Recessions particular market. To begin, the cause

Recessions in an economy are often due to the attitude buyers have towards the contemporary and subsequent state of the economy, when a consumer’s economic desires diminish, so does the market. When a consumer’s attitude diminishes, it eliminates their ability from purchasing and makes them act to wary. At the time where a crucial multitude starts to think the same way, the economy as a whole is negatively affected, for instance, there aren’t too many new are many jobs available to people, the sales of retail business start to decrease, and the unemployment rates start to rise etc. In order to rebuild consumer’s trust and attitudes, the federal government must take initiative. Another factor leading to a recession can be caused by a decrease in the growth of GDP. After carefully examining the higher education market, I’m going to explain what impact the 2008 recession had on this particular market.

To begin, the cause of the recession in 2008 all started when people were purchasing properties they couldn’t afford, with the help of irrational exuberance. An irrational exuberance occurs when lenders are self-convinced and focused on the fact that prices on assets will continue to grow, meanwhile, what they fail to take in account is the actual hidden worth. Everyone was under the impression that the housing costs will only rise. Many people who have lived through the great recession would agree that the Feds should have increased interest rates back in 2004.

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The minimal interest rate amount in 2004 and 2005 made the housing bubble more problematic, which then led to lenders focus in on all the wrong things by taking advantage of the minimal rates on properties on which they would turn around and end up reselling, whereas other people purchased their homes with interest loans only resulting in not being able to afford it. In 2006, many homeowners took a financial hit as the prices on homes started to decline, the loan they had taken out with little to no money down ended up hurting them when they were forced to sell for less than their mortgage amount, many resulted in foreclosures. As foreclosure rates rose, banks and hedge funds became wary of their potential losses. Additionally, banks were more frightened than ever when it came to lending to each other with the thought that they would be left with harmful loans as security. In December of 2008, employment rates start to drop more rapidly than ever and caused naïve students to surmise “higher education” in an unusual approach.

As opportunities for employment were declining during the recession, it resulted in more students turning to education to better themselves. During the recession in 2008, students were staying enrolled in college. Ever since the recession in the 1960s, the student population has increased, my assumption is that the opportunity cost of attending college, which is the job or skill building opportunity a person sacrifices while being enrolled in college decreases throughout an entire recession. Many people have trouble obtaining a job during a recession, let alone keeping one which causes an increase in college enrollment.

Although many families may find it difficult to afford college during a recession because of their money coming in or a decline in the value of their homes, they still do pay for an education. The cost of attendance may not be as painful as it is for others, many factors determine this such as, the homeschool and the expected family contributions (income). All throughout 2006 and 2009, there was an increase in the federal Pell grant fund, a federal program that issues free money to low-income students for their studies, so many students who were deemed eligible for this program ended up paying less during the recession. On the downside, a few colleges increased tuition rates to reflect the exact amount increased in the Pell grant, so this didn’t really work in the student’s favor. Whereas, student’s whose families were middle to the higher class, financial assistance was very limited. Initially, universities tried to keep their tuition as low as they possibly can, but when the recession hit, this was no longer an option.

These middle to high students were forced to pay higher tuition rates. Although this wasn’t ideal for most students and their families, they were still likely to remain in college. On the bright side, students are likely to become more educated during a recession. Although a recession makes our lives more challenging, the demand for a higher education rises during a more difficult time.

As a result of the demand rising, colleges are able to increase tuition rates to make up for many things such as cutting spending costs, not hiring new full-time faculty members and which causes an increase in the college enrollment rates.


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