[Class Title]
Executive Summary
The University of Maryland is considered as one of the best public universities in the United States. However, the rising cost of tuition fees and other charges has placed public institutions in an awkward situation making it questionable if whether they can provide affordable and quality education in the face of the current economic hardships. Students, on the other hand, could not help but seek for various loans in order to make their way through college. For most families who are earning a median income, sending a single child in college would leave them financially unstable which contributes to the low enrollment rate even in public institutions. The purpose of this proposal, then, is to help public institutions as well as students from middle-income families in making public 4-year college more affordable with a cushion effect on the net income of their parents. Three main objectives are determined, and these are: Reduction in college fees must be significant enough to leave a median income family well above the poverty line, Reduction in college fees must be subsidized through other sources and The quality of higher education in Maryland should not be compromised. It should be noted though that some assumptions are necessary in order to simplify the analysis. The proposal considers realistic options and is based on the most current data available. As a result, it shows that the reduction in college fees is achievable at a certain amount determined in this report. However, the solution is bilateral and requires extensive state and national support.
Introduction
The importance of college education could not be overemphasized. According to Odland, education “is the great equalizer in this country” as it provides a way for individuals to rise out of poverty. Statistics has proven the importance of educational attainment to the standard of living of an individual. For example, a person who has not graduated from high school may earn less than the average wage as compared to high school graduates. College graduates, on the other hand, earn an average of $55,000 per year incrementing to a much higher salary grade depending on the educational attainment. Criminality is also prevalent in communities of low educational background. As observed by Odland, “68% of the prison population is made up of non-high school graduates” which only shows that educational level have a significant consequence to the nation’s economic and social well-being. There is little doubt that the U.S. offers the highest quality college education in the world. For years, the United States have been the target destination of students around the world and finishing college in one of the U.S. universities have been a top priority for those who can afford. However, the rising cost of college education has severely limited the opportunities for individuals to be able to proceed and finish their way through college. With the rising cost of primary commodities coupled with low incomes, it is becoming obvious that college education is becoming more prohibitive. Public universities are supposedly the answer to this tertiary education problem in the U.S. However, even public colleges are not immune to tuition fee increases and even the cheapest public college is still comparatively expensive when based on the median income of American families. The focus of this study would be based on the higher educational system of the State of Maryland specifically the University of Maryland. Considered as one of the best public universities in the U.S., the university has weathered more than 15 decades of providing quality education since it was founded on 1856. According to its website, the university currently has 37,000 students, 9,000 faculty and staff and offers 250 academic programs. It ranks 38th among the best public universities in the world and 21st among the public universities in the U.S. In the face of the current trend of education where most people are complaining about how college fees has increased for the past decades, the University of Maryland, just like any public educational institutions, is facing an inescapable ethical dilemma. Is quality education considered a right or is it a privilege only for those who can afford? Unfortunately, there is no clear answer regarding this question if based on the U.S. constitution. The obtuseness of the U.S. laws in addressing this question adds to the confusion of the constitutionality of an affordable education. So far, the United States constitution has guaranteed that education is a right up to a certain age limit but beyond adulthood, the individual seemed to be on his own. Until now, no successful attempts have been made to amend the constitutionality of the right to equal opportunities in education most especially in the tertiary or college level. For the same reason, tuition fees seem to increase uncontrollably and unreasonably high. On the other hand, the University of Maryland is also under pressure in keeping its high standards of education which obviously require financial stability. Without a clear policy regarding the regulation of college fees in the U.S., the affordability of college education remains questionable. In the end, the obvious question would be can the University of Maryland decrease its college fees and still maintain and improve its quality of education? How can it be done?
Higher Education in the US is Becoming More Prohibitive
The cost of college education has sky-rocketed over the last three decades. As compared with other prime commodities and services such as health care, gasoline and housing, tuition fee has increased substantially at 500 percent since the 1980’s. According to Odland, college tuition fees have increased at an average of 7% annually. When compared with an average annual inflation rate of 3.22%, it would show that tuition fee has increased more than double the rate of inflation. The median income of households in the U.S. in a 2011 survey is $51,324. On the other hand, the cost of college education including tuition and other fees is about $28,442 for state residents. This means that a family that earns the median income would be left with $22,882 ($51,324 - $28,442) if they are to send a single child in college. Based on the U.S. poverty rate, families who make a net income below $23,492 annually is considered to be living in poverty. Subsequently, it implies that, families who earn a median income would be facing a dilemma of whether to send their child to college in the face of the impending financial hardships. At the rate of how residents are earning, it is obvious that a family that earns the median income would not be able to send their children to college if the cost would come directly from their pockets. This does not include the 15% of the Americans who are earning less than the median income considered to be living in poverty. For the same reason, only a few Americans proceed to college while fewer can make their way through it. According to surveys, only 30% of the U.S. high school graduates proceed to college while 43% could not expect to graduate within six years. As compared with developed countries, the percentage of individuals that have attained a tertiary education in the U.S. has stagnated. As observed by Schleicher, several developed countries have already surpassed the U.S. in terms of college graduates growing only at an average of 1.3 percent annually as compared to the 3.7 percent average of the Organization for Economic Cooperation and Development (OECD) member countries. Currently, the U.S. ranks 14th place in the number of individuals that have college education. However, of the total U.S. population, only 17% has earned a college diploma. Whether tuition fee should be increased or not has been a constant debate among concerned parties in the U.S. The University of Maryland, as a public institution, is facing a similar dilemma. Currently, the annual estimated cost of studying in this university is at $23,581 for residents while non-residents could pay up to $42,767. For resident students, college fees have been broken down as such:
Annual tuition and mandatory fees - $9,162
On-campus residence hall room, cable and phone - $6,152
Meal plan (Average) - $3,975
Books and supplies - $1,130
Local transportation and incidental costs - $3,162
.
Based on the data, it shows that the tuition fee is roughly 39% of the total annual cost while the bigger chunk of the costs is comprised of the miscellaneous and other college fees. This implies that a reduction in the tuition fee of let us say, 10%, would not be a significant factor since it would only amount to $397.50 which is only 1.6% of the total estimated cost. As compared with other state universities, the University of Maryland’s tuition fee for a 4-year bachelor’s degree at $9,162 is 8% higher compared to the State’s average of $8,475 and about 3% higher than the national average of $8,893. Factors such as rate of inflation, facilities and maintenance cost, wages of faculty and staff and other cost considerations among many others implies that colleges has little option but to increase their tuition fee in order to cover these costs.
Assumptions and Objectives
A reduction of the university’s earnings through tuition fees and other charges would certainly affect its operation that would have ripple effects in the quality of education that it provides. In view of this, there must be a balancing alternative that would cover the lost earnings if reduction of college fees must be pushed through. The proposal, therefore, would focus on alternative sources so that the reduction of college cost would not be detrimental to the institution making it more feasible and achievable. In order to make the analysis more realistic and feasible, several assumptions must be made which includes:
- Reduction of college fees must not concentrate on tuition fees alone. Obviously, tuition fees are roughly 40% of the total college fees. The huge bulk of college educational expenses lies on miscellaneous and other charges. The proposal, therefore, should consider the total charges as a single amount. This approach is ideal since miscellaneous and other charges are an integral part of college fees that students could not avoid but pay.
- The inflation rate would remain at an average of 3 % for the succeeding years. This inflation rate coincides with the acceptable range of inflation rate as determined by US banks and economists.
- The median income of Maryland is $71,122 and the national median income of $51,371 as based on the census conducted by the Census Bureau in 2012, will increase proportionate to the assumed inflation rate of 3%.
- The national and local median income should balance the succeeding college fee increases after the reduction according to the 3% inflation rate. Using this assumption, future college fee hikes after the reduction would have zero impact to the income of families in Maryland. UMBC’s student populations of 37,000 are all taking 4-year courses for ease of calculation. Furthermore, the proposal only applies to resident students and does not apply to non-residents.
Based on these assumptions, a proposal to reduce UMD’s college fees would revolve around these three main objectives:
- Reduction in college fees must be significant enough to leave a median income family well above the poverty line. This means that household income in Maryland should not be allowed to fall under the national median income of $51,371. The main purpose of this objective is to eliminate college loans by providing middle-income families a way to pay for their children’s education. As a result, college enrollment would increase coming from this sector. It should be noted though that the calculation only account for families that support only one child in college. The proposal does not consider, as well, families that earn below the median income of Maryland. Low-income families are not covered by this proposal since it is unrealistic to assume that college fees can be lowered enough to make it free for all. Unless the United States can afford to make college education free in public institutions (which is very far from the truth), assuming that a significant percentage of children from low-income families would proceed to college, could not be seriously considered. On the other hand, middle-income families have a higher chance of sending their children to college and the effort needed to do so is not as extensive compared to low income families. In order to increase the State’s higher education engagement, the proposal, therefore, must focus on middle income families since they are most likely to send their children to college. Surveys suggest that most parents who earn a median income hold college degrees while those parents who earns lower than the median are commonly without tertiary education. As observed by Schleicher, the odds of children attending college from parents that do not have tertiary education are nil as compared to those whose parents have been in college. However, the reduction of college fees would also have a significant impact to low-income families in such a way that their college loans would be reduced. Although students from low-income families could not be totally immune to college loans, the reduction would draw a certain increase of college enrollment coming from this sector. Maryland’s average income of $71,122 is well above the national median income. Based on this data, median income families of Maryland could spare $19,751 for college educational expenses. The current estimated cost of UMBC’s education is $23,581. The amount, therefore, that should be reduced to keep Maryland families within the national median income would be $3,830. This amount is derived by subtracting the excess income of $19,751 to the average UMBC college fee of $23,581.
- Reduction in college fees must be subsidized through other sources. The lost income of UMBC must be replaced. Currently, the university has a student population of 37,000 students. It is expected that student population would increase at a certain percentage in proportion to the college fee reduction. For example, a 30% population increase after college fees has been reduced would increase the number of students to 48,100. The cost reduction of $3,830 multiplied to the projected number of students enrolled would amount to an income loss of $184, 223, 000. Obviously, the university could not absorb this huge amount on its own. External help must be present to subsidize this amount. In considering this objective, it could not be avoided that the State and the Federal government must be involved. Among the OECD countries, the United States is one of the highest spenders in terms of education. This data, however, is misleading as it does not apply to all levels of education. Public spending in education is higher compared to private spending in the primary and secondary levels but in the tertiary level, most of the funds comes from the private sector with 45% coming from the household purse. Obviously, there is a big difference in government subsidies between educational levels that can be considered as an area that needs improvement.
- The quality of higher education in Maryland should not be compromised. In order to protect the sustainability and quality of education in UMBC, the reduction in college fees should not be made at the expense of the university. As much as possible, the university’s financial stability must be maintained. It is only logical to think that the proposal would fail once the quality of education in UMBC is adversely affected. For what is the purpose of college fee reduction if it results to the degradation of education and perhaps the eventual closure of the university. As the student population of UMBC is expected to increase due to the college cost reduction, it follows that the University of Maryland would have to add more facilities, faculties and staffs to accommodate the increased student population.
Possible Solutions
Several strategies can be developed to accomplish the three main objectives stated above. By examining each, strategies, we wish to determine the most feasible and realistic solution to the issue. Among the possible solutions are:
- Increased Taxes – The burden of paying for the projected $3,830 reduction in college fees would have to be shouldered by the taxpayers when this option is considered. In 2011, the tax burden of Maryland is 10.6%. As compared to the national average of 9.8%, the State ranked 7th among the highest income tax per capita. In order to cover for the university cost, the State’s tax revenue should increase with the projected amount of $184, 223, 000 assuming that no increase in student population is considered. However, if calculations would be based on the expected 30% increase in student population, the cost to be covered would amount to $239,489,900 which is 1.4% of Maryland’s tax revenue of $17,064,468,000 in 2012. Subsequently, the tax rate of Maryland would also increase by 1.4% for a total of 12% tax rate per capita. Considerably, this increase would place Maryland just a point shy of New York’s tax burden of 12.1%.
- Across the Board Wage Increase – Another option to cover for the university cost is to increase the annual earnings of employees by $3,830. This option would amount to a salary increase of $319.17 per month which is equivalent to a raise of $2 per hour assuming that each employee works for an average of 40 hours per week.
- Diversion of Funds – Education falls under the discretionary spending of the annual federal budget allocation. The largest chunk of the nation’s taxes go to defense-19%, social security-24% and health programs-22% while education has only 1% budget allocation. Furthermore, this 1% education budget allocation is under the discretion of congress and government agencies and most of the funds go to early childhood, primary and secondary educational level. In 2014, the Federal government allocated 67.3 billion dollars to the Department of Education. The budget was further appropriated to three major programs; the Elementary and Secondary Education Act Title I Grants to Local Education Agencies, the Individuals with Disabilities Education Act (IDEA) State Grants, and the Pell Grant program for college students. Though the Pell Grant program received 33.9% of the 67.3 billion dollars allocation, the amount is still grossly insufficient to cover for individual college expenses aside from the fact that recipients of this program goes through a selection process according to eligibility. Students have no other choice but to apply for loans to cover for the cost of college education. There are several types of federal educational loans that a student with a need can avail. The basic types are Subsidized Stafford, Unsubsidized Stafford, Grad PLUS and Parent PLUS. Stafford Loans are the most common among these types. However, the loan limit is set only at $23,000 for the entire years in college and should be repaid 6 months after graduation. But since the purpose of this proposal is to eliminate student loans of median income families, the loan options do not apply to this context. The approach, therefore, is to increase the budget allocation of the tertiary level to subsidize for the $3,830 projected reduction in college cost. In order to accomplish this budget allocation, it is necessary to cut the budget allocation of other government agencies and divert the funds to education most especially in the tertiary level.
Recommendation
Maryland’s tuition fee increases have been highly regulated that further reduction of tuition fees at the expense of the institution might result to the degradation of the quality of education. It is only logical to think that in every organization, financial stability is a crucial factor that would determine whether the organization survives or improves. The only reasonable way to cut college fees including tuition fee is through bilateral efforts that should be initiated in the federal and state level. As stated above, one of the possible solutions would be to increase the tax burden of the State by 1.4%. However, it is expected that this approach would be met with vigorous resistance among Maryland’s taxpaying population. It is also doubtful if this approach would ever materialize considering the laborious process it would have to go through to be approved. On the other hand, across the board wage increase is equally challenging. Most employers would have to disagree as it would have a significant impact to their business profits and would be met with equal resistance in the congressional level. The most feasible approach, therefore, would be to make do with current resources. That is, to appropriate the projected amount of $3,830 for individual college students regardless of the need. The conventional government approach of providing educational loans and grants to selected students according to need must be amended. The government provides a compulsory educational assistance to the primary and secondary level. Similarly, an appropriation of $3,830 per students per annum in the tertiary level would cover the cost in college fees in excess of the difference between the median income of Maryland and the national median income. As a result, median income families would be able to send their child in college while keeping their net earnings within the national median income. In order to accomplish this task, certain considerations must be made. First, the bulk of this budget should come from the budget allocation of other government agencies. The United States is currently experiencing a deficit in its national budget. But then, the need to realign its budget appropriation towards tertiary education must be considered as a pressing concern. Since the 9/11 terrorist attack, the United States’ budget allocation for defense has soared high than before grossly affecting the budget allocation in other sectors. In 2013, the United States has spent $643 billion in defense including support operations in overseas military activities such as its operation in Iraq and Afghanistan. Certainly, a reduction in the nation’s defense budget of 5% would not have a significant effect considering how the U.S. spends its money on developing war machineries that cost billions of dollars. This 5% reduction would amount to $32.15 billion which would be diverted to tertiary education’s budget. In 2013, the student population of public 4-year institutions is 6,837,605. Based on this data, the projected cost of $3,830 per students would amount to $26.18 billion. By inspection, it shows that a 5% diverted funds from the defense would be more than enough to cover for the university cost projected in this proposal. So much more if the educational budget would be increased by 100% to make it 2% of the national budget. An additional $67.3 billion would certainly come a long way.
Conclusion
Several attempts to end the college fees hike have ended miserably so much more if the approach is to reduce the tuition fee of public institutions. For obvious reasons, public institutions could not bear the weight of the inflation rate, construction of new facilities, maintenance as well as salaries of its faculties and staffs among many other considerations. External sources are, therefore, necessary in order to reduce the college fees especially in a public institution. With the University of Maryland in perspective, the university’s current estimated annual cost of $23,581 for resident students can be reduced. This reduction is made in such a way that middle income families would be able to afford to send one child in college without applying for a federal loan. In effect, middle-income families would still remain within the average national median income. Furthermore, this reduction is accomplished by diverting a certain percentage of the national budget to tertiary education to cover the $3,830 excess cost as determined in this proposal. As a result, America’s public 4-year course enrolment would increase giving individuals with the highest odd of attending college the opportunity to graduate less the trouble of educational loans. In the end, more Americans would become well-educated which would certainly make a significant contribution to the country’s economic and social development.
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