rising costs in higher education, affordability of education has also had a big impact on the growing prices. How can affordability cause prices to go up, one might ask? It is a fair question and as you might expect is a little bit complicated. To understand how affordability plays in it is necessary to understand how income distribution has changed over the last 40 years, to understand how “discounting” works in the college pricing game, and also how austerity has played a big role in the rising prices.

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Looking at the austerity measures that have been trending in our government for many years now will show a big reason for increased tuition prices. State and federal government have always subsidized higher education. Cuts in these subsidizes have been detrimental to our entire country. Austerity in education is a perfect example of how these practices actually hurt the American Public far more than the socialistic approach that was popular up until the 1970’s. This microcosm will show how maybe with cutting programs you might save a few (very few) tax dollars but in the end you will certainly pay for it in other ways and 99.9% of the time in much more expensive ways. In 1975, states allocated roughly $10.50 to higher education for every $1,000 of per capita state income. Because of austerity measures which have steadily reduced these subsidies states now pitch in just $6.00 per every $1,000 of per capita state income. It is a huge cut even if colleges were educating the same amount of students as in 1975, but it is a gargantuan decrease considering the massive increase in the number of students seeking postsecondary education. To offset these state and federal cost Universities have had no choice but to raise tuition prices in order to pay their bills. Affordability for parents and students obviously is greatly effected . In 1975, the states picked up 60% of the tab for a year in college while families shouldered 33%. The federal government picked up the remaining 7%. Today, the states pay only 34% while families bear 50% of the cost. The federal government’s share, through grants and tax credits, is currently 16%.

Feldman Figure 2 for Perspectives

Over the same span of years, the income distribution in the United States has changed dramatically. This is another major force for creating affordability problems in higher education. In the 1960s, an average person with a high school diploma could live a comfortable, middle-income lifestyle. Now people who were once solidly middle class find themselves falling further down the distributional ladder and their children are increasingly finding a college education more difficult to finance. U.S. income distribution has changed over the last 40 years. Only the wealthiest 1% have seen their incomes skyrocket by more than 260% over this time period. Everyone else has seen their incomes stall and actually most have fallen over the last many years. Because of this almost no one other than the wealthiest few can actually afford to pay for a college education. However, there is not enough of these elite to educate to meet the demand of the need of educated individuals in the US labor market so a way has to be made for educating those who otherwise cannot afford it. In comes “discounting”

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Private schools use “tuition discounting” as a way to get students families whose families finances make it impossible to afford a private college. But just because you discount still doesn’t mean that you can pay your bills by taking in less money, so those discounts are made up by raising the prices of tuition even higher forcing the wealthiest to pay even more to make up the shortcomings of those who can not afford to pay. Schools need revenues to finance their programming, and if they discount the price to some students who otherwise could not come, they must increase it for others who can pay, it is just that simple.

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With the austerity measures taken by government over the last many years private universities have had to push the envelope on tuition discounting, and this has increased the average list price. In 1993, for instance, the discount rate at private universities was roughly 25%; ten years later it had reached 32%. This means that list price tuition rose by 30% more than if the discount rate had remained the same. Coupled with rising tuition at cash-starved public universities, the result is that many upper middle-income families increasingly bear the full impact of rising list-price tuition at both public and private institutions. Again if you do not pay in taxes you WILL pay somewhere else.

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Paul Ryan wants to eliminates Pell Grants for more than 1 million students. Ryan’s budget claims both that rising financial aid is driving college tuition costs upward, and that Pell Grants, which help cover tuition costs for low-income Americans, don’t go to the “truly needy.” So he wants to cut the Pell Grant program by $200 billion, which could “ultimately knock more than one million students off” the program over the next 10 years. Above it is shown, and by just looking around at yourself and your neighbors and friends that it isn’t likely that many people are receiving grants that do not need them. But whatever the case, Ryan’s solution of cutting $200 billion in Pell Grants is exactly what has caused the skyrocketing prices in higher education to start with. His assertion that it is from financial aid being to easily available is absurd.

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So the question is, “Is Paul Ryan dumber than this hillbilly from Kentucky or is he a Liar with a Fascist Agenda?”

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