Over at Quartz, Matt Phillips has a good post summarizing “everything you need to know” about the student loan story (in 17 charts, of course). All the usual data points are there—the massive upswing in total student debt as more students clamber for an ever-more expensive degree; the recent surge in delinquencies as millions of underemployed twenty-somethings fail to make their payments on time; the growth of the federal student lending market in response to the financial crisis.
But what is missing in Phillips' post, as in too many articles about student debt, is any acknowledgement of two critical facts. First, three out of four undergraduates in the United States attend a public college or university—only about 15 percent attend the costlier private schools that get so much attention in the press. And second, state funding for those public colleges and universities has collapsed over the last two decades, forcing students and their families to borrow the difference.
These cuts have been particularly severe in the years since the Great Recession. As the Center on Budget and Policy Priorities has reported, every state except for North Dakota and Wyoming is spending less per student on higher education than they did in 2007. As a result, students in nearly every state are paying higher tuition, even as colleges try to lower costs by firing faculty, eliminating course offerings, closing campuses, and reducing library services. In the last five years alone, thirty-six states cut funding for public higher education by more than 20 percent, eleven cut funding by more than a third, and two states—Arizona and New Hampshire—cut their spending per college student in half.
It wasn't always like this. In the late 1980s, public colleges and universities received more than 75 percent of their total funding from state government, with a small percentage coming from the federal government. But today, that number is closer to 50 percent, with higher student tuition responsible for the other half:
Per-student revenue from state and local governments fell by $2,600, after adjusting for inflation, between 1987 and 2012. During that same period, per-student tuition increased by $2,600. In other words, the entire increase in tuition at public colleges and universities over the last 25 years has gone to make up for declining state and local revenue, leaving no additional funding available to improve programs and services or fund costs that are rising faster than the rate of inflation such as employee health care.
This trend has meant that students have assumed much greater responsibility for paying for public higher education without those institutions receiving more money to fund quality improvements. In 1987, public colleges and universities received 3.3 times as much in revenue from state and local governments as they did from students. They now receive about 1.1 times as much from states and localities as from students.
America's collective divestment in higher education—once considered a public good—has a high social and economic cost. Millions of young people are entering the workforce each year with an average $26,600 in student debt, seriously limiting their disposable income and access to credit. That means they have less money to spend on traditional middle class goods like a car or home, creating a major drag on the housing market and the overall economy.
The whole point of funding public colleges and universities with state tax revenue is that higher education is an investment in the next generation—an investment that pays dividends in rising living standards and incomes for everyone in society. Those who would pull the ladder up behind them by passing the tax burden down to students in the form of higher tuition and debt are shooting themselves in the foot.