The Funding of Higher Education - Report Example

Public Policy: The funding of higher education ABSTRACT This report discusses the higher education scenario in US with special focus on funding given to students for pursuing higher education sources. It discusses the situation of high debts for students because of high cost of education and the consequent fallout in terms of a decline in number of students pursuing higher education. Even if the students do enroll for such programs, most of them do not complete the courses because of lack of funds. INTRODUCTION A secure higher education is one of the best investments any parent, any state or any country can make for its future citizens and for the nation as a whole. The same is true for United States of America or any third world country. According to the study by Department of Education in US by Baum and Payea , by getting a college degree, a student’s worth increases by 75% than when he has only a high school diploma. With increasing globalization, there is a marked change in the profile of labor market with more and more jobs requiring a minimum of a college degree. Moreover, from a country’s point of view, a better educated population contributes more significantly towards the country’s growth and has lower health care costs because of higher earnings IN addition the socially knowledgeable citizens are able to protect their rights and are able to work for the betterment of society and country in general. In fact, it was the civil rights movement which triggered the enactment of The Higher Education Act of 1965 that started the federal student loan programs. (Swarthout, 6) However, things have changed in the past decade. The government support for higher education has declined and as a result, burden of tuition and fees have fallen entirely on the students themselves. The Scholarships and Grants are not proving o be effective with less and less students being able to benefit from them. With increasing costs, students are forced to take more and more debt to pay for their degrees. It was seen that out of all the four-year college graduates with student debt, about two-thirds left school in 2004 as compared with less than one-third in 1993. (Swarthout, 4) Thus, US faces a very peculiar problem as there is a high percentage of students facing debt who are reaching the job market. This is not a good sign for the economy as well a jobs that have a high social value but lower salary structures such as teachers and social service providers. Therefore, it is important for US government and citizens to work collectively to solve this problem as the future of the country depends on these two basic high value jobs which no one wants to take up especially since they have large loans to repay. Amidst fear of deteriorating American higher education system and alarmed by dropout rates of students from universities and colleges, the US government set up a Commission on the Future of Higher Education, also known as the Spellings Commission, on September 19, 2005. The nineteen member Commission was given the responsibility of devising a strategy for reforming post-secondary education, with a particular focus on preparation of students for the 21st-century workplace and how the high schools are preparing the students for post-secondary education. The Spellings commission in its report focused on four areas of access, affordability, the standards of quality in instruction, and the accountability. The accountability was to the stakeholders in their respective constituencies such as the students, families, taxpayers, and other investors in higher education. In this report, we will discuss the literature available on this topic and then further go on to discuss the US higher education in comparison to other countries. We will also take a look at the problems of inadequate fundings and how these can be minimized. Finally, the findings will be summarized and the broader implications will be discussed. LITERATURE REVIEW There have been a lot of studies on the status of higher education and how it is faring in terms of number of students enrolling or completing the courses. There have international studies as well which have concentrated on the time-series evidence for some countries and on more detailed evaluations of grant programs in USA. Many experts have tried to link funding with the enrollment figures and the evidence seems to indicate that grants have a positive effect on enrolment and the effect is higher for students in lower income groups. A study on the above issue has shown that a one per cent increase in public funding more or less increases enrolment by one per cent (Lanot, Winter-Ebmer and Wirz, 86) Similarly, many experts have researched on the economics of higher education and the sensitivity of enrollment to tuition changes (Allen and Shen, 468; Bryan and Whipple, 564; Chressanthis, 210; Heller,650; Leslie and Brinkman 201; Koshal and Koshal, 580; McPherson and Schapiro, 310 ; Ghali et al. 470) Their findings are same as before that if there is an increase in tuition fees by one percent, enrollments decline by about one-half of one percent that is the enrollments increase when tuition and fees are lowered and vice versa. But this effect is quite minor in nature. Actually, the effect of fees increase depends on other factors as well such as income groups of the family that is the students from lower income group will be more responsive to changes in tuition and fees compared to the students from higher income group.(Chressanthis, 210 ). Similarly, As per Leslie and Brinkman, a majority of students in two-year courses are from lower-income families and are thus more sensitive to price. Another study found out that students in public universities were more responsive to changes in fees than those who study in private institutions. And as Heller (650) pointed out – all these findings are consistent with theories of price and demand of economy according to which, the price and quantity demanded are inversely related, and demand decreases as the price increases. As tuition and fees have risen, students have taken financial aid to help pay for those increases. In 1999-2000, the average student loan debt for a full-time student at a four-year institution was $16,928. (USPIRG) This was an increase from $9,188 in 1992-93. . The government added to their woes by announcing a largest cut to higher education in the history of federal student aid in 2006. This decreased the student aid by about $12 billion. Thus more and more students are now relying on student loans to finance their education and this has resulted in large number of students graduating with debt. This increasing debt levels might have serious consequences on career choices by students, or their decisions to pursue graduate and professional studies. Number of researchers have investigated these problems but they have not been able to establish any statistically significant relationship between undergraduate borrowing and enrollment in a graduate degree program. (Choy, 8) HIGHER EDUCATION : TRENDS AND CHALLANGES Around the world and in most of the European countries higher education is highly subsidised by the public sector. This is done because it is believed that a better educated population will have better chances of improving the nation and its economy and there will be more civic participation in political and democratic processes and thus the life will be more richer and free. Moreover, social justice warrants that students from economically weaker sections of society should have equal chance of attaining higher education and should be helped with financial aid. A look at the higher education scene in USA shows that the America is slipping in comparison to the world countries in this sphere. As per Measuring up, 2006, the United States is still among the world leaders in the proportion of 35- to 64-year-old adults with college degrees, but it drops to seventh in the educational attainment of younger adults (ages 25 to 34). Thus there will a large gap in the workforce when the previous generation retires. See figure 1 in Appendix. A look at table 1 shows that USA has a net entry rate of 42 & in college education. Similarly, the United States ranks in the bottom half—16th among 27 countries compared— in the proportion of students who complete college degree or certificate programs (see figure 2 in appendix) Moreover, it has been seen that the high school graduation rates have also decreased and the chance of a student of 9th grade getting enrolled in college four years later is less than 40%. Table 1 Country Net entry rate 2001 New Zealand 76 Finland 72 Sweden 69 Poland 67 Australia 65 Norway 62 Iceland 61 Hungary 56 Netherlands 54 Korea 49 Spain 48 Country average 47 United Kingdom 45 Denmark 44 Italy 44 United States 42 Japan 41 Slovakia 40 Ireland 38 France 37 Austria 34 Switzerland 33 Belgium 32 Germany 32 Czech Republic 30 Source: OECD, Education at a Glance, 2003 A look at table 2 and table 3 in appendix show that US spends more than any other country on its students and higher education institutions but it seems that this is mot enough The studies have shown that paying for college is becoming more and more difficult for most American families, specially for those who belong to modest and low incomes. And this can be seen by the increase in student debt. Thus even after taking the financial aid, the students and their families have to share an increasing percentage of their income to pay for their college education at almost all public and private two and four-year campuses. Thus as shown in figure below, the rate of increase in the price of college is now more than the price increases in other sectors of the economy including the health care. Over these years, median family income increased by 127% while college tuition and fees by 375%. FINDINGS From the above discussion we find that American higher education system is in need of serious introspection especially in terms of student funding schemes. There participation in higher education is constantly declining because of higher costs and lower financial aids by government. And there seems to be direct relationship between the family incomes and the decision to pursuer higher education in US. There are three main components in the funding of American higher education: public funding of teaching and research activities (state and federal), private funding and funding through student-aid. The first one is mainly focused on research and development activities as is obvious from the name itself. The second component of funding is coming from the private contributions and include revenues from fees etc. Generally, the private institutes depend on the fees and tuitions for half of their revenues. And the third stream is the funds for student aid in form of grants, scholarships, work-study programs and loans. Federal government is the largest contributor with 75% of all funds for undergraduate student aid. Students may receive funds from more than one type of student aid (NCES, 348) But all is not lost yet. The US government passed the College Cost Reduction and Access Act in 2007, which is aimed at providing increased aid to students and more money in additional grants for low and middle-income students. It will also help students in managing their loans by lowering interest rates and giving easy repayment options. CONCLUSIONS From the above discussion, we can conclude that there have been substantial decline in the number of students enrolling for higher education and a significant increase in student debts to cover their educational needs, in the recent decades. In addition, there are significant differences in response to fees increases among students from families of different income levels, among racial groups, and between students in community colleges and four-year institutions Thus only wealthier families are being able to afford higher education for their children. But US government seems to have taken note of the situation and is coming out with proposals and actions to improve the situation. . APPENDIX REFERENCES Allen, Robert F., and Shen. “Some New Evidence of the Character of Competition Among Higher Education Institutions.” Economics of Education Review, Vol. 18, No. 4, 1999, 465-470 Baum, Sandy and Kathleen Payea, “The College Board, Education Pays: The Benefits of Higher Education for Individuals and Society,” Revised Edition 2005. Bryan, Glenn A., and T. W. Whipple. “Tuition Elasticity of Demand for Higher Education Among Current Students.” Journal of Higher Education, Vol. 66, No. 5, 1995, 560-574. Choy, S. P. “College Access and Affordability” Education Statistics Quarterly Postsecondary Education. http://nces.ed.gov/pubs99/quarterlyjul/4-Post/4-esq12-b.html, 1998 Chressanthis, G. A. “The Impacts of Tuition Rate Changes on College Undergraduate Headcounts and Credit Hours Over Time ¾ A Case Study.” Economics of Education Review, Vol. 5, No. 2, 1986, 205-217 Ghali, M., W. Miklius, and R. Wanda “The Demand for Higher Education Facing and Individual Institution.” Higher Education, Vol. 6, 1977, 477-487. Heller, D.E. “Access to Public Higher Education, 1976 to 1994.” Annual meeting of the American Educational Research Association, San Diego. (http://wwwpersonalumich.edu/~dheller/papers/aera98.pdf), 1998 Lanot, Gauthier et al, “Public funding and enrolment into higher education” 2001, 86-89 Leslie, L. L., and P. T. Brinkman “Student Response in Higher Education.” Journal of Higher Education, Vol. 58. No. 2, 1987, 179-204 Koshal, R. K., and M. Koshal . “Determinates of Tuition at Comprehensive Universities.” Applied Economics, Vol. 30, No. 5, 1998, 579-584 McPherson, M. S., and M. O. Schapiro “Does Student Aid Affect College Enrollment? New Evidence on a Persistent Controversy.” The American Economic Review, Vol. 81, No. 1, 1991,. 309-311. National Centre for Education Statistics, Digest of Education Statistics 2000, NCES: Washington DC, 2000. Swarthout, Luke, “Paying Back, Not Giving Back: Student Debt's Negative Impact on Public Service Career Opportunities”, 2006 State PIRGs’ Higher Education Project, 2006 Read More