States Shift Higher Education Costs to Families

As the nation’s trillion-dollar student debt continues to rise, a new analysis of public higher education’s funding finds dwindling state support is the key factor driving rising tuition costs and deepening student debt. According to Demos, a public policy organization advocating economic opportunity and inclusive democracy, over the last two decades, state support for higher education funding shifted to a new paradigm.

As government support of higher education dwindled, public institutions raised tuition costs to recover those lost funds. These increases occurred at both four-year and two-year public institutions. And in that process, families were handed a larger financial burden to fund their children’s college education.

“The shift from a collective funding of higher education to one borne increasingly by individuals has come at the very same time that low-and-middle-income households experienced stagnant or declining household income,” the report says.

A quarter of a century ago, according to Demos, tuition costs at public colleges and universities were only 20 percent of the actual cost of studies. By 2012, however, tuition paid for 44 percent. Since the Great Recession, 49 states – all but North Dakota – spend less per student on higher education. Among these 49 states, 28 have cut higher education funding by more than 25 percent.

States reduced support for higher education for a variety of reasons including the desire to lower taxes, cut spending, or deal with constrained budgets that resulted from the financial downturn.

In the meantime, families are increasingly finding themselves priced out of higher education. Demos found that the average total cost of tuition, room and board for one year consumes more than one-third of the median household income in 23 states.

Nationwide, the average amount of state funding for full-time enrollment in the 2011-12 school year is $6,796, a 26.7 percent drop in funding since the 2008-08 school year. A total of 23 states have higher education funding cuts higher than the national average. The most severe cuts by state include: Arizona (51.1 percent); Oregon (45.9 percent); South Carolina (43.5 percent); Louisiana (40.6 percent); Massachusetts (37.3 percent) and Florida, (37.0 percent).

Similarly, the national average cost of state tuition for the 2011-12 school year was $7,701 at a four-year institution. Even so, several state tuition rates surpassed the national average and include: Pennsylvania ($11,818); Illinois ($11,252); Massachusetts ($10,104); Michigan ($10,527); and California ($8,907).

Among two-year public institutions, the average cost of tuition was $2,647; but more than  30 states charged tuition higher than the national average. Some of the highest costs at these schools were found in Minnesota ($5,198); New York ($4,146); Massachusetts ($4,009); Tennessee ($3,380); and Alabama ($3,868).

“The result has been the debt-for-diploma system in which most students fill the gap between what their parents can pay, available grant aid and their earnings from part-time work, by taking on student debt,” states the report.

If anyone would wonder what happened to federal financial aid – beyond loans — Demos’ findings are equally dim.

“Federal financial aid no longer provides grants robust enough to defray the rising cost of college: the Pell grant once covered $7 out of every $10 in college costs; today it covers only $3 out of every $10 needed to attend a public college or university.”

Later this year, lawmakers will set federal priorities in education funding through a reauthorization act. Funding levels for both federal student loans and Pell Grants will be included. But it will be left to each of the 50 states to decide whether higher education funding will become a budget priority.

“Higher education remains a public good – with all of us relying and depending on the system not just for the education of doctors, nurses, teachers, accountants and other professionals,” concluded Demos, “but to provide the critical thinking that is the lifeblood of our democracy.”

Charlene Crowell is a communications manager with the Center for Responsible Lending