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Disinvestment in Public Higher Education by States Threatens Long-term Competitiveness

April 11, 2012

“Disinvestment in public education and increasing costs are pricing low-income students out of an education,” according to a new report from Demos.orgThe Great Cost Shift: How Higher Education Cuts Undermine the Future Middle Class. Over the last two decades, the authors highlight a trend of state disinvestment has shifted the cost education from state governments to students and their families. The result of this trend is students and their families are paying and/or borrowing a significantly more for a college.

According to the report, this long-term trend may threaten the economic health of states due to an insufficient supply of college-educated workers need to thrive in the 21st economy. The authors contend that the insufficient financial support for students will contribute to low rates of college completion depriving states of an educated workforce.  They also contend that other long-term social costs include decreased social mobility by low- and middle-income students and a diminished middle-class.

Key Highlights include:

  • Compared to the generation that came of age in the 1990s, the current population of young adults is larger in size, more diverse and more apt to enroll in college;
  • Public institutions absorbed 65.6 percent of the undergraduate enrollment increases that have occurred since 1990;
  • Real funding per public full-time equivalent student dropped by 26.1 percent from 1990-1991 to 2009-2010;
  • After adjusting for inflation, published prices for tuition and fees at public four-year universities more than doubled (rising by approximately 116 percent);
  • The real price of two-year colleges climbed by approximately 71 percent;
  • An increasing percentage of that aid is taking the form of merit-based aid without regard for students’ financial situations; and,
  • The volume of outstanding student loan debt has grown by a factor of 4.5 since 1999.

The report provides several policy recommendations to reverse the trend including:

  • It is necessary for states to invest in higher education, especially given the projected future growth of student enrollments;
  • State tax systems must be reformed to ensure that higher education remains a budgetary concern and does not face further budget cuts;
  • State leaders must prioritize funding for institutions that educate the largest fraction of college students faced with funding decisions;
  • States must align investments in higher education with the goal of completion;
  • Financial aid polices must be reoriented back toward need-based aid; and,
  • Students need to be steered towards more affordable sources of debt like federal student loan programs.

The authors contend that these steps are necessary for public institutions of higher education to “continue to function as a bridge to the middle class for young adults, especially those from low- and moderate-income backgrounds.” Read the report

higher ed, policy recommendations