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Challenges and Solutions in US Higher Education Finance

Explore trends in postsecondary costs and degree attainment in the US, highlighting funding challenges, equity issues, and the need to increase educational attainment. Learn about the impact of privatization on costs and student outcomes, as well as the implications of declining high school graduation rates. Gain insights into the rising costs to students and the financial pressures facing educational institutions. Join the conversation on addressing the existing gaps and improving degree completion rates in the US higher education sector.

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Challenges and Solutions in US Higher Education Finance

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  1. United States Trends in Postsecondary Costs and Degree Attainment Jane Wellman INTERNATIONAL SYMPOSIUM ON UNIVERSITY COSTS AND COMPACTS CANBERRA, AUSTRALIA 14-15 JULY 2008

  2. Summary of Major Dynamics Affecting Costs and US Degree attainment • Need to increase degree attainment • Persistent gaps in access and degree attainment affecting low income and minority groups • Funding needed to increase degree attainment with current cost structures is highly unlikely under current trends • Among public institutions, prices are increasing but spending is not – subsidy shift from state funds to tuition revenues • Privatization of revenues has not benefitted instructional function; competition is further increasing spending • Low income and minority students increasingly clustered in public two-year sector – where spending is low, and fewer than 30% of students get to a baccalaureate degree • Public perceptions/critique about higher education sharpest on issues of cost and cost management

  3. U.S. Nationwide enrollment demand in 2005 at an all-time high

  4. Growth steepest in public two-year, proprietary and private masters’ institutions…. Market shares dropping for public four-year and private research institutions

  5. But US educational attainment dropping in an international context – from #1 for older students, to #7 for 15-and above • Reasons? • Other countries are increasing attainment and US is staying even • US better at access than degree completion • Attrition is highest among students who are the majority of new students • Declining high school graduation rates

  6. The Attainment Challenge: Degree Completion Rates, 2004 SOURCE: OECD, Education at a Glance 2007

  7. Closing the Gap—Number of Degrees Required Beyond Current Production by 2025

  8. Collective Cost to StatesAssuming no change in tuition $ 31.0 Billion = Annual Costs of Additional Students at Current $ per Student $ 78.2 Billion = Current State Contribution 39.7% = Percent Increase in Annual State Support Needed

  9. Average Cost to Students, Assuming: No Additional State Investment $ 2,565 = Additional Annual Costs to Students at Public Four-Year Institutions 47.9% Increase in Tuition and Fees (Currently $5,355) $ 1,824 = Additional Annual Costs to Students at Public Two-Year Institutions 108.8% Increase in Tuition and Fees (Currently $1,677)

  10. United States: Money versus students: per capita spending per student (excludes research, service and auxiliary enterprises) against student enrollments (2006) $ spending/student; number of students enrolled 7,000,000 $35,000 6,000,000 $30,000 5,000,000 $25,000 4,000,000 $20,000 Enrollment of FTE Students, 2006 Median Full Educational Cost per FTE Student, 2006 3,000,000 $15,000 2,000,000 $10,000 1,000,000 $5,000 0 $0 Private Research Private Bachelor’s Private Master’s Public Research Public Master’s Public Associate’s Source: Delta Cost Project IPEDS database.

  11. General purpose revenues are declining as a proportion of revenues among public institutions Nationwide trends in median revenues by major source, 1987 - 2005 } Estimated “general purpose”= Tuition and fees+state appropriations + portion of private gifts } ($/FTE/CPI-U /2005)

  12. Spending increases most apparent in research, public service, and institutional grant aid - + + + Instruction and institutional grants funded from general funds; research and public service from designated revenues.

  13. As Educational Costs Rise, the Subsidy Share of Costs is Decreasing and Students Are Paying More Average Full Educational Cost per FTE Student, 1998 and 2005 (in 2005 dollars) – Excludes Spending for Research and Service $40,000 $34,103 $35,000 Cost = $28,868 $30,000 $16,635 $25,000 Subsidy $13,653 $20,814 $20,000 $17,942 $16,790 $8,844 $14,414 $15,000 $4,075 $13,519 $13,118 $8,175 Price $4,066 $10,065 $9,613 $10,000 $7,191 $8,636 $8,492 $8,516 $17,469 $15,215 $5,416 $6,085 $12,715 $11,970 $6,051 $6,518 $10,349 $5,000 $9,767 $6,328 $4,649 $4,602 $3,529 $2,585 $1,974 $0 1998 2005 1998 2005 1998 2005 1998 2005 1998 2005 1998 2005 Public Research Public Master's Public Associates Private Research Private Master's Private Bachelors Average Subsidy Net Tuition per FTE Source: Delta Cost Project IPEDS database, 19-year unmatched set.

  14. The policy critique is sharpening Perception that higher education finance is a “dysfunctional top-line enterprise with no bottom line” Critique that the line between profit and non-profit is blurring Senate finance committee investigation into non-profit tax status Massachusetts state proposal to tax college endowments Federal proposal re: excessive tuition increases

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