Blog #2: Relationship Between Variables: Testing Our Hypothesis

As the purpose of our project is to understand if there is a correlation between the rise in college tuition with the amount of financial aid offered to students. If a relationship exists between these two events, we hope to understand how the level of subsidies impact tuition across the United States, as well as other countries worldwide. Developing our research and going forward with factors that we believe most greatly affect our hypothesis, our research thus far supports our initial claim.

While conducting research and strategizing the most effective ways to gather information and research, we selected conceptual variables that have the potential to influence the rise in tuition prices. The variables chosen for the full model are: Average yearly Inflation in the United States, Total Financial Aid (in millions), Gross Domestic Product- GDP- (in trillions, from CPI), Expenditure of Public and Private Colleges and Universities, Median Household Income in the United States, Human Development Index (HDI). We are using the average price of tuition as our y-variable, as it is necessary to look at averages when assessing the cost of universities over time.

The variable “Total Financial Aid in US dollars” was chosen due to our curiosity related to the possibility of colleges making the average amount paid by a student the same by increasing the tuition price correlated to the increase of Aid. This was the other factor in our model that was a nonnegotiable factor; one that our model could not properly be solved without. Average inflation in the US over one year is important to our model due to the possibility of it affecting the rise in tuition costs, justifying the increase in real dollars. The fourth factor chosen for our model was GDP in trillions of dollars. We believed that if there was a serious trend in the rise of GDP, it could be a possible explanation for the rise in college tuition.We believed that an increase of a country’s economy would generate an increase in quantity demanded to attend university, justifying the increases in price. The next factor we selected was the average expenditures of public and private colleges and universities in the US per year. This factor was chosen for our model because we assume that the more the university spends and invests, the more they expect students to pay. As students are given an increased amount of aid and as colleges and universities are given more money to spend per year, they would only adapt their budgets to have more and more money each year. Median household income was a factor we chose to incorporate into our model because we were making an assumption that if household income increased then colleges and universities would be more likely to raise tuition. If colleges and universities are assuming that median household incomes are rising then they would rationalize a raise in tuition. HDI was a factor added into our model because it is the measure of life expectancy at birth, average years of schooling per person ages 25+ and the GNI or gross national income per capita. We believed this would be important to add into our model because it is a good measure of if the number of college age citizens are actually attending college or university.

When creating our full model, we believed these factors  had a high influence due to our preliminary research within the beginning stages of our work. We added additional variables that we strongly believe may explain the amount charged by colleges. We expected for all of these factors to have a positive influence in the prices of college, and for the constant to also be a positive number.  

From the research conducted thus far, Total Financial Aid (in Millions) multiplied by Expenditure of Universities, and Median Household Income in the United States are significant for  our model, and have the potential to explain the rise in Tuition. For every additional $1 million given in aid in the combination of financial aid and college expenditures sees an increase of .001 cents in the average price of tuition. And for every dollar increase in the median household income, the average price of College tuition in the US increases by about 29 cents. Our constant is of -8159.35.

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