Question

According to information in the text, how are a student’s finances connected to making a decision between a two- and four-year school?

Answer 1

A student's finances influence the choice between a two-year and a four-year college due to the need to borrow money and the impact of future loan interest, as well as preferences over immediate employment versus future higher earnings. Students might choose a cheaper two-year college or bypass higher education entirely to avoid debt and immediate financial strain. Financial aid, especially in the form of grants, can influence graduation rates by reducing the financial burden.

Step-by-step explanation:

The connection between a student's finances and their decision to choose between a two-year and a four-year school can be interpreted through the lens of intertemporal choices, as discussed in the provided text. The financial crisis of 2008, which led to wide-scale economic hardships, greatly affected the decisions of young adults regarding their education. Given the need to possibly borrow money to fund higher education, students must consider the long-term implications, such as the interest on loans, which may dissuade them from opting for more expensive four-year institutions.

Furthermore, some students might prioritize current consumption over delayed gratification, preferring to work immediately at a lower salary rather than invest in a college degree that may provide higher earnings in the future. For those with immediate financial obligations or preferences, a two-year college can be more appealing due to its generally lower cost compared to a four-year university.

Consequently, the availability of financial aid in terms of grants versus loans can significantly impact graduation rates. Students who receive grants, which don't need to be repaid, might be more likely to complete their education as compared to those who rely on loans, adding future debt that may deter completion.

Answer 2

Students' financial situations impact their decision between two-year and four-year schools due to concerns about immediate income versus future debt and earning potential, a concept known as intertemporal choices.

Step-by-step explanation:

A student's finances are intimately connected to the decision-making process when choosing between a two-year school (such as community college) and a four-year university. The financial upheaval referenced, particularly the 2008 financial crisis, had a lasting impact on young adults, shifting how they weigh their educational options. Rising costs of education and the potential burden of student loans influence whether a student opts for a shorter, generally less expensive two-year degree program or invests in a four-year degree, which typically costs more but may lead to higher earnings in the long run.

This financial consideration is part of what economists call intertemporal choices, which involve decisions about current versus future consumption. A student may choose to work immediately after high school to earn and consume right away, rather than accruing debt from student loans that would impact their financial freedom in the future. This trade-off between immediate earnings and potential future income is a critical factor in the decision between attending a two-year or four-year institution.