“We believe, that is, you and I, that education is not an expense. We believe it is an investment.”
– Lyndon B. Johnson, October 16, 1968
In 2012 for the first time student tuition contributed a larger portion of public college funding than did state government. In 2012 state funding comprised just 23% of funding, while student tuition composed 25%. Compare this to 2003, just a decade ago, when state funding comprised 39% of funding and student tuition contributed 17%. Overall, state funding for public colleges across the nation decreased by 12%, from $80 billion in 2003 to $71 billion in 2012. Government Accountability Office
The reductions are even more staggering when enrollment levels are taken into account. Student enrollment in higher education increased by 20% in the United States between 2003 and 2012. The result is a decrease in the median state funding from $6,211 per student FTE in 2003 to $4,695 per student FTE in 2012. (ibid)
Unfortunately, Ohio has followed this national trend. At the University of Cincinnati state appropriations made up 25.26% of UC unrestricted revenues in FY 2006 ($166,126,899 out of total unrestricted revenues of $657,540,133). (Unrestricted funds are defined as those free from any external restrictions and available for general use.) In FY 2014, state appropriations (unrestricted) made up 19.15% of UC’s unrestricted revenues ($181,107,512 out of total unrestricted revenue of $945,432,908).
Had FY 2006 state appropriations (unrestricted) to UC only kept up with inflation, the FY 2014 state appropriations would have been $198,588,530—over $17 million higher. Had state appropriations (unrestricted) to the University of Cincinnati remained at a stable percentage of UC’s unrestricted revenue from FY2006 (25.26%) to FY2014, state appropriations would have been $238,816, 352—over $57 million higher! (See UC Office of the Controller; Ohio Board of Education.)
In the wake of Legislative disinvestment, students and their families at UC and across the county have borne the brunt of the state cuts in the form of higher tuition and dramatic increases in student debt. Legislators across the country have assumed, or hoped, that university and college administrators would somehow “grow” their revenues from outside funding sources, but this simply has not happened. And it’s hard to see how it can happen: there is only so much grant funding and only so many “big donors” out there. As it is, most university presidents and deans have already been diverted from their work running their institutions for the benefit of the students and the general public, into virtually full-time work as fundraisers. But it’s not working.
The result: skyrocketing student debt. According to Forbes, the average student loan in 2012 was $27,253, up from $17,233 in 2005—a 37% increase. Ohio is worse with the average student loan debt in 2012 at $29,037, up from $19,259 in 2005—a 34% increase). In 2012 that earned Ohio the dubious distinction of ranking 9th highest in average student debt per borrower. The Institute for College Access and Success, Student Debt and the Class of 2005-2013. Total student debt is now $1.05 trillion. Eight million Americans have student loans, and 11.5% of all student loans are 90 days past due or in default. (See also, “Life Delayed: The Impact of Student Debt on the Daily Lives of Young Americans,” American Student Association, 2013.)
The negative impacts of increased student debt are both multiple and great. The effects are not yet fully understood and additional implications are still being discovered, but what is known is sobering. As stated in the American Student Association’s recent report, “Student loans were created to be an engine for social mobility, but they are, in fact, limiting young people’s ability to achieve financial success.”
A Penn State study agreed with the ASA report’s suggestion, showing a correlation between the increasing amount of student debt and a reduction in the amount of student borrowers starting small businesses. Student debt makes it more difficult to raise the necessary capital to start a small business (described as 1-4 employees). The 2013 ASA study found the same with 47% of respondents stating that affected their decision and ability to start a new business. As small business is responsible for 60% of job growth, this is alarming.
Student debt may also be affecting borrowers most fundamental and personal life decisions, including when to marry. A study from Rutgers found that 14% of student delayed marriage due to student debt, but the ASA study reported the number to be significantly higher—that 41% had put off marriage due to student debt.
Student debt is also affecting the career choices of recent borrowers to a much larger degree than previous generations of borrowers. Whereas a 2002 report found that 17% of student loan borrowers reported that there loans had an impact on their career choice, the new ASA study found that 30% of respondents reported that there loans impacted their career choice. Additionally, 25% stated that their student loan debt was a factor in pursuing employment in the private sector and not the public sector.
Students being compelled to take higher paying jobs that are not their first choice to repay student loans could have negative consequences for the employee and the employer since dissatisfied employees are more likely to suffer apathy, decreased productivity, and poor performance. This dynamic will also make it more difficult for the government, educational institutions, and nonprofits to compete for quality employees, ultimately decreasing the performance of these critical institutions. (ibid)
A different survey of law students found that 66% of graduates were dissuaded from pursuing government or private sector work due to student debt. (ASA 2013, citing 13 Baum, Sandy and Marie O’Malley, “College on Credit: How Borrowers Perceive Their Education Debt,” NASFAA Journal of Student Financial Aid. Vol. 33, No. 3, 2003, and 14 Equal Justice Works, “From Paper Chase to Money Chase: Law School Debt Diverts Road to Public Service,” November 2002.)
Student debt is also affecting home ownership rates and may be a factor slowing recovery from the housing crisis. The Federal Bank of New York found that decreasing numbers of thirty-somethings have bought houses since the recession, with the sharpest decreases found among those with a history of student loans. For the first time, buyers with student debt are less likely to purchase a home than those without debt. (Note that many without student debt also do not a have a college degree). A stunning 75% of respondents to the ASA study reported that student debt has affected their ability to purchase a home.
The debt crisis is not just impacting young people, however. Over 2 million Americans over the age of 60 have student debt. The amount of debt for older Americans has shot up from $8 billion in 2005 to $43 billion in 2012. Many people on fixed incomes are continuing to pay back student loans. Borrowers with unpaid loans can have up to $750 of the social security income assessed to pay back student loans.
Unsurprisingly, this myriad of pressure is affecting borrowers’ mental well-being. A Gallup survey tracked college graduates on a series of well-being elements. One element was financial, or managing your economic life to reduce stress and increase security. Forty percent of those with no debt described themselves as financially thriving, while only 26% of those with significant debt ($25,000 or greater) described themselves as thriving.
Another category was physical, or having good health and enough energy to get things done daily. This again showed a significant disparity, with 34% of those without debt describing themselves as thriving, compared to 24% for those with significant debt.
Ohio needs to dramatically reinvest in higher education. Similar calls for reinvestment in higher education are now occurring in other states. In Texas, for example, this month the presidents of the six state college systems jointly called for a renewed investment in higher education.
The truth is finally starting to be aired publicly: We just can’t cut any more. We’ve already cut to the bone, and then some. As a country, we must stop—and reverse—the tuition burden that is not only a disaster for individual students and their families, but is also proving to be a drag on local and state economies.
As Greg Loving writes in this month’s President’s Corner, a similar effort is necessary in Ohio. It cannot come from one individual or organization. It must be a clarion’s call from a multitude of leaders and organizations, including the faculties, administrations and, most importantly, students of all of Ohio’s public colleges and universities. To do otherwise is further mortgage the future of generations of Americans.
Some statistics from the ASA report:
- 75%—indicated that student loan debt affected their decision or ability to purchase a home
- 73%—said they have put off saving for retirement or other investments; and
- 63% —said their debt affected their ability to make larger purchases such as a car;
- 27% —of respondents to ASA’s survey said that they found it difficult to buy daily necessities because of their student loans;
How student debt is affecting borrowers’ fundamental life decisions:
- 47% —said it was the deciding factor, or had considerable impact, on their decision or ability to start a small business;
- 43%— said that student debt has delayed their decision to start a family;
- 30% —responded that their student loan debt was the deciding factor, or had considerable impact, on their choice of career field;
- 29% —indicated that they have put off marriage as a result of their student loans.