Haslam College of Business - UT Haslam Faculty Study the Economics of Education

For students and their families, it’s impossible to separate education from economics. Any decision about where or what to study inevitably invites questions about affordability and long-term employment prospects.

The pace of economic change makes these decisions especially challenging. With the 2026 back to school season fast approaching, current and prospective students may feel anxious over the cost of higher ed, the strength of the labor market and even the broader implications of AI and other disruptive technologies.

Faculty at the University of Tennessee, Knoxville, Haslam College of Business have conducted standard-setting research into the intersection of economics and college attendance. While issues like cost, employment and technology remain fluid, the researchers challenge students and families to be optimistic about education.

Rethinking the Cost and Value of College

Anyone who has paid attention to higher education in recent years, and particularly those considering tuition payments for themselves or their children, has doubtless seen headlines about spiraling costs. While these headlines can be troubling, they don’t necessarily tell the whole story.

Mike Kofoed, assistant professor with Haslam’s Department of Economics and Boyd Center for Business and Economic Research, has conducted significant research on issues including financial aid, Pell Grants, the GI Bill and the overall cost of getting a college degree. Kofoed understands the concern over higher ed’s mounting costs, but he also advocates for a more holistic view. 

“A lot of the time, we focus on the Ivy plusses: Yale, Harvard, Stanford and the like,” he notes. “The majority of students do not go to places like that.”

Instead, Kofoed says, most student pursuing higher education choose to study at state, regional or other public institutions. At these schools, the real cost of college has gone down, as financial aid availability has increased while the tuition price has held steady. Plus, students at these institutions rarely pay the advertised price.

“The reality is, I’m going to apply to the university, I’m going to complete my FAFSA and the university is going to put together a financial aid package for me,” he says. “Very few people actually pay that sticker price.”

Kofoed’s research also challenges the narrative that college doesn’t hold the value it once did. 

“Public universities are becoming more affordable and having that college degree means you will be less likely to be unemployed and more likely to have higher wages,” he says.

Students in A Changing Labor Market

Employability is a major concern for those who are investing in a degree, and who desire reassurance that decent jobs await them upon graduation. Even for students enrolled in or preparing for college, the rising cost of living means part-time employment is often necessary, whether to offset tuition and housing or simply to pay for gas and groceries.

This is another area where cautious optimism is warranted. According to Celeste Carruthers, the William F. Fox Distinguished Professor of Labor Economics and associate director of the Boyd Center, the rate at which teens and young adults are participating in the labor market is rebounding from its COVID-era decline.

“A little bit over one in three older teenagers (ages 16-19) are in the labor force,” she explains. “That figure is actually at or above the pre-COVID level for that age group.”

Additionally, Carruthers’ research finds that, in Tennessee, about 47 percent of four-year college students participate in the labor market, along with 62 percent of community college students.

While there are multiple factors that help explain this post-pandemic rebound in young adult labor participation, one of the most significant is the number of older employees leaving the workforce — reducing the competition for available positions.

“The 55 and up labor force participation rate has not reverted to its pre-COVID level and has actually suggested a downward trend over the last few years,” says Carruthers. 

While finding a job can still take time, the overall trendline is promising.

“Post-COVID, a number of older Americans left the labor force, are still leaving the labor force and aren’t coming back,” Carruthers explains. “That is indirectly opening up more opportunities for young adults, which might be why we see young adult labor force participation stabilizing.”

Technology’s Cutting Edge

Questions and concerns around the value of higher education and the future of labor are inseparable from discussions around technology, especially the proliferation of AI.

For Carruthers, the adoption of AI brings uncertainty to the labor forecast. Many companies are experimenting with AI as a replacement for entry-level roles, and some employers are also spending so much money on AI technology itself that they are eroding whatever resources might have been available to create new positions.

Still, there is reason to be hopeful.

“Other economists have characterized most of the 20^th century as a race between education and technology,” she explains. “Historically, education was strong enough to help high school graduates take advantage of new technology and push the whole economy forward, rather than get replaced by that technology.”

Carruthers observes a similar dynamic with today’s AI usage, even noting how students are bringing high-level proficiencies into college classrooms.

“I’m optimistic they will show us the way,” she says.

Meanwhile, AI tools and digital learning environments have become increasingly prominent in college classrooms. For Kofoed, this has prompted some timely conversations about the kind of value colleges can offer.

“With the rise of AI and other technologies, we’re going through a reckoning in higher ed,” he says. “I think it’s a good reckoning because it asks us, as educators and professors, ‘What is my role? What is my actual job in the lives of my students?’ And it asks students, ‘If you’re going to pay to come to UT, what types of classes do you really want?”

It’s clear that colleges and universities are reckoning with disruptions of all kinds, but while uncertainty can be destabilizing, the research shows a clear path for higher ed to navigate these changes and maintain its value for students, families and communities.

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CONTACT:

Josh Hurst, digital marketing writer, [email protected]