The Shifting Costs of Higher Education

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Oregon college students are heading back in to campus for fall semester classes this week. These students are returning to friends, classes, dining hall food. Oh, and mounting debt.

A few weeks ago, we explored the crushing school debt facing America’s students. The main cause of the growth in student debt was easy to pinpoint: tuition increases.

But what we didn’t know at the time was why those rates have increased so dramatically.

Since then, we’ve spent a good chunk of time on the phone with the Oregon University System, sifting through financial analysis and academic reports, and conducting our own analysis. Here’s what we found out:

Total costs to students have increased far beyond the rate of inflation…

… yet OUS operational costs have stayed pretty much right on par with inflation:

Graph Source: OUS Office of Finance and Administration

So if operation costs aren’t to blame for rising tuition rates, what’s the cause of tuition increases (and, by extension, student debt)?

As it turns out, the mystery lies within Oregon state investment.

State spending on higher ed has been sporadic since the 90s, but recent trends point to clear findings: In the last five years, Oregon has dramatically cut funding. In fact, since 2007, the Oregon Legislature has decreased investment to the tune of a 15% drop in state spending per student.

(In fact, accounting for inflation, we now spend less per student than we did 15 years ago.)

I know what you’re thinking now: tough economy, tough choices.

But Oregon’s record on higher ed can’t be explained just on the recession caused by Wall Street greed. Because relative to the rest of the nation, Oregon actually now spends less on higher ed than nearly every other state.

In 2010, the national average for higher education was 11.8% of state budget spending. In Oregon, we spent 5.8%, the third smallest percentage of state budgets in the nation. Only Massachusetts and Rhode Island (both of which have significant private universities and endowments) invested less in their state public universities.

What does this all mean?

It’s hard to say with certainty what this spells out for future generations, but we know two pretty basic things:

1. Debt is up…

… which means middle class families are hurting, individuals have less money to spend back into the economy, and we’re losing an entire generation of students to chasing back debt.

2. And motivation is down, as questions of whether college is “worth it” abound. Many young people have become alarmed by the figures, and some have decided that higher ed is not a good investment in the current environment. (Though plenty of studies show that, in the long run, college is still a smart choice.)

It’s hard to know how these trends will change over time but, at least for now, things look troubling as fewer and fewer students continue their education. (Because, try as they may, our K-12 schools are struggling with state budget cuts as well.)

It boils down to a simple choice: are we willing to continue a pattern of less and less investment in our state education systems? Or do we want to turn things around now and plan for the future?

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