Hard Economics: Funding Trends at Public Universities

Many high school grads look to public colleges and universities for a quality education at an affordable cost. But tuition hikes at state schools are placing greater financial burden on students. These rising college costs come in the wake of public funding cuts to higher ed.

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A Troubling Reversal

For decades, government funding has made up the majority of operating budgets at state universities. However, a recently released study by the Delta Cost Project shows that this is no longer the case at many schools. Instead, more than half of costs at most public research universities in the U.S. are now covered by student tuition.

Students have been feeling the financial hurt of this new reality in recent years. Tuition and fees at four-year public schools rose by about 3% for the 2012-2013 school year; in-state students now pay an average of $8,893 per year at these institutions. Out-of-state students' tuition and fees rose to an average cost of $22,203. Budget shortfalls have led states to substantially cut appropriations to public universities, causing schools to raise tuition and fees so they can cover operating costs.

As tuition rises, government aid is not keeping up. According to The New York Times, grants per student only rose 1% from 2011-2013, when from 2008-2011 grants per students rose 30%. On average, undergraduates received about 52% of their aid from grants, 39% as loans, and 9% as tax deductions or work study programs. The increased reliance on loans resulted in about 60% of graduating students in 2012 incurring average debt of $26,500.

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Sobering Facts

In this economic environment, more tuition is not translating into a better education. The Delta Cost Project notes that virtually all monies raised from tuition increases are being used to offset financing revenue losses from other funding sources - especially cuts in state contributions. Despite rising costs, spending dedicated to classroom instruction at universities actually declined. Class sizes have risen, employees have been laid off and academic departments have been cut.

Despite reductions in state appropriations, colleges and universities do continue to collect revenue from grants, private gifts and contracts. However, individuals and organizations providing these monies often stipulate that they must be used for a particular purpose; in these situations, schools cannot use funds for core programming, forcing them to continually raise tuition just to maintain operating budgets.

rising college costs Delta Cost Project public state university universities colleges funding

Diminishing Opportunity

California, Arizona, Georgia, and Washington are among the states most severely affected by budget shortfalls. From 2011-2012, tuition rose 16%-21% in these states alone. As of 2013, California public universities have the fastest-rising tuition costs. The state has already cut $750 million from the University of California system budget for 2013, and it's possible another $250 million will be cut if Governor Jerry Brown's tax initiative is rejected. UC regents have been hinting at raising tuition 6% for the next school year.

California is hardly alone in this plight - many states face budget shortfalls in the near future. Jane V. Wellman, executive director of the Delta Cost Project, worries state funding cuts and escalating tuition costs will have drastic effects. In a 2011 interview with The New York Times, Wellman suggested: 'In the next three or four years, we're going to have more students who are spilling out the bottom, priced out of the expensive institutions. We're going to be rationing opportunity. We're moving in that direction fairly rapidly.'

Ever wonder whether going to a top-tier school is really that important? Learn what the education experts have to say about the cost-benefit analysis of elite colleges and universities.

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