College Costs: High and Rising

New data released today by the Department of Education shows that college costs increased substantially for the 2007-2008 school year. Although colleges continue to welcome large numbers of students, the price tag for higher education climbs upward. Students are struggling and America is falling behind.

The tragedy is that tuition at public colleges has risen even faster than at private colleges [1]. The institutions that were created to provide public backing for broad public access are letting us down. The average tuition at a public four-year university has increased 29% between 2000 and 2007. Private college tuition increased by 13% over the same period. (All figures are adjusted for inflation)

The problem becomes more vivid when individual states are examined. Between 2000 and 2007, California has seen tuition increase by 37%, Illinois an increase of 44% and Massachusetts by 39%.

And we all know, of course, that these were not boom economic times. The cost of attending a public university was 25% of an annual household income in 2007 [2]. Incomes have been flat since 2000, and in the last year savings accounts have plummeted.

It comes to no surprise then that a December 2008 study by the National Center for Public Policy and Higher Education [3] showed 49 states received a grade of F (failing) on college affordability.

Costs rise at state colleges because states are cutting spending and passing the bill to students. The Center on Budget and Policy Priorities [4] observes that so far in 2009, 28 states have implemented cuts to higher education institutions — resulting in faculty and staff cuts and tuition hikes ranging from 5% to 15%. Looking forward, 16 additional states are proposing similar measures to cope with deficits.

Meanwhile, student aid from the federal government in the form of Pell Grants is unable to cushion rising college costs. Historically Pell Grants covered 77% of total college costs. Now it’s down to a third [5].

The lack of college affordability places individuals and the whole country at a disadvantage. Internationally, the United States is slipping in college enrollment [3]. Currently, only 34% of young adults (18-24 years of age) in the United States are enrolled in college. The United States is ranked 7th by the Organization for Economic Co-Operation and Development for college enrollment—well behind countries like Korea and Greece; that enroll 53% and 50% of their young adults in college, respectively.

President Obama is aware of the gap in education and has outlined a commitment to higher education. His FY 2010 budget increases Pell Grants and pegs future increases to the rate of inflation (CPI +1%). It also replaces the bank-subsidizing Federal Family Education Loan Program with the more efficient Federal Direct Lending program.

The Campaign/Institute for America's Future will have more on his plan and what else needs to be done when we release a report next week. Stay tuned.