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August 01, 2012 3:37 PM Treasury Department: Families Paying More in Tuition

By Danny Vinik

The Treasury Department’s top economist has chimed in on tuition costs: families are shouldering a greater share of college costs than ever before.

College students are graduating with increasingly high levels of debt. Total student debt surpassed total credit card debt in August 2010 and topped $1 trillion for the first time this past year.

Meanwhile, while students have taken on more and more debt, schools have relied more and more on tuition as a revenue source.

As more students have decided to go to college, state and local governments have not kept pace increasing support for those schools. According to the annual report from the State Higher Education Executive Officer, in 1986, the government appropriated $69.619 billion (2011 dollars) to colleges. This number rose to by $86.213 billion by 2001, but has fallen since then, to $84.621 billion last year. It would be even lower if not for the nearly three billion dollars in federal stimulus money that states received. At the same time, more and more students are going to college. While 8.7 million students attended school in 1986, more than 10 million did in 2006. But in the last five years, that number has jumped by nearly 17 percent to 11.8 million students.

This has caused a dramatic decrease in government funding per student. In 1986, state and local government expenditures were $8,025 per student. In 2001, it was up slightly to $8,036, but it has decreased significantly since then, falling to $6,290 last year.

All of this has led to students shouldering a greater and greater percent of college tuition. In 1986, tuition accounted for just 23 percent of a school’s revenue. By 2001, this had grown to 29 percent and just last year, it increased to 43 percent.

Upper-class students still have the family wealth to afford a college education, even with students bearing a greater share of the costs. For middle- and lower-class families though, students must take out loans to afford school.

At the same time, a college degree is more valuable than ever before; just 4.1 percent of college graduates are unemployed right now while 8.4 percent of high school graduates and 12.6 percent of those with less than a high school diploma are out of work.

With further spending cuts on the horizon, undoubtedly some of it will blowback on support for colleges. This will just exacerbate this trend, forcing student to choose between foregoing college and graduating with high levels of debt. Is this really the decision we want our kids to have to make?

Danny Vinik is an intern at the Washington Monthly.

Comments

  • Patrick Shane on August 02, 2012 11:45 AM:

    Student debt is stunting the growth of the economy. Student loans have increased by 275% over past decade. As the next generation graduates from college, they are plagued by insurmountable debt that places demands on their income, limiting their ability to spend their earnings in ways that stimulate the economy.

    http://www.youtube.com/watch?v=mRA9ndc1pCM