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Wednesday, January 28, 2015

How college census data reflects economic conditions

U.S. college enrollment and business cycle
College enrollment is believed to be influenced by business cycles

College enrollment in the United States has dropped and is expected to continue to fall. In the 2012-2013 academic year, the amount of new students reached a level of decline not seen since the 1990s per the New York Times. What is more, over two years, the cumulative drop in enrollment amounts to 930,000 per the U.S. Department of Commerce. Moreover, since college enrollment is a measure of educational prospects, industry demand and consumer sentiment, the drop in higher education census data is also an economic indicator.

So far, the decline in college enlistment has applied mostly to older students over the age of 25. This means the correlation to the economy and clues about its meaning are more specific to that particular demographic. Nevertheless, this trend reflects what is believed to be a counter-cyclical market per an interview with Terry Hartle in The Atlantic magazine. According to Hartle, student population typically rises during recessions and declines during better economic times. Hence, the drop in college enrollment is thought to be a sign of economic improvement.

Even though past trends have linked economic conditions to student census data, this is not the only statistical relationship present. More specifically, tuition rates, student debt and the job market are also linked to school attendance. These additional variables muddy the statistical waters as an improving economy is not necessarily mutually exclusive of things like a rising cost of eduction. In other words, in terms of gross domestic product, the economy is capable of rising at the same time as average national student-loan debt is rising.

The reason why education costs are also an important variable is because they indicate other economic conditions such as government spending. For example, according to the Chico Enterprise Review, state governments cut financial support for higher education by more than 28 percent between 2008-2012. This has influenced the cost-benefit ratio that students ideally consider before choosing to apply for and attend college. For instance, with each extra dollar spent on tuition, a corresponding rise in post-graduation income must be assessed to justify the higher expense equally.

Additional consequences of rising tuition or a higher student debt burden also influence the housing market, student debt repayment and even credit ratings. On the one hand, more employed people who do not go to school are good for debt markets and economic growth. Yet, on the other had, a study published by the Consumer Financial Protection Bureau states a problem with affordable private student-loan debt negatively impacted the lending market, which itself is also linked to economic expansion.

If the decline in college enrollment is primarily due to an improvement in the job market, then the declining figures suggest a positive economic trend. This is part of the story, and the question then becomes how big a part is it? If fewer mature students means a mostly better job market and economy, then it is positive data. However, if the shrinking numbers reflect something else, then the trend might not be a repeat of past historical correlations, but rather a statistical medley of different reasons such as state funding cuts, job outlooks and higher student debt.