United States Trends in Postsecondary Costs and Degree Attainment

Jane WellmanINTERNATIONAL SYMPOSIUM ON UNIVERSITY COSTS AND

COMPACTS

CANBERRA, AUSTRALIA14-15 JULY 2008

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Summary of Major Dynamics Affecting Costs and US Degree

attainment•Need to increase degree attainment•Persistent gaps in access and degree attainment affecting low income and minority groups•Funding needed to increase degree attainment with current cost structures is highly unlikely under current trends•Among public institutions, prices are increasing but spending is not – subsidy shift from state funds to tuition revenues •Privatization of revenues has not benefitted instructional function; competition is further increasing spending •Low income and minority students increasingly clustered in public two-year sector – where spending is low, and fewer than 30% of students get to a baccalaureate degree•Public perceptions/critique about higher education sharpest on issues of cost and cost management

Total Headcount Enrollment Growth by Sector, 1987-1998 and 1998-2005

Institution Type 1987 1998 2005Total 12,423,910 14,435,418 16,873,337        Public Research 3,184,465 3,468,988 3,886,981Public Master's 1,931,729 2,158,637 2,443,878Public Associates 4,115,676 5,075,690 6,035,652       Private Research 883,580 925,787 1,018,483Private Master's 841,881 1,031,028 1,241,227Private Bachelors 594,391 698,964 811,725       Proprietary 218,688 296,108 530,241       Other Institutions 653,500 780,216 905,150

U.S. Nationwide enrollment demand in 2005 at an all-time high

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Growth steepest in public two-year, proprietary and private masters’

institutions…. Market shares dropping for public four-year and private research institutions

  

Sector Share of Enrollments  Avg Annual Percent Change

Institution Type 1987 1998 20051987-1998

1998-2005

1987-2005

Total 100% 100% 100% 1.4% 2.3% 1.7%             Public Research 25.6% 24.0% 23.0% 0.8% 1.6% 1.1%Public Master's 15.5% 15.0% 14.5% 1.0% 1.8% 1.3%Public Associates 33.1% 35.2% 35.8% 1.9% 2.5% 2.1%             Private Research 7.1% 6.4% 6.0% 0.4% 1.4% 0.8%Private Master's 6.8% 7.1% 7.4% 1.9% 2.7% 2.2%Private Bachelors 4.8% 4.8% 4.8% 1.5% 2.2% 1.7%             Proprietary 1.8% 2.1% 3.1% 2.8% 8.7% 5.0%             Other Institutions 5.3% 5.4% 5.4% 1.6% 2.1% 1.8%

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But US educational attainment dropping in an international context – from #1 for older students, to #7 for 15-and above

•Reasons?•Other countries are increasing attainment and US is staying even•US better at access than degree completion•Attrition is highest among students who are the majority of new students•Declining high school graduation rates

The Attainment Challenge: Degree Completion Rates, 2004

SOURCE: OECD, Education at a Glance 2007

SURVIVAL RATES IN TERTIARY A (FOUR-YEAR) EDUCATION

54%60%

64% 65% 65% 66% 67% 67% 68% 69% 69% 71% 71% 73% 74% 74% 74% 76% 78% 79%83% 83%

91%

54%

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10%

20%

30%

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70%

80%

90%

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Closing the Gap—Number of Degrees Required Beyond Current Production by

20257

15,600,000

10,500,000

16,200,000

0

5,000,000

10,000,000

15,000,000

20,000,000

To Meet InternationalBest Performing

To Close Equity Gap To Meet Manpower Demands

Collective Cost to StatesAssuming no change in tuition

$ 31.0 Billion = Annual Costs of Additional Students at Current $ per Student

$ 78.2 Billion = Current State Contribution

39.7% =Percent Increase in Annual State Support Needed

Average Cost to Students, Assuming: No Additional State Investment9

$ 2,565 = Additional Annual Costs to Students at Public Four-Year Institutions

47.9% Increase in Tuition and Fees

(Currently $5,355)

$ 1,824 = Additional Annual Costs to Students at Public Two-Year Institutions

108.8% Increase in Tuition and Fees

(Currently $1,677)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Private Research Private Bachelor’s Private Master’s Public Research Public Master’s Public Associate’s

Med

ian

Full

Educ

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ost p

er F

TE S

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nt, 2

006

Enrollment of FTE Students, 2006

United States: Money versus students: per capita spending per student (excludes research, service and auxiliary

enterprises) against student enrollments (2006)

$ spending/student; number of students enrolled

Source: Delta Cost Project IPEDS database.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

1987 1998 2005 1987 1998 2005 1987 1998 2005 1987 1998 2005 1987 1998 2005 1987 1998 2005

Public Research Public Masters Public Associates Private Research Private Masters Private Bachelors

Med

ian R

even

ues P

er FT

E St

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t (in

2005

dolla

rs) Restricted Revenues

Private Gifts, Investment Returns, and Endowment Income

State and Local Appropriations

Tuition

Source: Delta Cost Project IPEDS Database, 19-year matched set.

}

Estimated “general purpose”=Tuition and fees+state appropriations+ portion of private gifts

($/FTE/CPI-U /2005)

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General purpose revenues are declining as a proportion of revenues among public institutions

Nationwide trends in median revenues by major source, 1987 - 2005

}

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Average Annual Percent Change in Median Spending per FTE Student – Average Annual Percent Change in Median Spending per FTE Student – Publics 1987-1998 and 1998-2005 Publics 1987-1998 and 1998-2005

  Public ResearchPublic Research Public MastersPublic Masters Public AssociatesPublic Associates

1987-19961987-1996 1998-20051998-2005 1987-19961987-1996 1998-20051998-2005 1987-19961987-1996 1998-20051998-2005

InstructionInstruction 0.5% 0.4% 0.6% 0.4% 1.0% -0.2%

ResearchResearch 3.9% 3.2% 4.3% 3.2% -3.7% 1.0%Public ServicePublic Service 5.0% 7.2% 5.4% 3.7% 2.1% 0.0%Academic SupportAcademic Support 2.3% 0.1% 2.0% 0.6% 1.0% 0.2%Student ServicesStudent Services 2.4% 0.9% 1.3% 0.4% 2.0% 0.3%Institutional Institutional SupportSupport 0.6% 0.9% 1.8% 1.2% 1.3% 0.5%Operations and Operations and MaintenanceMaintenance -0.4% 2.0% -0.6% 1.8% -0.3% 0.9%Institutional GrantsInstitutional Grants 9.5% 7.5% 7.6% 6.4% 6.1% 4.6%

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+

Spending increases most apparent in research, public service, and institutional grant aid

- +

Instruction and institutional grants funded from general funds; research and public service from designated revenues.

+

$4,602$6,328

$3,529 $4,649$1,974 $2,585

$15,215$17,469

$10,349$12,715

$9,767$11,970

$8,516$7,191

$6,085$5,416

$6,518 $6,051

$13,653

$16,635

$4,066

$4,075$8,175

$8,844

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

1998 2005 1998 2005 1998 2005 1998 2005 1998 2005 1998 2005

Public Research Public Master's Public Associates Private Research Private Master's Private Bachelors

Average Full Educational Cost per FTE Student, 1998 and 2005 (in 2005 dollars) – Excludes Spending for Research and Service

Average Subsidy Net Tuition per FTESource: Delta Cost Project IPEDS database, 19-year unmatched set.

Subsidy

Price$13,118 $13,519

$9,613 $10,065$8,492 $8,636

Cost = $28,868

$34,103

$14,414$16,790

$17,942

$20,814

As Educational Costs Rise, the Subsidy Share of Costs is Decreasing and Students Are Paying More

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The policy critique is sharpening

• Perception that higher education finance is a “dysfunctional top-line enterprise with no bottom line”

• Critique that the line between profit and non-profit is blurring

• Senate finance committee investigation into non-profit tax status

• Massachusetts state proposal to tax college endowments• Federal proposal re: excessive tuition increases