Question

In recent years, the federal and state governments have reduced the percentage of higher education costs...

In recent years, the federal and state governments have reduced the percentage of higher education costs that they will pay, thus increasing the percentage of costs borne by students and their families. What is the likely effect on the future rate of growth in the United States?

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Answer #1

Education seems to be playing a critical role in human capital which in turns, becomes an important factor of production besides physical capital and labor. Hence, when a greater proportion of the cost of education is borne by the parents and students, it can be expected that either these students will receive their education outside the US in countries where the level of education is similar and the cost is low. Or, they will not pursue higher education. This will result in a reduction in the numbers of scientists, doctors, engineers, etc. This is likely to reduce the growth rate of the economy as the productivity will hamper.

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