The Economics of Education (as seen by neither an Economist nor an Educator)
Try as I might to write and think happy thoughts, I find myself realizing that most of the things I want to write about relate to things I've recently heard on NPR or read on other peoples' blogs. I'm not 100% positive, but I think it goes back to the unspoken agreement between my wife and me not to speak about politics with each other unless she brings it up and I can count the number of times that has happened in four years on one hand. We can talk about pop culture, school, the drama amongst our less-squared-away friends and family, our future, and even work (moreso hers than mine), but politics is something usually to be avoided. So without Carrie as an outlet, and without polished debaters like my buddy Freshboy to banter with on a regular basis, I usually find myself thinking about this stuff in my own mind. Now, I've got my blog and its phantom readers...
Anyway, this week's mental struggle is with the cost of education in the United States and two or three things have combined to get me on the warpath. For the last year, Carrie has been attending Sullivan University in pursuit of her Associates degree in Travel & Tourism. You can't know how proud I am of her for putting in the time and effort at our age to go back to school and finish a degree, any degree. So with 10 weeks left in her studies and without wanting to take anything away from that accomplishment, we got to talking about whether she would pursue her Bachelors degree in Hospitality Management. All I'm worried about is her finding a full-time job in her field so we'll be able to pay off her previous student loans as well as the $15,000-or-so she's racked up this year, preferably with a company who will also pay her to go back and finish her Bachelors work. On the other hand if she keeps going to Sullivan to finish her degree without taking any time in between, we probably end up racking up another $15-18,000 in loans but her current loans stay on deferment and her tuition stays locked in at last year's level. I'm not sure if Carrie will continue or if she even wants to, and I'm not going to push her in either direction, but I'd be all for the higher tuition if the bill gets paid by her future employer instead of us.
While we're on the subject of student loans, yesterday was the last day for past and present students to take advantage of the 2.77 percent interest rate on government-subsidized student loans. From here on out, we'll all be paying interest at 4.7 percent. That means an extra $2300 we'll pay in interest on a $20,000 Stafford loan. I can't decide if the loan providers have started to believe the media hype about student loan interest rates being "the lowest they've ever been" and simply want to make more profit on the same service they've provided for decades, or if it's a case of having to raise the rates to limit the number of loan requests (remember your supply-demand curves and how fewer customers will demand a product at a higher price?) because financial resources are already being used elsewhere.
Finally, when I picked up my prescriptions for this month, I got to thinking about the cost of healthcare. For every $25 I pay, there's another $100 or so of cost related to seeing the doctor and another couple of hundred dollars in tests that all either have to be paid for by my insurance company or passed back to me when the insurance company decides at random intervals that it's not going to pay. Meanwhile, one of the reasons prices are so high is the cost of guess what?...insurance. Then I heard a clip from the Dave Ramsay Show in which a doctor's wife was asking Dave how to clean up their $100,000-plus student loan and credit card debt because they were getting ready to go from a guaranteed $270,000 a year in income to $180,000 now that her husband was finishing up his residency and going into private practice. Seeing as how that family will still bring in more than 3 times what Carrie and I make in a year I have little sympathy for them, but I do have to wonder why it costs so much more to educate doctors than it does to teach engineers. The website for the University of Kentucky medical school says in plain English that a new resident student can expect to spend $120,000 in tuition, books, fees, and living expenses during a 4-year MD program. Tuition for an undergraduate engineering major is $6,000 per year. Even if you're generous with living expenses ($1000 a month), a four-year engineering degree is going to cost you $72,000. Medical equipment is expensive, I'll grant you, but so are CAD equipment, computer measurement systems, and lab testing rigs. I have to wonder if the reason that medical school tuition is so much higher isn't something as simple as having to pay the good medical professors higher salaries so they're able to pay off their own loans and continue teaching.
Like I said in the title, I'm neither an economist nor an educator, but I like to think that I know enough about life and our world to be dangerous. I've said for a couple of years now that our knowledge is one of the few things Americans have left, and it's probably the "product" we should be focusing on the most. Manufacturing jobs are going offshore because the Chinese can live off of pennies compared to even the poorest American worker. Materials can be gotten anywhere in the world and shipped to anyone who wants to buy them. Where America has always prospered is in its application of knowledge - nuclear energy, space and sea exploration, automation. We are quickly losing the race for knowledge because we don't have enough teachers and enough institutions to pass that knowledge on to our younger generations. Here in Lexington, KY - the second largest city in the state and one of the best-known for its horses, bourbon, and history - the city's government can afford to spend money on condemnation of the water company while there are public schools without enough money to provide books for their students. Parents cry bloody murder that they are no longer allowed to smoke in bars and restaurants, but rarely talk about the fact that most teachers make less than restaurant and bar managers. More and more students are going to college because you have to have a degree for even the most menial of jobs outside of food service and custodial work, but our first- and second-year students find themselves in chemistry classes with 500 other students. Education and knowledge are the only treasures Americans have left, and yet on one end of the spectrum we're not putting enough emphasis on teaching our young children and helping them want to keep learning, while at the other end we're pricing their education right out of their reach.
posted by Ted D. @ 4:08 PM
2 comments
2 Comments:
In terms of educating engineers your tuition rate you quoted was based on that engineer attending a state run college. As a Lehigh student, I know that our engineers as well as our theatre majors paid about $35,000 a year which adds up to about the same as your medical students. Just food for thought. Perhaps if there were state-run public medical schools it would be cheaper - ask Pratt if WVU's program is 40k a year, or less... probably less than Lehigh cost us.
I start teaching next year - with a masters degree and therefore a pay increase - I will make 31k a year - my debt is 45k student loans, 5k car loan, 5k credit card debt and i'm thinking about taking out a mortgage. I must have been crazy to want to actually have a career I enjoyed. And yes, my managers at Chilis make more than I will. :-/
While we're talking 'politics' call your kentucky senators and ask them to please support a Moderate! nominee to the supreme court to fill Mrs Sandra Day O'Connor's position - not some crazy christian conservative getting rid of all out right bush loonie. ;)
that's my politics for the night.
all the best,
~Stella
Like mortgages, student loans are packaged and sold to investors on a secondary market. Instead of Fannie Mae and Freddie Mac, the government-supported real estate enterprises, Sallie Mae buys and packages student loans. Rates are set by a combination of factors, including the rate at which Sallie Mae can borrow from the government. With interest rates on the rise (the Federal Reserve again raised the Federal Funds Rate), it is only natural to expect that federally subsidized student loan interest rates will likely rise as well. So will mortgages.
If you don't like the federally subsidized student loan rates, try getting an "education loan" through a bank or credit union. Rates run more like 8-10% for an unsecured loan, and you have to qualify based on income. Not to mention that there is no grace period...
When it comes to higher education, I'm an elitist. My wife teaches Shakespeare to college students--mostly to college students who shouldn't be in college. One could argue that we should subsidize higher education like many European countries do. In Germany, for example, college students don't pay tuition. But not everyone gets to go to university--it's highly competitive, and there are long waiting lists--sometimes students have to wait for several years. Is this a better system? I don't know. But it's certainly a different mindset and has a different set of pros/cons than the american system. But I can tell you that I've never met a German with a degree whom I didn't think was well-educated... wish I could say that about Americans...
You argued that there shouldn't be 500 students in a Freshman chemistry class. I agree--but I don't think that means Universities should increase the number of classes--I think they should weed out more students.
The cost of prescription drugs and doctors salaries aren't really related, so I'll address each in turn.
Many drugs cost Americans more than they cost Africans. Why? Because Americans can afford to pay. Drug companies spend billions on R&D for each new drug and ensuring that it is safe. They generally release it on the American market at a high price to recoup those costs. They need to recoup these losses before their patents expire, and the drug can be manufactured by other companies (as generics). With the competition, the price falls. Back to the Africans. Companies supply drugs in other countries at lower prices--it's the only way they can sell them, but it's still profitable, after the R&D costs have been recovered.
Doctors are paid high salaries for a couple of reasons. It's not simply the amount they have to invest in their education, although that's a part of it. But if that were the only reason, my wife would be a millionaire--she's got a B.A., an M. A., an MPhil. and a PhD. But I make more than she does with my 4-year education (ok, 6, but who's counting?).
The difference in the labor markets of Shakespeare professors and medical doctors. Comparitively, there are few doctors per hospitals needing doctors vs. a glut of Shakespeare professors for each university position available. It's all about market demand. Same with lawyers--their level of education is only one factor in their salary, the rest is the increase in silly law suits in this country.
Insurance is another issue. In the states, the cost of medical insurance is the responsibility of the individual. Often we get benefits through our employers, who negotiates the cost of insurance for us as a group. But our insurance costs are relatively low compared to socialist countries who pay for health care through (much higher) taxes. We only really subsidize the elderly in this country (medicare, medicaid, social security), and not much by comparison.
But the costs of health care are rising as a result of several factors, mostly, due to people living longer and requiring more care in their later years as a result. Insurance is a numbers game. They figure out the average cost of writing policies, then charge slightly more than that to make a profit. Sometimes they win, sometimes they lose, but in the end, they end up ahead.
Post a Comment
<< Home