College Tuition and Competition

Have you ever wondered why college tuition is so expensive? A study conducted by the New York Federal Reserve 2008-2010 attempted to figure that out. They concluded that, as the government expands federal subsidized and unsubsidized loans, college tuition tends to increase proportionally. So, while federal loans are intended to help students, the expansion of these loans may actually be hurting students because of the subsequent effect on tuition costs. This is likely only one of the reasons why college tuition is increasing, but it is certainly a contributing factor.

Obviously college students care about the price of college tuition, but what does the increasing price of college tuition mean for the economy? This was part of what I researched to compete in the Rutgers Federal Forecasting Competition over the weekend. This competition challenged teams of six or seven to predict what the U.S. economy would look like at the end of this year. The competition is not based on the accuracy of the predictions, but on the quality of the presentation and the reasonings behind each team’s projections.

The teams had to come up with projections for GDP, unemployment rate, inflation rate, Fed funds rate, 10-year Treasury rate, and the S&P 500 as well as an awesome team name. My research focused on the inflation rate, which we predict will increase to about 1.2% and begin to get closer to the target rate of 2%.

This competition was a lot of work but it has definitely been a learning experience. I learned a lot more about the inflation rate and the U.S. economy in general while getting to work with some awesome people.