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Budget Cuts Means More Debt for College Grads and More Dropouts

Viany Orozco

"The Great Cost Shift" a recent Demos report on state disinvestment in higher education

Graduation ceremonies this spring will recognize about 2.7 million new college graduates: 895,000 who will receive associate's degrees and 1,781,000 who will receive bachelor's. As well, postsecondary institutions will grant roughly one million certificates that recognize training in specific fields. All these graduates, on average, will do better economically than peers without comparable credentials.

Yet rather than taking comfort in that fact, attention should be focused on why using postsecondary education to climb upward has become so expensive? Why do students graduate with so much debt? Why do a rising number of them graduate from for-profit institutions that saddle them with so many loans? And why do hundreds of thousands of students not graduate at all, because the costs of college force them to drop out?

One simple answer to all these questions is that government doesn't spend enough on higher education -- and recent budget cuts have made the financial strains on college students worse than ever.

A recent report by Demos revealed the alarming pattern of state disinvestment in funding for higher education. While state spending on higher education increased by $10.5 billion in absolute terms from 1990 to 2010, it has failed to keep pace with growing college enrollments. State funding per public full-time student dropped by 26.1 percent from 1990 to 2010.

Largely as a result of this disinvestment, tuition and fees at public colleges and universities have soared, leading to rising student debt among its graduates. In fact, 56 percent of the seniors who graduated from public four-year universities during 2009-2010 had student loans worth an average of $22,000, an amount 11 percent greater than the average inflation-adjusted loan balance owed by students who graduated in 1999-2000, a year in which 54 percent of graduating seniors from public four-year institutions had loans.

State cuts to higher education funding have also contributed to rising numbers of graduates from for-profit institutions, which charge considerably more than public colleges, leading to higher debt burdens among its graduates.  A report by the Institute for College Access and Success found that almost all graduates from for-profit four-year colleges (96 percent) took out student loans, and they borrowed 45 percent more than graduates from other types of four-year colleges. Yet as public institutions close their doors to prospective students or reduce their course offerings due to cuts in state funding, many students have turned to for-profit institutions for an education. The number of bachelor’s degrees awarded by for-profit institutions increased by 387 percent between 1999-00 and 2009-10, while the number of associates they awarded rose by 132 percent over this period. For-profits awarded 44 percent of total certificates in 2010. 

Finally, the elephant in the room at graduation ceremonies are the students who dropped out. Only 56 percent of bachelor’s students graduate within six years of starting their degree, while only 29 percent of associate’s students graduate within three years.  While several obstacles explain the college dropout crisis in America, rising college costs are top of the list. Here again, cuts in funding to institutions not only lead to tuition increases but also deprive institutions of resources to offer  students better supports that could increase their chances of completion, especially as an increasing number of first generation college students make up a larger share of the college population. 

We have the capacity to invest more, for despite the budget challenges of recent years, we are a wealthier nation today than we were twenty or thirty years ago. America must do more to ensure that students ready and willing to pursue a postsecondary credential will one day have their graduation day.