With Millennials Graduating, Gen Z May Face Lighter College Debt
(Bloomberg Businessweek) -- Public colleges and universities, which educate the majority of American postsecondary students, have had a tough century so far. Per-student funding from state and local governments has dropped 20 percent since 2001, adjusted for inflation, and was 7 percent lower in 2018 than in 1980.
This data, from a report released in April by the State Higher Education Executive Officers Association, explains a lot about higher education in the U.S.—such as why tuition at public institutions is up 67 percent in real terms since 2001; why average student debt at graduation is more than double in real terms what it was in 1996; and why state universities have gone to such lengths to recruit out-of-state and foreign students, who pay more than in-staters.
It doesn’t explain everything, though. Federal funding of student financial aid and research grants actually rose while state funding fell after 2001, with the Pew Charitable Trusts estimating that federal higher-ed spending surpassed state spending in 2010. That aid wasn’t enough to keep student debt from rising over most of that period, but since 2012 the debt increase has stalled.
This is in part a generational story. Not long after the oh-so-numerous millennials started arriving on campus in 1999, boosting full-time university enrollment 20 percent in just five years, a weak economy began to pressure state finances. Now state coffers are more full, and with almost all the millennials done with school, colleges are having to get creative to recruit from a smaller pool of potential students. This means that the postmillennials (aka Generation Z, or iGen, or whatever) are less likely to suffer through the education funding cutbacks and tuition hikes that their elders did.
● Pay It Forward
Tuition hikes helped lead to a 130 percent real rise in the average amount owed by graduating seniors with student debt from 1996 to 2012, according to an Institute for College Access & Success analysis of federal data. But from 2012 to 2016 the increase was less than 1 percent, to $29,650.
● Big Spender
U.S. total higher-ed spending was 2.6 percent of gross domestic product in 2015, tops among wealthy countries. Almost two-thirds of that came from private sources such as tuition and donations.
● Public Investment
Norway has the highest government spending on higher education, at 1.7 percent of GDP in 2015 compared with 0.9 percent in the U.S.
● State Schools Rule
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