Higher Education Is Not Just an Investment in human capital to improve future.

With the season of college graduation beginning, we will now witness several news reports about the difficulties faced by current graduates. Most of the reports will highlight the issue of the burdens of students debts and the declining job prospects, and identify higher education investment as a failure. Although it is true that new graduates will face various severe challenges, but the main issue is not that a degree does not pay off.

Challenges of higher education

There is no doubt that constantly increasing tuition fees in higher education institutes is a severe problem. The average yearly tuition fees at private universities and colleges has increased to $31,000, which is around roughly 76 per cent after adjusting inflation. The average cost of education at public universities and colleges increased to $9,100, which is almost 141 per cent. About 70 per cent of 2015’s 3.5 million graduates have taken student debt just to meet the expensive costs of higher education. At present, the average student debt stands at around $27,000. As a result of this, many academic experts are now asking whether college is worth the investment?

However, this question originates mainly from a false premise. Higher education is simply not an investment in human capital that will result in enhanced future earnings. Most often college also offers consumption goods as well. Although these goods may be represented in forms of recreational amenities, it primarily incorporates majors and courses on various topics such as art appreciation and other subjects, which result in cultural enrichment in the long term, but has little effect on income.

Growing need for consumption

But huge government subsidies to institutes of higher education convert the bundling of human capital investment as well as consumption for the youths into a raw deal for the community at large. But those students and parents who have a clear understanding about the distinction among the two, it can be seen as a fruitful deal. But the fact remains that taxpayers have to bear a fraction of the education and consumption expenses of students as well. With more families becoming affluent, they are demanding more consumption and leisure for their students. And universities and colleges are glad to offer it. However, government subsidies warp this adjustment; and the institutions or the families will not face the market prices.

The government subsidies have also resulted in boosting for college education, which has increased tuition fees up, with the institutions getting incentivised so that they can oversupply various consumption goods. After we realise that most of the student debt and academic spending are taken up by funding consumption instead of investment, we will get a much clearer understanding about the challenges which recent graduates are facing.

The bottom line

This is not to say that the college graduates are not facing a real problem. There is a real problem related to student debt and lack of good job opportunities. Moreover, the government has created further difficulties for fresh grads who get employed just to meet their usual financial needs.

What do you think? Add to the discussion by sharing your opinions in the comments section below.

Article source – huff.to/1dOirU3

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