Financial Strains Growing for Students and Colleges
As the 2016-17 academic year commences, community colleges and their students are encountering a financial landscape fraught with peril.
Despite talk of free community college tuition for all, tuition and other costs are on the rise in most places. State governments are continuing to retreat in their support of community colleges. Grants under the bedrock Pell Grant program fall well short of what it actually costs to attend college, contributing to a decline in enrollment. A record number of student loans are in default.
This year, more members of National Council of State Directors of Community Colleges report that their institutions are under greater fiscal strain than in any year since the Great Recession.
The strain, in turn, is creating unrelenting upward pressure on tuition. More than at any time in their seven-decade history, community colleges rely on tuition rather than on state and local appropriations, placing more of the burden of higher education on the shoulders of students and parents. In the 10 years that ended in 2012–13, the percentage of education and related expenditures covered by net tuition revenue rose from 26 to 39 percent, reflecting a broad state government disinvestment in higher education.
In contrast to past decades, when state spending was a bulwark of community college financing, many colleges receive a relative pittance from their state government. According to a report from the Education Policy Center at the University of Alabama, 159 institutions in 2013-14 received 15 percent or less of their total revenues from state appropriations. Another 91 received 10 percent or less of their total revenues from state appropriations, and 59 received 5 percent or less.
Those numbers signify a fundamental shift in how community colleges have been funded. The Education Policy Center report puts it this way: “Declining state funding has changed the social compact between states and the local boards of trustees responsible for governing community colleges. Seven decades after the 1947 Truman Commission challenged states to make the 13th and 14th years geographically universal, deep state funding cuts have changed the basic rules of the game.”
The shift in community college financing has contributed to the huge and growing inequities between the higher education sectors. Community colleges, which educate students with the greatest needs, spend far less per pupil than do four-year institutions.
According to the Century Foundation, private research universities spend $67,359 per student, five times as much as community colleges, which spend $12,918 per student. Public research universities spend $37,408 per student.
Community colleges also receive far less public money than do their four-year public higher education cousins. Direct public funding is more than twice as high at public sector research universities than at community colleges. That means moreaffluent students who can afford to attend a more prestigious program are then rewarded with their school receiving an outsized portion of public support, the report said.
“This public support is only the tip of the iceberg, since wealthy private colleges receive enormous tax subsidies that are largely hidden from the public,” the Century Foundation report added. “Based on the theory that nonprofit private colleges serve the public interest, they are exempt from property, sales, and income taxes, and donations made to nonprofit universities are tax deductible to the donor.
“Even if one thinks the gross inequalities in spending and subsidies are perfectly justified, the growing gap in spending over time seems hard to defend. In the period from 2001 to 2011, funding increased substantially at public and private research universities, while public community colleges actually saw a $904 decline in real funding. These inequalities are particularly difficult to swallow, given the evidence to suggest that community college students on average have greater—not fewer— needs than four-year college students.”
There is also substantial inequality in funding within the two-year sector. Community colleges typically receive some local funding. How much they get depends on the wealth of their regions. Colleges located in rural areas without strong economies can’t rely on localities for much financial support.
The situation is particularly severe at the nation’s 613 rural community colleges, which have always lacked basic economies of scale, according to the EPC report. Financing is also acute at the 39 urban and 87 suburban community colleges in the 25 states whose community colleges receive less than 10 percent of their total revenues from local appropriations. At these institutions, the local share is typically near zero.
That means community college students in similar financial circumstances will encounter dramatically different financial barriers to attendance depending on where they live. That’s the central point of a brief prepared for the Urban Institute by Sandy Baum, a senior fellow in the Income and Benefits Policy Center at the institute, and David Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges.
“In 2015–16, the average published annual tuition and fee price for full-time students at community colleges was $3,430,” the brief says. But in California, where 21 percent of the nation’s community college students are enrolled, community colleges charged full-time students $1,420, and a generous tuition waiver program benefits students with incomes below 150 percent of the federal poverty level for their family size. This tuition waiver applies to more than 50 percent of all students and represents over $800 million in assistance; it is outside of any federal or state grant aid students receive. However, living costs in California are higher than in most parts of the nation, placing a different but no less challenging financing burden on students.
“At the other end of the tuition spectrum, the Community College of Vermont had a published annual price of $7,530 for 2015–16. In that state, only 21 percent of public college students are enrolled in the two-year sector compared with about 60 percent in California, Illinois, and Wyoming. These discrepancies have enormous policy implications for state financial aid programs and other efforts to increase educational opportunities.”
Meanwhile, significant numbers of community college students are defaulting on their student loans. According to the U.S. Department of Education, 18.5 percent of community college student loan borrowers who entered repayment in 2013 are in default. That’s a drop from 19.1 percent from the year before. But it’s more than the overall rate of 11.3 percent.
The good news is that only 17 percent of community college students take out student loans. Most have relatively small balances. Research published by the White House Council of Economic Advisors showed that twothirds of all defaults in fiscal year 2011 were of those with less than $10,000 in debt.
Defaulting on a student loan has serious consequences. Students in default — which means that have made no payments for 360 days — lose eligibility for federal student aid. Federal loan defaults are recorded on their credit histories for seven years and can disqualify them from lowinterest car loans and mortgages.
The Association of Community College Trustees has called for reforms in the federal student loan program to reduce the number of defaults.
“The reality is that default penalizes not only students, but our communities,” said J. Noah Brown, president and CEO of the ACCT. “We cannot expect our communities to thrive if a significant number of borrowers default, and our college leaders are making progress toward improving defaults to the best of their abilities. It is incumbent upon the Education Department to likewise make adjustments to existing policies so that students who do falter won’t continue to suffer undue consequences.”