Effects Of Annual Income On Going To College

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nfluence of Annual Household Income on Going to College

Introduction:

There comes a time when some families must make the decision of whether or not to send a child to college. There are many benefits to a college education that become noticeable throughout a person’s life such as a higher salary than those of an individual without a college degree. College may also produces a multitude of long term setbacks to overcome with the largest being debt. Therefore the family must consider a college quality versus its price and their willingness to pay based on the household annual income. Quality of a college here includes average starting salary after 4 year and rate of employment after college. In this paper we will consider both the value of college to a given American family and the cost of tuition to attend a 4 year college without considering financial aid. The table below depicts the average tuition
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A high-income family tends to send their kids to more expensive and more reputable colleges. Vice versa, a low-income family can only afford sending their kids to a cheaper college. According to the following data:
We can assume that an average American family that has 2 working members - the mother and the father - and one child that needs to go to the college, want to spend around 40% of their annual income towards college before grants are subtracted:
Let’s also assume that every parents want their kids to get the best possible education for their kids, so they will pay as much as their budget allowed to get into a good school. This means that cheap schools are inferior goods, mid-range schools are normal goods until the household have enough income to pay for expensive schools - then they will become inferior goods - and expensive schools are luxury goods. The following graphs depicts how the demand of three categories of schools changes with regards to household’s annual

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