Demographics, student loan debt and falling enrollment — particularly among international students — are growing risk factors for higher education credits, analysts say. The trend comes after years of declining state support for higher education that has left public colleges and universities more dependent on tuition.
“The higher education industry has reached a critical juncture with decreasing financial support (as evidenced by declining state appropriations as a percentage of public university operating budgets), increasing student debt, and rising skepticism about the value of a four-year college degree,” a March 14 report from S&P Global Ratings said.
“We believe some of these issues stem from the revolution of technology and the raised expectation for higher education, which have intensified competition among institutions to invest in human capital as well as in facilities to transform the way they provide their services,” wrote S&P analysts led by Ying Huang. “Other pressures arise from unfavorable demographic trends that are projected to continue in various regions across the country.”
Overall state funding for public two- and four-year colleges in the school year ending in 2018 was more than $7 billion below its 2008 level after adjusting for inflation, according to the Center on Budget Policy and Priorities. The average state spent an inflation-adjusted $1,502, or 16%, less per student in 2018 than in 2008.
Per-student funding in nine states — Alabama, Arizona, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Pennsylvania, and South Carolina — fell by more than an inflation-adjusted 30% over that period, according to an October report from CBPP.
Annual tuition at four-year public colleges has risen by $2,651, or 36%, since the 2008 school year, the center reported. In Louisiana, tuition at four-year schools has doubled, while in six other states — Alabama, Arizona, California, Colorado, Georgia, and Hawaii — published tuition is up more than 60%, the
“These sharp tuition increases have accelerated longer-term trends of college becoming less affordable and costs shifting from states to students,” the report’s authors said.
These trends have already shown up in the consolidation and closure of small private colleges in the Northeast and Midwest, but the enrollment issue is surfacing even in fast-growing Texas, as well as its less economically robust neighbors Arkansas, Kansas, New Mexico and Oklahoma.
Over the past two years, the number of international students enrolled at public universities in Texas declined 9%, according to the Texas Higher Education Coordinating Board. The drop in international students seeking master’s degrees was even greater at 25%.
The falling numbers prompted the graduate student associations of major Texas universities to send a recent letter to the Texas congressional delegation seeking relief from a recent crackdown on immigration.
“Nearly 51% of all basic research in the United States is conducted by international students, who also make up around 50-70% of American science, technology, engineering, and math programs,”
In graduate level computer science classes, international students account for 63% of the full-time students at Baylor University, 76% at Rice, 86% at Texas A&M, 83% at the University of Houston and 67% at the University of Texas at Austin, according to the National Science Foundation. Similar percentages are found in the electrical engineering programs.
Tuition and other student-generated income represent the largest revenue stream for colleges and universities, making up 50% of income for public and 74% for private universities that offer four-year degrees, according to Moody’s Investors Service.
As states struggled in the wake of the recession and reduced funding, the extent to which state higher education institutions rely on tuition increased sharply, from 35.8% in 2008 to 47.8% in 2013, and has held largely steady since then,
University of New Mexico regents were alarmed to learn that student population fell 7.2% and that the number of first-time freshmen dropped 17.6% between fall 2017 and fall 2018. Officials had expected enrollment to decline only 2.5%.
Enrollment at the flagship university has fallen every year since 2012. Total post-secondary enrollment in the state fell 18.6% between 2010 and 2017, according to the New Mexico Higher Education Department.
Citing declining enrollment and state support, Moody’s downgraded UNM to Aa3 from Aa2 in November, returning the outlook to stable.
Among reasons for the decline, Admissions and Recruitment director Matthew Hulett sees an increasing reluctance among young people to take on debt, and growing price-consciousness.
New Mexico State University has seen its total enrollment plummet 23% since 2010, prompting the Las Cruces-based university to boost scholarships more than 70% since 2017.
At the University of Colorado, out-of-state students now make up the largest share of enrollment after the university pursued higher tuition in the face of falling state support. In-state tuition provided $234 million or 27% of the education budget in 2018. Out-of-state tuition provided $474 million, or 54%, of the budget.
Administrators at CU and other state universities say an increase in non-resident population is the only way to avoid raising in-state tuition even higher.
In Kansas, regents reported that enrollment at all state-supported universities was down slightly, including the University of Kansas. Kansas State University reported a 3% drop in 2018. A 4% drop in enrollment in 2017 led KSU to cut its budget by $15 million or about 5.7%.
Kansas legislators in 2018 returned $15 million, or about 64% of the cuts that former Gov. Sam Brownback had made for the state’s higher education system. However, KSU’s $3 million share of the restored state funding did not cover all the gaps in revenue.
Neighboring Arkansas experienced a similar enrollment drop of 1.3% in 2018 and a 5.4% decline over the past five years, according to the State Department of Higher Education. Lower birthrates during and after the 2008 recession will translate to lower enrollment in the future, officials said.
The University of Arkansas at Little Rock faced a $9 million budget shortfall for the 2018 school year due to an enrollment drop of 2,000 students or 18% of enrollment.
Oklahoma cut higher education funding over the previous five fiscal years by 17.8%, more than any other state in the nation, according to a survey by the University of Illinois. The cuts coincided with a deep downturn in oil prices that led to a series of revenue crises.
The only other states whose last five-year appropriations accounted for an overall decrease were Louisiana, West Virginia, Alaska, Kentucky, Arkansas and Kansas, according to the study.
The decreases ranged from 11.5% in Louisiana to a 1.8% decrease in Arkansas and Kansas.
To compensate for lost state support, Oklahoma universities and colleges increased tuition, cut programs, and let go of faculty and staff. Enrollment in 2018 continued to fall in public universities and colleges, according to state reports.
In Arizona, lawmakers are considering two measures that would restore some of the lost funding for state colleges and universities. Senate Bill 1345 and Senate Concurrent Resolution 1011 would require a public vote in 2020 to amend the state constitution.
Two bills recently introduced in the Arizona state legislature would work together to increase funding for primary, secondary and post-secondary education. The proposals would increase the share of sales tax earmarked for education from the current 0.6 cent to a full penny per dollar.
In Utah, the state with the lowest median age, the trend is more positive. For the 2018-19 school year, the number of students at institutions in the Utah System of Higher Education increased about 2.17% since 2017.
