Higher education funding is something of a mystery to me. Here are the facts I know:
1. The rise is college costs has far exceeded income growth.
Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent.
2. At the same time as costs were rising, endowments exploded.
The number of colleges and universities boasting endowments of $1 billion or more climbed by 14 last year to a record 76, nearly doubling the number of such schools five years ago.
3. With the stock market taking a hit these endowments are crumbling.
The question is:
1. Will this lead to a spike in the cost of tuition?
2. How much do other factors play a role? (states cutting back on higher education expenses)
3 How much will the credit crisis effect student loans?
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1. Possibly, it’s difficult to say. Every State’s mechanisms for setting fees in public higher ed is different. Private schools are a different deal. It’s tough to guess how they are going to respond — Harvard has taken a big hit in its endowment, and they’re going to try to address it through belt-tightening.
2. Higher ed tends to be countercyclical — bad economic times show increased enrollments, especially in graduate and professional programs. States may want to cut higher ed expenditures, but they’ll find it difficult to do. Some States (California, I’m looking at YOU) are already severely underfunding higher ed, so it’s difficult to see how they can go further down.
3. The credit freeze has already affected student loans, adversely. It’s difficult to understand why, because they are (mostly) guaranteed by the Feds. The ROR on them isn’t especially great, but it does tend to be a safe investment.