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The History of State Funding for Higher Education

University of Louisville History Professor John Cumbler has an interesting piece in the Louisville Courier-Journal concerning the historical development of state higher education funding. He argues that higher education was mostly provided by elite institutions through the Civil War period. This changed with 1862 Morrill Land-Grant Act which led to 69 land-grant colleges designed primarily to educate teachers. These new colleges were not as academically rigorous as the elite private institutions, thus leading to a bifurcated system of higher education.

This changed at the beginning of the 20th Century based on the “Wisconsin Idea” model. Cumbler states:

The heart of the Wisconsin Idea was to initiate a graduated tax and pour the additional revenue into the university, making it a university of excellence which would serve the state by providing both the highest quality education for its citizens, regardless of their economic status, and by being a center for research and invention which would serve the state. The Wisconsin model became so successful that other states around the country looked to combine excellence and accessibility in higher education by pouring public funds into higher education.

It was not until the advent of the GI Bill in the post-World War II era that affordability and quality were joined together at state universities. States began viewing universities as a source of economic development, both through the jobs they provided in college towns and the educated workforce they provided.

However, in recent years the notion of a high-quality, inexpensive public university has begun to fall out of favor. Cumbler argues that

despite the obvious advantages of this model, which combines excellence with accessibility, because it is expensive at a time when there are other legitimate demands on limited state funds, increasingly states are slowly retreating toward the older two-tier model of higher education.

He concludes that

[i]n the short term states will save money. In the long term it is a strategy for stagnation and loss.

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Discounting, Debt and Tuition Increases in Higher Ed

According to the College Board College costs have raised a total of five percent. If admissions rates have been on an increasing rate for many years how could the total cost still be on a rise?

Here are a few statistics for you. Instate tuitions have climbed $400 on average for the 2012 fall semester, bringing the average cost up to $8,655. Yes many would say that this is a moderate increase but in an economic slump this brings more difficulties to already struggling families. Room and board costs have also risen to an average of $17,860. That’s double the cost of a semester at a state university!

The latest study according to the College Board shows that only one-third of full-time students pay the full published price, but with costs increasing the last two years how much longer will it be before more students have to pay that published price?

This brings up the question of whether or not it is worth it to spend your money on a university when one could stay home and attend a lower priced community college. However, according to CNN Money, community college tuition costs have jumped 8.7%. So now what, if we go to college we earn a degree but we dig a hole of debt for ourselves that will in-turn result in years of paying off student loans, possibly taking away most of our income.

The only way to solve this seems to be either do not attend college unless you can pay for it or find a way to end the tuition madness. Unfortunately, since family incomes have been falling for the last four years, the paying for college aspect becomes less of an option.

So how do we attack the monster that is known as college costs? For one students must work harder and challenge themselves by aggressively seeking good educational value, graduating on time and cutting down on personal costs. In doing this we not only reduce the cost ones family has to pay for college but we also better the nation as our future will be full of brighter youthful minds.

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Report from New America Foundation on Higher Education

The New American Foundation released a report today outlining the current state of federal financial aid in higher education. Rebalancing Resources and Incentives in Federal Student Aid argues that the existing federal financial aid system has had a

haphazard evolution over the decades [that] has made it inefficient, poorly targeted, and overly complicated.

Despite dramatic growth in federal higher education funding it is still not adequate to help middle class families that have been hit hard by the economic downturn and declining property values. The report states

the federal government has become the funder of last resort in American higher education. As recently as 2002, federal student aid totaled $72 billion per year. By 2012, it had grown to $174 billion—a $102 billion increase in annual aid in just a decade’s time. Most of that money came in the form of federally-backed loans that students are increasingly struggling to repay. Yet despite this wave of new funding, federal lawmakers are struggling to keep vital aid programs afloat.

At the same time, federal policy makers are increasingly focused on getting value from their higher education spending.

Given these circumstances the report states that

More incremental change will not suffice. With the need to support higher learning never greater and fiscal pressures acute, the time has come for a top-to-bottom overhaul of how the federal government manages financial aid. Everything should be on the table: grant aid, loan programs, tax credits, and long-standing subsidies to institutions. Taxpayers and students need an aid system that is simpler, more understandable, more effective, and fairer.

The report offers 30 policy proposals that fit the current era of fiscal austerity because they can be accomplished at

no additional cost to taxpayers — by rebalancing existing resources and better aligning incentives for students and institutions of higher education. Ultimately, those reforms will increase access to high-quality credentials and boost student success in higher education and the workforce.

The report concludes that

decades of accumulated policy offer many opportunities for such reform. Tucked away in the system are inefficiencies and obsolete subsidies that can be used for better purposes. Overlapping programs can be consolidated in ways that make them more generous and understandable. Overly expensive programs that have strayed from their original purposes can be made more affordable for the federal government and more effective at helping students earn degrees.

In fact, there is enough waste and inefficiency in the existing system to substantially increase funding for Claiborne Pell’s foundational grant program, put federal aid on a firm budgetary footing, solve the student loan repayment problem, and provide new incentives to spur college graduation—all for no additional cost to the taxpayer above what is already being spent today.

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New Report on State Higher Education Funding

Each year the Grapevine Project at Illinois State University tracks changes in funding for higher education across the 50 states. They have just released their newest report incorporating data for the 2013 fiscal year.  Jordan Weissmann of The Atlantic has some interesting graphic charts from the report summarizing recent changes to state higher education funding. Funding cuts for higher education have be deep. Weissmann states:

Cash-poor state legislatures have gone to town on their higher education budgets, and as they’ve hacked away, tuition has risen along with the sums undergraduates have had to borrow. In total, 38 states cut post-secondary funding since the recession, many by more than a fifth.

Arizona (-36.6%) and New Hampshire (-35.7%) have had the largest cuts to their higher education budgets since 2008. According to Weissmann

collectively, states are spending 10.8 percent less than they were five years ago, when the recession began.

There is some good news as 11 states have increased aid to higher education over this period with North Dakota (+35.4%) and Wyoming (+32.3% ) leading the way.

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Vermont Colleges Try Innovative Ways to Reduce Expenses

Susan Stitely, President of the Association of Vermont Independent Colleges, wrote an interesting op-ed article yesterday concerning ways that private colleges in her state were trying to reduce costs. One of the most innovative ways to reduce costs and debt for students was offered by Green Mountain College. They guarantee “that students will graduate in four years or the college will cover all tuition costs for any additional course needed.” Click here to read the article.

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Is College Worth It?

College costs are rising at nearly three times the rate of inflation.  More than 1 in 10 students graduate with more than $40,000 in undergraduate student debt.  Fewer entry-level jobs are available for students once they do graduate.  Is it even worth it to go to college anymore? Christina Couch from Bankrate.com explains why it is. Click Here for the article.

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The Rising Costs of College

Rising college costs are like a runaway train—out of control and dangerous for people and the economy. It affects us all in some way or another. For future college students, finding, loans will be harder, and for people who have graduated college it is harder to pay back loans. More people are going to college, college costs are rising, and funding has reduced. College costs are actually “rising faster than other goods and services”.

A college education guarantees more money earned in one’s lifetime, but the rising costs of college and the interest rates on the loans make it hard for college students and graduates to really succeed. The number of enrolled college students has increased and the funding per student has decreased. There was a “37% increase from 2001-2012 in fulltime enrolled undergraduate students”. One third of “all fulltime students pay full tuition without grants”, requiring these students to find other ways to pay for college like taking out loans, for example. To make matters worse for these students, the average net price of “public four-year colleges, public two-year colleges, and private nonprofit colleges” has increased measurably. This year alone, there was an average increase in tuition and fees of “4.2%”. Shockingly, even the tuition of public school institutions is rising; they boast “70% fulltime students”. Solutions to rising college costs are being investigated like delivering college courses in different ways to give the same education at a lower coast. The rising trends in college costs are not promising and should make everyone concerned.

Report on “Student Debt and the Class of 2011”

Every college student and their family realize that paying for college is a major obstacle and even though the problem of college cost and graduate debt is being talked about in the media and the government, still the cost of college and the average debt continues to rise. The Institute for College Access & Success collected data from 1,057 public and private nonprofit colleges and found that  2/3 of college seniors in 2011 averaged $26,000 of student loan debt. There was great variation between and within states concerning average debt per graduate. However, several trends emerged. Schools located in the Midwest and Northeast have higher average debt, while schools in the West and the South are lower.  Private nonprofit colleges have higher average debt than public schools, but there are exceptions caused by factors such as financial aid endowment resources, financial aid packaging policies, and cost of living in the area. It is thought that private for-profit colleges have the highest debt but they are not obligated to share their figures so that data was not available for this study.

There are many factors that contribute to this problem with debt and paying it off upon graduation. When choosing a college, most students and families judge the affordability of each school based on the tuition but don’t consider the full “cost of attendance” which includes cost of books and supplies, living expenses, transportation, and other miscellaneous personal expenses, which can significantly increase the cost of attendance. In terms of loans, federal loans are typically easier to pay off than private loans, which make up about 1/5 of student debt. These private loans have higher interest rates and don’t have basic consumer protection and flexible repayment methods like federal loans do. However, many financial aid offices do not offer counseling to educate students on federal aid availability and some even include private loans in their preliminary financial packages. The majority of undergraduates who take out risky private loans have not used up all of their available federal loan options. Finally, once students graduate, they are faced with a difficult job market and a bad economy, making it difficult to pay all of these loans back.

The unemployment rate for 2011 undergraduates is 8.8% and many of those with jobs are considered underemployed; out of the graduates who wanted to work full time 19.1% were either part-time or had given up looking for a job, and 37.8% of the employed graduates held a job that didn’t require a degree. While a college degree gives graduate a better chance than those with only a high school degree, these employment difficulties make it very difficult for grads to pay off their loans in time.

This report made by The Institute for College Access & Success summarized some recommendations from their national policy agenda to address rising student debt. First, they suggest improving and promoting tools that allow students and their families to better assess and compare the affordability of different colleges, such as a college scorecard, net price calculator, and a “shopping sheet”. Also more data needs to be collected on debt at graduation for each college and other statistics. This data would be collected straight from the lender so that the borrower can see all their loans in one place and assess their total student debt. They also want to reduce the need for students to borrow by offering more need-based grant aid and tax credits, which will hopefully reduce the amount of risky private loans that students get. Financial aid offices should also offer counseling so students are aware of all their options and don’t miss out on opportunities for federal loans that are easier to pay off and educating them on helpful repayment options, such as income-based repayment. Hopefully with progressive ideas like these the average student debt will finally start to decrease, giving even more people the opportunity to a college education.

Reference: Reed, Matthew and Debbie Cochrane. “Student Debt and the Class of 2011”. The Project of Student Debt. The Institute for College Access & Success. October 2012, Washington D.C.