Dwindling State Funding Increases Burden of Debt on College Students
January 13, 2015

Estimates suggest that the national student loan debt has exceeded the $1.2 trillion mark. The rising cost of tuition has resulted in a higher number of students taking out student loans to pay for college. This figure continues to rise with each passing year.

The Price of Higher Education – Constantly On the Rise

Many people might be aware that private colleges have contributed to this by hiking their tuition and fees considerably. However, even public colleges have not done much to alleviate the financial burden that their students experience. In recent years, sharp cuts in state funding have transferred a higher share of the costs on to the hapless students, thereby increasing the levels of student debt.

The Institute for College Access and Success (TICAS) is a nonprofit that aims to make higher education more affordable. Recently, The Project on Student Debt released a new report. According to the report:

  • Seven in 10 college seniors (69 percent) graduating from public and private nonprofit colleges in 2013 had student loan debt
  • These individuals had average student loan debts worth $28,400 (an increase of two percent from the 2012 figure of $27,850)
  • Nearly one-fifth (about 19 percent) of the Class of 2013 had taken out private student loans to pay for college
  • In six states, the average student loan debt exceeds $30,000 namely, New Hampshire, Delaware, Pennsylvania, Rhode Island, Minnesota and Connecticut
  • The average student loan debt was lowest in New Mexico at $18,656, while it was highest in New Hampshire at $32,795

Attending College – Worthwhile in the Long Term, Despite the Associated Debt Traps

The rising levels of debt have affected several people. In some cases, even people approaching their retirement were struggling to repay their student loans taken decades ago. In this situation, many students might wonder whether it’s worth accumulating high levels of debt for getting that college degree.

The Federal Reserve Bank of New York reported that a college education remains an important investment for college students. It enables them to acquire skills, while preparing them for high-skilled jobs. It found that the unemployment rates for college graduates was considerably lower than that for young workers (who did not have a bachelor’s degree or higher).

It also concluded that young college graduates typically have high unemployment rates that tend to decline as the graduates continue to progress in the labor force. In other words, it established that it took time for recent college graduates to settle into the labor market and find a job.

The study by the Economic Policy Institute vindicates this as well. In its 2013 study, researchers concluded that states having a highly educated workforce yielded greater productivity levels. This, in turn, resulted in higher wages. For example, the study found that Americans with four-year college degrees earned about 98 percent more per hour on average when compared to people without college degrees. The difference in earnings existed in the 1980s too. In the early 1980s, the study found that people with college degrees earned 64 percent more as compared to people without college degrees.

The Increase in College Tuition Expenses Exceeds Increases in Household Incomes and Costs for Medical Care

In her article on the rising costs of college tuition, Danielle Kurtzleben reported that:

  • The price index for college tuition increased by nearly 80 percent in the period from August 2003 to August 2013
  • This increase was twice as fast as the increase in costs for medical care as well as the overall consumer price index for the same period
  • Tuition costs grew faster than household incomes, showing a consistent increase from 2003 to 2012; in contrast, the median household income annual change rose marginally for just three years in the same span of time

As if this were not enough, students also need to pay for textbooks. She mentions that the skyrocketing price growth in the costs of textbooks has matched the pace of growth in tuition fees.

The Double Whammy – Decreasing State Funding Raising Cost of Tuition and Fees for Students

However, the rising costs of tuition are only one aspect of the picture. For years, working-class students have viewed public colleges as affordable alternatives to the exorbitantly priced private colleges. However, this might no longer be the case.

In a 2013 study, the Center on Budget and Policy Priorities (CBPP) found that:

  • States were spending $2,353 lesser on each student on higher education at a nationwide level in 2013 than they did in 2008 (a decrease of 28 percent per student)
  • Barring North Dakota and Wyoming, all other states were spending less per student on higher education than they did prior to the recession
  • The states of Arizona and New Hampshire cut their higher education spending per student by half, while 11 states cut funding by a third

The cuts in state funding resulted in public colleges and universities across the country:

  • Increasing their tuition costs by 27 percent since the 2007-08 academic year
  • Curtailing expenses by:
    • Reducing faculty positions
    • Eliminating course offerings
    • Closing campuses
    • Shutting down computer laboratories and,
    • Providing reduced library services

A Heavy Price – The Example of the Rising Costs of Public College and Universities in Virginia

A write-up in The Virginian-Pilot cites the example of the burgeoning expenses at Virginia’s public colleges and universities. It mentions that Virginia’s Joint Legislative Audit and Review Commission found that universities and college went about massive renovation projects from 2004 to 2011. These projects aimed at expanding campus facilities by relying on loans for funding construction. These projects ended up creating long-term fixed costs that had the potential to become substantial budgetary constraints – especially for institutions with stagnant or dipping levels of enrollment.

At the same time, lawmakers began pulling back state operating funds for higher education. With little (or no) ability to generate additional fee revenue, these institutions hardly had any means to pay for services, programs and facilities. As a result, the burden of bearing these expenses fell on the college students enrolling in these institutions.

Don Brunell refers to the reasons cited by Frank Mussano and Robert Losue, co-authors of “College Tuition: Four Years of Financial Deception” for the increasing tuition costs. These include:

  • A Higher Number of Administrators: The number of college administrators increased 50 percent faster than instructors since 2001, according to the US Department of Education
  • Reduced Teaching Workloads: The Higher Education Research Institute at UCLA notes that in 2010, about 44 percent of fulltime faculty spend nine or more hours per week in the classroom, as compared to 12 – 15 hours per week back in 1989
  • The Rise in the Numbers of Extravagant Buildings: Higher education construction spending has doubled since 1994. It touched a peak of $15 billion in 2006, before leveling off to $11 billion.

College Students Stuck Between a Rock and a Hard Place

A recent Government Accountability Office report mentioned that state funding decreased from 2003 to 2012 by 12 percent overall. However, median tuition expenses increased by 55 percent across all public colleges. As a result, tuition revenue for public colleges rose from 17 percent to 25 percent and surpassed state funding levels by the 2012 fiscal year.

Naturally, the average net tuition (i.e. the estimated tuition after accounting for grant aid) also rose by 19 percent. Consequently, college education has become increasingly less affordable, with many students and their families having college tuition as a larger portion of their total family budget.

The CBPP study mentions that the recession and the ensuing weak recovery led to these cuts in state funding. However, college students are the ones bearing the actual impact of these cuts.

On the one hand, they are taking out student loans of higher amounts to pay for college. On the other, they are not getting the services that previous batches of students received – despite paying more for college. As a result, many students have no other alternative but to work on a part-time basis for covering the cost of tuition.

Therefore, it is unsurprising that the number of high school graduates enrolling in college has been declining steadily. That too, at a time when many new jobs require people having college-level skills.

The Bureau of Labor Statistics (BLS) found that in October 2013, 65.9 percent of 2013 high school graduates enrolled in college. In October 2009, the corresponding number of high school graduates enrolling in college stood at 70.1 percent. Clearly, applying to colleges might be stressful enough. However, many high school graduates are finding that paying for college once you get in, is nothing short of a nightmare.

Higher education typically serves to enhance upward mobility for students. However, the burgeoning expenses in public and private colleges across the country is achieving nothing more than forcing millions of students into a state of long-term indebtedness. This will ensure that many of these students will spend most of their adult lives repaying their student loans, instead of utilizing their skills and creativity for the benefit of society.