For Immediate Release
Contact: Eric Lupher
Organization: Citizens Research Council of Michigan
Date: January 10, 2023
Livonia, MI – Today, few argue about the benefits of obtaining a college degree, and data show high-paying jobs are increasingly reserved to those who have one. A new report from the Citizens Research Council of Michigan suggests that rising tuition and fee charges at public universities and community colleges are making it more difficult for some students to achieve those benefits. The report also points to a key factor driving this decline in college affordability: stagnant growth in public operating support for these institutions.
The new report, Out of Reach: Examining the Price of Higher Education in Michigan, analyzes federal data on higher education finances between 1989 and 2019 to document the precipitous decline in affordability of tuition and fee charges over that period. Tuition and fees at Michigan public universities equated to 7.4 percent of state median household income in 1989; by 2019, that percentage had grown to 21.6 percent. Community college tuition in Michigan grew from 3.2 percent to 5.8 percent of median household income over the same period. Michigan is not alone as the report documents similar trends for universities and colleges across the country.
College and university spending growth alone cannot explain this sharp uptick in tuition. For example, while tuition rose by 6.2 percent annually at Michigan public universities over the period, instructional and student services spending per student increased by a lesser 3.5 percent per year and administrative and support services spending rose by just 4.3 percent annually.
“Tuition certainly goes up in part to meet institutional spending needs, but spending growth can’t explain all of the growth we see in tuition charges,” said Bob Schneider, Senior Research Associate for State Affairs. “Something else is happening, and we think that ‘something else’ is the really slow growth in public support experienced by public institutions of higher education, particularly universities, over this 30-year period.”
Public institutions rely on both tuition revenue and government operating support to finance their educational programming, but the share of revenue coming from public support has fallen over the decades, particularly for universities. In 1989, Michigan public universities received about 61 percent of this revenue from public support, with only 39 percent coming from tuition. Over the next 30 years, however, public support to Michigan universities grew at an annual rate of only 0.4 percent on a per-student basis. As a result, by 2019, those revenue shares flipped, with 78 percent of these key revenues coming from tuition and only 22 percent from public support.
In a nutshell
- Growth in tuition and fee charges at public universities and community colleges is making college less affordable to the typical household. For public universities, average annual charges as a percentage of median household income have grown almost three-fold over the last three decades.
- Tuition has risen significantly faster than institutional spending, so spending alone cannot explain the sharp growth in tuition charges. Data analysis suggests that slow growth in public operating support has been a key driver, especially for public universities.
- While growth in financial aid grants has helped mitigate some of the out-of-pocket tuition and fee costs to students and families, affordability has still declined even after factoring in increased financial aid availability.
Growth in the availability of financial aid grants has helped mitigate some of the increased tuition costs, but affordability has declined even after controlling for financial aid. Further, significant cuts in state-based financial aid in 2010 made matters worse for Michigan students.
“Data show that in academic year 2003-04, more than 55 percent of first-time university undergraduates in Michigan received state or local based financial aid,” said Schneider. “Nationally, that was true for only 30 percent of those students. But by 2018-19, after the budget cuts in Michigan, less than 12 percent of first-time university students in Michigan received state and local aid, while the percentage rose to almost 39 percent nationally. So in Michigan, students saw both rising tuition charges and a decline in this important component of financial aid.”
“We know that Michigan’s economic future will depend critically on the talent of its workforce” said Eric Lupher, President of the Citizens Research Council of Michigan. “A college degree not only helps Michiganders obtain good-paying jobs, but also helps make Michigan an attractive place for business development. This report really sheds light on how decades in stagnant growth in public support for higher education has made college less affordable to the average family.”
Paper copies are available upon request.