The market economy is based on the principle of supply and demand which it means that, if you have a large supply for one item the price of that item should go down in contrast if demand for that item goes up the price also should go up. So, consumer demand for a product determines the price of that product. If we apply the principle of demand and supply for college education where supply is the quantity of students with the right skills and demand is the businesses in need of students with the right skills we can determine the value of a student for that business. As an example if the demand for civil engineer goes up, the value of a student with civil engineering degree goes up; however, if the number of student …show more content…
However I have to consider the costs of getting my degree in college before I apply for loans. The link below shows the interest rate on 2016-2017 by U.S department of education. Government has placed an interest rate ceiling on student loans as you can see in the link below. Because of high demand for student loans and shortage of supply the interest rate can go up; however, government placed interest rate ceiling to avoid high interest rates which affects students applying for loans. The amount of money they can borrow goes down. As an example Let's say I need 5000 dollars to fully pay for my collage without price ceiling I can get a loan for 5000 dollars but my interest rate will be around 40%. With price ceiling however, my interest rate will stay at 3.70% but I can only borrow 2500 dollars max. https://studentaid.ed.gov/sa/types/loans/interest-rates#who-sets
I believe if students do their own homeworks and research to find out high demand jobs and also calculate how much is the cost of education to gain necessary skills to apply for that job they are making rational decision. However, if they just keep getting loans after loans and change major they are not making rational decision. The link below shows supply and demand from 2016 to 2021 which can help student make rational decision when they take student loans.