College students pay more as subsidies drop

Funding for medicaid, correctional facilities and K-12 wins out over higher education
By: | Issue: September, 2014
August 28, 2014

Subsidies for public higher ed institutions are the lowest in a decade—and for the first time, students are paying, on average, half or more of their tuition’s cost. Those are a few of the financial trends substantiated by a recent American Institutes for Research (AIR) study.

According to “Trends in College Spending: 2001–2011,” a report by the Delta Cost Project at AIR, both public and government contributions to institutions continue to decrease. Steve Hurlburt, research associate with AIR, cites a few main reasons for this decline.

“States have a host of other priorities, including Medicaid, correctional facilities and K12 education. This pushes higher education to the side. Why? Because higher ed has potential sources of revenue,” Hurlburt explains.

Also, tax cuts have resulted in state revenue declines. “It’s a shrinking pie, already divvied up among many other causes,” he says.

The study also showed that subsidies declined by 2 to 4 percent at public nonresearch institutions in 2011—an improvement over 2010, when declines averaged 8 percent or higher. However, public research universities suffered through a second year of 8 percent declines.

“Students are paying 4 to 6 percent more than they paid before last year; this equates to hundreds of dollars yearly for public university students, and thousands more for private,” says Hurlburt. “In 2011, we saw the convergence point with student share and subsidy share—we’ve reached a crossroads at all four-year institutions.”

Unfortunately, a simple solution to the financial challenges institutions and students face is not immediately evident.

“Students and the public can’t blame tuition increases on spending. Institutions seem to think that state appropriations are going to be bouncing back to prerecession levels,” says Rita Kirshstein, managing researcher of AIR’s education program. “To keep costs down, institutions have to think about how they spend their money. There are always cuts possible.”