There's this myth of self-reliance out there around higher education tuition. And there are different variations on the theme, but they seem to boil down to the idea that, "back in the day," baby-boomers were able to afford college without student assistance programs.
Now, this theme typically takes two approaches. First, that tuition is difficult for students to afford today because they're not used to hard work and gumption. Alternatively, that the costs of higher education have been skyrocketing over the last few decades, and it's all due to (choose one or more): pension costs, administrator salaries, building lavish facilities because these millennials won't eat in a regular cafeteria, or some other factor that doesn't get at the real issue. Both assumptions are false.
Here's the flaw in the logic: Baby Boomers got massive amounts of student assistance; much more than students get nowadays. But many of them never knew. Additionally, students today are expected to take on personal debt in order to help cover the costs of state budget shortfalls.
Today, Student assistance is seen as something that is given directly to the student in order to lower the financial burden of tuition. But several decades ago, it was in the form of massive state-level assistance to institutions, which yielded a much lower tuition rate up front. Take a look at this example of 20 years worth of Oregon University System costs.
The chart represents the total underlying costs of educating a student (per year), regardless of where that money is coming from. So for example, the total cost in 1989 was $6,941. Out of that, tuition and fees from students make up about $2,000 of that, with the state share about $4,300 and the rest made up through other miscellaneous revenue. So at that point, the state was publicly supporting that education at more than what the student put in. But let's look at what this means for total costs... Regardless of where the costs are coming from, the total costs (the tippy top line of the light blue section) are actually tracking inflation pretty darn well. Some years it's even lower. This indicates that the underlying costs of higher education are not spiraling out of control.
However, higher education does seem more and more out of reach for young people. And that's not a mass hallucination. It's a result of the fact that the tuition and fees portion of the total cost is indeed outpacing both inflation and income growth. Whereas back in 1989, the state share of the underlying costs was more than double what students were expected to pay, the public support is by 2009 less than half of the student's share and dropping (as a proportion of total costs).
Here's what those amounts looked like adjusted to be proportions of the total costs:
In 1989, students were expected to cover about 27% of the cost of their education. By 2009, that number had skyrocketed to 63%! (More on that in a bit)
But that applies more to Gen-Xers. What about those Baby Boomers who went to college before the Reagan Years? According to the University of Oregon, tuition and fees for a resident undergrad in 1970 totaled $408 per academic year (three terms). That's comparable with data provided by the U.S. Department of Education which puts the national average tuition+fees amount for public universities at $478 in the same year.
In the same year, the minimum wage was $1.45/hour, per the U.S. Department of Labor. For a student working year-round at minimum wage in 1970, that means that a bit less than 5 and a half hours of work each week could fully cover tuition and fees at the University of Oregon. ($408/yr = $7.85/week = $1.45 per hour x 5.41 hours)
Today (2019), the fees are $11,898, and the minimum wage is $11.25 (in Lane County). For the same student working year-round at minimum wage, that means working 20 hours/week solely to cover tuition and fees, leaving little time to earn rent or attend classes. Or, to put that in another perspective: For the minimum wage to provide a comparable leg up to students as it did in 1970, it would have to be set at about $42.30 per hour.
And those figures are based on Oregon's relatively generous minimum wage. With the national minimum wage at $7.25/hour and the College Board reports an average in-state tuition+fees rate of $9,970. A student under those conditions would have to work over 26 hours per week at the national minimum wage rate to pay for college. (In that context, the minimum wage would have to be $35.44/hour to compare to 1970.)
And as we see, this difficulty isn't due to skyrocketing higher education costs, which actually track inflation. Remember: it's due to a shriveling state share of that higher education bill -- year after year, Oregon and other states expecting students and families to pick up a larger proportion of a tab that used to be lavishly subsidized.
Before exploring why it's been shriveling, let's explore why higher education was subsidized in the first place. Aside from just being an issue of fundamental fairness in helping to make college more accessible to students from varied backgrounds, it's profitable for the state's bottom line.
Among states, Oregon is most heavily-reliant on income taxes in order to feed its budget (having no sales tax and a capped property tax). As the chart below shows, moving an individual from a high school diploma to a 4-year degree -- on average -- results in a significant increase in employment potential for that individual.
Cohorts of 4-year degree holders typically show an employment rate of about 3% higher than high school graduates. Additionally, The Statistical Atlas reports an median bump in annual income of about $17,800 for moving an Oregon student from a diploma to degree.
This translates to an increase in revenue for the State, which likely taxes that margin at or around 9%. Combined with the lower unemployment rate, then on average each student could bring the State an additional $1,500 or so per year in General Fund dollars.
Additionally, 4-year degree holders are statistically less likely to consume public services:
This is a limited set of examples, but higher education is statistically linked to improved (and therefore cheaper) public health outcomes, less interaction with law enforcement or the prison system, and less reliance on public assistance. (It should be noted that there are similar benefits in achieving a technical certification or high-skilled position without a 4-year degree.)
So with each student moving from diploma to degree (again: on average) representing a total value to the State General fund of $60,000 over a lifetime (about $1,500/year x 40 working years) and a liability to the General Fund of about $47,500 (the cost of a full ride), it begs the question: Why cut a net revenue producer that would also result in less of a demand on other services?
Well, whether you want to blame Measures 5 and 50 in the 1990s for slashing property taxes, the Legislature for slashing the corporate tax rate in the 1980s and early 2000s, or a slew of initiatives forcing the state into astronomical prison costs, there have been a number of significant blows to the state budget during the time we've discussed. (A longer discussion as to the details and effects of these expenses is another article.)
When faced with falling revenues, a Legislature has two basic options: 1) Cut services, or 2) Raise revenue. The Legislature can't, for example, just make budget cuts to a program and then expect anyone who wants to continue to use that program to take on massive amounts of personal debt to make up the difference.
... Except when it comes to higher education, it can!
Higher education is, perhaps, the only service that the Legislature can cut and then expect to have that budget hole filled by students and families paying higher rates of tuition -- many by taking on student loan debt or mortgaging their home. That 20-year move from a student share of higher ed costs from 27% to 63% also reflects a drastically diminishing state share.
Eerily, the chart below shows the effective corporate tax rate rising and dropping seemingly in sync with student loan defaults. [EDIT: To clarify, this is national data.]
Or, to put it another way: The revenue lost from lower corporate tax receipts is not merely realized by cuts to public services, but also by massive consumer debt, as significant portions of the resulting budget hole is foisted upon students and families.
The "higher prices" argument against taxation doesn't appear to take higher ed costs into account. This may seem a bit ironic to political observers, since a common bugaboo among corporate tax opposition is the idea that the increased costs to corporate entities will be passed along to consumers in the form of higher prices.
While there doesn't seem to be a correlation between corporate tax rates and higher prices for consumer goods, there does seem to be a correlation (if not causation) between lower corporate tax rates and a higher financial burden on students and their families.
In charitable fairness, it is easy for some from the Baby Boomer generation to assume that since they don't recall getting a student assistance check they had a tougher time paying for college than today's students.
The data, however, show that previous generations were beneficiaries of generous (and prudent) subsidies of the public higher education system. These subsidies have been whittled down in order to address thinning tax revenues, and the net effect is that we have asked students and families to bear the cost by taking on personal debt in order to support public services. Reversing this trend should be a moral imperative.
Comments