A few weeks ago, Moody’s Investors Service said that 25 percent of private colleges are running deficits. The news isn’t much better for public universities, according to Moody’s. Last year, revenue at state-run schools grew 2.9 percent while expenses jumped 4.8 percent — the second consecutive year that expenses outpaced revenue. What’s especially troublesome for colleges and universities is that these trends are emerging in a strong economy and as higher education heads into a period of stagnation among traditional high school graduates nationwide. The number of high school graduates is projected to rise slightly in the middle of next decade. Then, between 2026 and 2031, the ranks of high school graduates are expected to drop by 9 percent. In that period, four-year colleges nationwide stand to lose almost 280,000 students.
A new nationally representative survey of 3,117 adults out of Teachers College, Columbia University finds that overwhelmingly (76%) of Americans say public spending on higher education is a good or excellent investment. Survey writers explain these perceptions play a role in policy outcomes for higher education resources at the governmental level, noting around 61% of respondents say that increasing federal support for post-secondary education is favorable, with specifically 52% wanting an increase in funding for community colleges.
While funding sources have shifted over the years, the actual dollar amount of state appropriations has essentially remained flat with fiscal 1998 funding levels nearly equal to the amount appropriated to the universities in fiscal 2018. In that same time period, enrollment has spiked, meaning on a per-student basis, financial support for higher education has not kept pace with growth; the amount of available monetary resources hasn’t changed much, but that dollar amount has to be spread among more students. In the fall of 2000, the regents reported an enrollment of 68,930, and in fall 2017, that number rose to 80,066.
Across the country, state fiscal support for higher education grew by just 1.6 percent, according to the Grapevine survey, which provides an early look each year at states’ funding for higher education. That was down sharply from a 4.2 percent increase last year and represents the lowest annual growth in the last five years.
The financial lives of college students and universities took center stage this year in ways few could imagine. Higher education captured the attention of Congress with the sweeping Republican tax plan, resulting in an unprecedented move on college endowments. State authorities tangled with the new administration over the rollback of rules governing federal financial aid. And the nascent tuition-free movement gained momentum as New York joined the cause. These are among the influential events that shaped the economics of higher education in 2017.
A long-awaited bill to overhaul the nation’s higher education law would change how students obtain federal student aid, place new limits on that financial aid, and eliminate current federal language governing teacher preparation, among other notable shifts.
If high schoolers can get a jump on college credits, state lawmakers figure the state will save big later when those same kids get to college and need fewer classes to gain a degree. But here’s the problem: Our recent cost analysis in three states reveals that dual enrollment yielded no state savings at all, though they did lower students’ direct costs for earning the same credit.
The trend has persisted. One recent report found that, since 2002, state support for higher education in Michigan has declined 30 percent, when adjusted for inflation. The university, like nearly every other state school in the nation, leaned on tuition to make up the difference. In-state tuition rose, but university leaders also focused on another, more lucrative, funding stream: out-of-state students — many of them elite students from wealthy families who couldn’t get into the Ivy League. Michigan was the next best thing.
In its annual survey of four-year colleges and universities, the credit rating agency said private institutions project net tuition revenue — the money earned from students after colleges provide financial aid — will climb about 2.4 percent in fiscal 2018. Meanwhile, public universities anticipate a 2 percent growth rate during that period due to pricing constraints and shifting demographics. Moody’s polled a total of 280 of the colleges and universities it rates for the survey.
Two years ago, Folsom Lake College began a partnership with the city of Rancho Cordova to provide a fee waiver for residents who were recent high school graduates. Funding comes from a half-cent sales tax levied by the city. The program, still in its first cohort of students, is overwhelmingly popular, Robinson said, and student success rates are up as well.