Blog

If you thought the worst was over in terms of budget cuts and rising tuition and fees at colleges and universities across the country, think again. The latest projections from Moody’s Investors Service show that most institutions of higher education shouldn’t assume recoveries and relief from their states until at least 2013 and probably later.

In those states that have suffered the worst cuts, recovery may be even slower to kick in, as those are the same states that have had to cut spending in other areas as well. According to an article yesterday in The Chronicle of Higher Education, those states may first decide to increase spending in pensions, health care, and other services considered more essential than higher education. Only North Dakota, Texas and Alaska were listed by Moody’s as states where employment figures, a good projection of economic recovery, will return to stable levels before 2012.

Colleges may then be on their own for the next few years, leading to more cuts and creative cost cutting. (You may remember that students at Middlebury College make their own granola in the school’s bakery.) The economic picture is especially bleak for those states that have relief on federal stimulus funds to keep from making even deeper cuts. According to the Chronicle and Moody’s data, in 20 states, stimulus funds made up at least 5 percent of state support for public colleges in the 2009 and 2010 fiscal years. Three states have been particular reliant on stimulus funds – Colorado at 18 percent, Massachusetts at 12 percent and Arizona at 10 percent.

So what do these figures mean? For one, colleges need to figure out how to remain financially solvent with less state support. The Moody’s report also criticizes colleges for not doing more to make sure they won’t need to make deep cuts to their programs and faculties or, worse yet, close their doors. The latest school to do so is Wesley College, a small Mississippi college owned by the Congregational Methodist Church that was unable to find a way to cover about $2.7 million in debt. Southern Catholic College closed mid-semester due to a lack of funding, and may not raise those funds in time for fall. Nebraska’s Dana College will also close after the Higher Learning Commission of the North Central Association of Colleges and Schools refused a buy-out of the college by a for-profit entity.

In yet another sign that a college education is becoming a necessity, rather than a luxury, a recent study of the stimulus legislation reveals that many of the jobs the stimulus is expected to create will require some education or training beyond high school.  In fact, at least 54 percent of the estimated new positions will require at least a postsecondary certificate according to analysis by Georgetown University’s Center for Education and the Workforce.  Considering a major goal of the stimulus package was to create jobs for less-skilled workers who are usually hardest hit by economic downturns, this figure is especially telling.

It appears that despite the calls for "shovel-ready" projects, few workers will be expected to merely wield shovels. Many of the "non-college" jobs created by this legislation still may require some employer-provided training or time spent at a community college.  Inside Higher Education has more complete information, including a chart of the percentage of anticipated stimulus jobs that will require various education credentials.

While some required training will be covered by grants to employers and the increased Pell Grants and college tax benefits in the stimulus, those hoping for job security but apprehensive about college costs may be left with little choice but to go to college.  College scholarships and grants, as well as student loans and other financial aid can help.  A postsecondary education is becoming increasingly necessary in our economy, and it appears that this trend will continue.

Reducing college costs continues to be a hot topic of discussion, especially given survey results that show that college affordability is a growing public concern.  Recent congressional acts, including the education provisions in the stimulus bill President Obama will sign today, the Ensuring Continued Access to Student Loans Act of 2008, and last year's reauthorization of the Higher Education Act, have kept the issue in focus, as have economic events, such as losses to 529 plans, rising unemployment, and new financial troubles for colleges.  A wide range of ideas have attracted the attention of lawmakers and the media, including several suggestions making the rounds this month.

Jesse Jackson recently wrote an article in the Chicago Sun-Times suggesting that Congress pass a law to offer a 1% interest rate on federal student loans, including Stafford Loans and PLUS Loans.  The Minneapolis Star-Tribune ran a column in January that went even further, suggesting that the federal government forgive all student loan debt.  Meanwhile, Lamar Alexander, a republican Senator from Tennessee, has gotten some publicity for suggesting that more colleges offer three-year paths to degrees, as one of many potential cost-saving measures.  Some states are looking into "no-frills" universities, and partnerships between state colleges and community colleges are also gaining traction as cost-saving options.

So we were wondering what people who are in the process of paying for college think.  What would you like to see happen to make college more affordable and reduce the burden of student loan debt on college graduates?

The House of Representatives just passed the compromise version of the economic stimulus package.  Now there are just two stop left for it before it becomes law: the Senate and President Obama's desk.  The Senate plans to vote later this evening, putting it on track to be signed on Monday.

As the dust settles, more detailed accounts of what's actually in the bill are emerging.  While the final totals have not yet been made public, Inside Higher Ed has an updated version of their stimulus chart online today, featuring many of the stimulus provisions related to higher education.  The $787 billion stimulus package will include: 

 
• $17.1 billion to increasing the maximum Pell Grant award by $500 and eliminate a shortfall in funding
 
• $200 million to college work-study programs focused on community service
 
• A $2,500 education tax credit available for four years of college.  The credit is 40 percent refundable, so people who don't make enough to pay taxes can still receive $1000.
 
• A provision to allow computer purchases to count as qualified educational expenses for 529 plans
 
• $39.5 billion to offset state budget cuts to education, including money to modernize facilities
 
• $8.8 billion for states to award to high-priority needs, including education
 

The Senate passed their version of the economic stimulus bill Tuesday, and by late afternoon yesterday it was announced that a compromise had been reached between the House and the Senate. The compromise bill includes less funding than either version--$789 billion as compared to $820 or $838 billion, and one of the areas that faced cuts was education.

While the final draft of the stimulus bill has not been released--or necessarily written--yet, some details are emerging in media coverage. It appears that a Pell Grant increase has made it into the final draft, though the exact amount is still unknown. Federal Work-Study also receives a funding boost, though it's also unclear whether it's the full $490 million appropriated by the House. The $2,500 tuition tax credit has also survived, as have several other tax credits not related to education. Proposed increases to Perkins Loans and unsubsidized Stafford Loans appear to have been axed from the conference committee's version of the bill. States will receive some money to offset educational expenses and aid in school construction and renovation, though not as much as the House had appropriated.

More details will likely emerge over the next couple days as the bill makes its way back through the House and Senate for final approval. The stimulus package could be signed by President Obama as soon as Monday. While the stimulus will provide some help to most people attending college, it's not too late to find other ways to boost the funding to your own college education. Conduct a free college scholarship search to see what financial aid is out there.

The loss in funding faced by state and community colleges this year may not be a one-time thing.  A report issued this week by the State Higher Education Executive Officers (SHEEO) indicates that state budget cuts to higher education made during recessions tend to become permanent.  With many attempting to eliminate multi-billion dollar budget shortfalls, cuts to education are almost certain to happen across the country, and based on data collected by SHEEO, they are likely to continue into the future.

Per-student state higher education spending peaked in 2001, when it hit the highest level in inflation-adjusted dollars since data was first collected in 1983.  A recession in 2001 prompted drops in education spending that continued until 2006, when spending began to grow again until 2008, though per-student funding did not return to 2001 levels before another recession interfered.

In response to cuts in funding of around 7 percent between 1998 and 2008 and increases in enrollment of around 25 percent over the same period, tuition revenue has risen 20 percent.  The report suggests this trend is likely to continue, with funding potentially falling off permanently and tuition hikes continuing as a result of this year's budget cuts.  Thus, the burden is passed on to already cash-strapped students and families, who are already facing the prospect of needing more student loans due to losses of income and declines in college savings plans.

The SHEEO expressed hope that the stimulus package currently moving through Congress might mitigate this effect.  However, the version passed yesterday by the Senate eliminated billions of dollars that would have gone to offset state budget cuts, so the positive impact on higher education could be less than is hoped.  Additionally, members of Congress have expressed frustration with rising tuition rates, especially given tuition's likelihood to continue to outpace increases in Federal Pell Grants, such as the new funding currently included in the stimulus.

While it's still a long way from becoming law, the first published draft of the economic stimulus legislation created by the House of Representatives includes billions of dollars for higher education, including several provisions designed to make paying for school easier.  The bill still has to be approved by both the House and the Senate (which is drafting its own stimulus legislation) then signed by the President, so it remains to be seen how many of the following appropriations will make it into the final version of the stimulus package.

The stimulus bill would increase funding to several federal student financial aid programs, as well as providing emergency funds to states to prevent further drastic budget cuts, and designating money to help colleges, especially ones affected by disasters, make needed improvements and repairs.  If the bill is passed, federal work-study will receive a boost in funding, as will Pell Grants, eliminating a projected budget shortfall for the program.  Unsubsidized Stafford Loans will increase by $2,000 per year, bringing the loan limit to $7,500 or more for undergraduate students.  The maximum Pell Grant award will also increase to $5,350.  In addition, lender subsidies will also increase, hopefully enticing more banks to remain in the FFEL program.  The Hope tax credit and a provision that allowed families to deduct up to $4,000 in educational expenses will also be combined into a new $2,500 tax credit, through which families with too little income to file taxes could still receive $1,000.

As Congress hammers out the details of the stimulus bill in coming weeks, these numbers will likely change.  A more detailed breakdown of these and other proposals affecting colleges and universities is available from Inside Higher Ed.