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Rising Tuition, Credit Crunch Threaten Affordability of Higher Education

BY Admin  December 3, 2008 at 12:50 PM EDT

Students at Binghamton University; america.gov

The biennial study by the nonprofit National Center for Public Policy and Higher Education gave 49 states an F for affordability, up from 43 two years ago. California passed with a C because of its community college system.

“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” Patrick Callan, president of the center, told the New York Times.

The study found that college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent.

The current economic crisis is likely to make things worse, Callan told the Associated Press.

During downturns “states make disproportionate cuts in higher education and, in return for the colleges taking them gracefully, allow them to raise tuition,” Callan said.

“If we handle this recession like we’ve handled others, we will see that this gets worse.”

The president of the American Council on Education has predicted that students could face double-digit tuition increases next year, reported the Wall Street Journal.

Adding to the pressure, the credit crunch seen in the broader financial market is also affecting private student lending, which has shrunk sharply, making it even harder for some students to make college a viable option.

To alleviate pressure on lending, the Federal Reserve recently said it will provide up to $200 billion to investors who offer credit card, auto and student loans to consumers, in an effort to expand their availability and boost economic growth.

The affordability grades given by the National Center for Public Policy and Higher Education are based on how much of the average family’s income it costs to send a child to college.

The net cost of sending a student to college last year amounted to 28 percent of the median family income for a four-year public university, and 76 percent of the median family income for a four-year private university.

The numbers are even gloomier for low-income families. Families in the lowest 20 percent of income pay 55 percent of the family’s income for a local public university.

Reductions in state funding for public colleges have forced some university systems to take new measures. Florida’s state universities instituted a temporary cap on freshman enrollment, and the California State University system is cutting its student count by 10,000 for next year.

Some schools are eliminating majors and courses to cut costs. Others are exploring options like distance learning.

The Denver-based Education Commission of the States, a nonpartisan research group, estimates that more than 40 states could be facing budget shortfalls in the fiscal year that begins July 1, 2009 for most states. While public universities are not completely reliant on state funding, that makes them a more likely target for cuts over other services and education systems that are completely state funded.

“It’s going to be a remarkably challenging situation,” economist Michael McPherson, president of the Spencer Foundation, an education non-profit, told the Wall Street Journal. “This is going to be bad, and it looks like the near-term impact on state budgets is going to be quite dramatic.”