A Weekly Reflection - The Economics of Higher Education
The pandemic has lasted over 2 years now and has exposed credibility issues of universities and the massive financial challenges that they are facing. Despite the opening up of Universities, a significant portion of the physical infrastructure is being heavily under-utilised as a result of various restrictions. This has led to a global phenomenon of "Zoom University", begging the question of whether it makes sense to be paying University fees for a watered-down experience.
Unsurprisingly, the answer is a resounding NO. Colleges lost 465,300 students in 2021, a continuation of a total 6.6 percent decline in enrolment since 2019. That number put into perspective – more than a million potential college students have decided to forego college since the onset of the pandemic (https://www.washingtonpost.com/education/2022/01/13/fall-college-enrollment/). This worrying trend is one that is not just being experienced in the US but around the world. India has banned the opening of new engineering colleges till 2024 as a result of low enrolment and significant losses in revenue (https://www.news18.com/news/education-career/no-new-engineering-colleges-in-india-till-2024-aicte-extends-ban-4581005.html).
Over a series of Twitter posts throughout the week, we covered various topics regarding the economics of the state of higher education today:
- There have always been persistent debates on the value of a college degree, but findings point to positive gains from obtaining a college degree. However, the question of whether a student's utility is efficiently and completely maximised, under the incumbent system, is something that remains unanswered. (https://twitter.com/Eduweave_/status/1480857877673746435?s=20)
- The Tuition Fee Fallacy: The sunk-cost fallacy and loss aversion phenomena obscuring the true utility students experience from going to college as a result of exorbitantly high tuition fees. (https://twitter.com/Eduweave_/status/1481219320827224066?s=20)
Universities are failing from an economic and financial standpoint, and the perceived value of attending a college is toppling down. Education is highly critical and when educators are empowered, they have the ability to not just impart knowledge, but drive the social process of learning and inspire students to apply their knowledge and skills to effectively contribute to societal progress. This is lacking as existing institutions derive no perceived benefits from changing their model of education.
In summary, Universities are failing primarily for three reasons - an imprudent vision, an outdated pedagogy and a mismatch of skills.
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