As student debt continues to climb, it’s important to understand how our once debt-free system of public universities and colleges has been transformed into a system in which most students borrow, and at increasingly higher amounts. In less than a generation, our nation’s higher education system has become a debt-for-diploma system—more than seven out of 10 college seniors now borrow to pay for college and graduate with an average debt of $29,400.1 Up until about two decades ago, state funding ensured college tuition remained within reach for most middle-class families, and financial aid provided extra support to ensure lower-income students could afford the costs of college.
As Demos chronicled in its first report in the The Great Cost Shift series, this compact began to unravel as states disinvested in higher education during economic downturns but were unable, or unwilling, to restore funding levels during times of economic expansion. Today, as a result, public colleges and universities rely on tuition to fund an ever-increasing share of their operating expenses. And students and their families rely more and more on debt to meet those rising tuition costs. Nationally, revenue from tuition paid for 44 percent of all operating expenses of public colleges and universities in 2012, the highest share ever. A quarter century ago, the share was just 20 percent.2 This 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 Great Recession intensified these trends, leading to unprecedented declines in state funding for higher education and steep tuition increases:
NATIONWIDE CUTS: 49 states (all but North Dakota) are spending less per student on higher education than they did before the Great Recession.3 In contrast, only 33 states cut per-student spending between 2001 and 2008,4 the period since the last recession.
MANY DEEP CUTS: In many states, the cuts have been especially deep. Since the recession, 28 states have cut per-student funding by more than 25 percent, compared to just one state—Michigan—that did so between 2001 and 2008.
ESCALATING TUITION: Funding cuts have led to large tuition increases. Nationally, average tuition at 4-year public universities increased by 20 percent in the four years since 2008 after rising 14 percent in the four years prior. In seven states, average tuition increased by more than a third, and two states—Arizona and California—have raised it by more than two-thirds, or 66 percent. At public 2-year colleges, average tuition has risen by more than a third in six states.
FAMILIES PRICED OUT: Average tuition at 4-year public schools now consumes more than 15 percent of the median household income in 26 states. Average total cost—including room and board—consumes more than one third of the median household income in 22 states.
The decreasing affordability of higher education is eroding the last relatively secure path into the middle class, as more students take on larger amounts of debt to finance their higher educations, or forego it altogether. With $1.2 trillion in outstanding student loan debt and climbing, student loan debt is now substantial enough to affect our overall economy as indebted graduates find it harder to buy a home or a car.5