College Tuition… Will Increases Slow Down?

In Education Planning, Tuition by Landmark Financial Advisors, LLC0 Comments

Great piece today by Catherine Ramplell in her Economix blog on the New York Times. College tuition and fees today are 559 percent of their cost in 1985.  In other words, they have nearly sextupled (while consumer prices have roughly doubled).  What is the real reason behind this increase?  We would tend to agree with her opinion that the core of the problem lies with decreasing state funding.  Do you think state governments will be increasing spending in the next ten years?  We think not, so continue to plan for more of the same in planning for education.

Here is an exerpt from her post:

“But at least at public colleges and universities — which enroll three out of every four American college students — the main cause of tuition growth has been huge state funding cuts.

Every recession, states face a budget squeeze as their tax revenue falls and demand for their services rises. They have to cut something, and higher education is often a prime target.

Why? Struggling states have to prioritize other mandatory spending, like Medicaid. Higher education usually falls under the “discretionary spending” part of the budget — and in fact is often one of the biggest programs, if not the biggest, in the discretionary category.

State legislators also know colleges have other sources of funds to turn to.

“If you’re a state legislator, you look at all your state’s programs and you say, ‘Well, we can’t make prisoners pay, but we can make college students pay,’” said Ronald Ehrenberg, the director of the Cornell Higher Education Research Institute and a trustee of the State University of New York System.

College students do end up paying more. But in the past, after the economy recovered, most states did not fully restore the funds that were cut. As cuts accumulated in each business cycle, so did tuition increases.

Here’s a chart showing what’s happened to state support and actual tuition (what students pay after receiving financial aid, not sticker price) over the last 25 years. It presents just how much cost-shifting has been going on:

Figures are per full-time equivalent students, in constant 2010 dollars adjusted by SHEEO Higher Education Cost Adjustment (HECA).
Sources: State Higher Education Executive OfficersFigures are per full-time equivalent student, in constant 2010 dollars adjusted by SHEEO Higher Education Cost Adjustment (HECA).
 
The trend does not look likely to reverse itself, either.
 
Sure, state tax revenues are growing again, but so are state spending obligations. States will soon have to pay out trillions in public pensions for the retiring baby boomer generation — squeezing the funds for training the next generation of workers even more.”

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