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The Ghost of Funding Past: A Comparative Look at How State Higher Education Funding Drives Costs

The Ghost of Funding Past: A Comparative Look at How State Higher Education Funding Drives Costs

For many college students and their families, the concern of lingering student loan debt or the costs of education may be scarier than any Halloween ghoul. Though recent research from the Federal Reserve shows that the vast majority of Americans with Bachelor’s Degrees still recognize that the benefits of their education outweigh the costs, there are some people who still wonder how college degrees grew to be so expensive.

The SREB reported that the average Alabama family could spend almost half of their annual income to cover the costs associated with one student’s degree. Alabama’s students took on more debt than almost any other state in the region.

Some alumni may find themselves asking – what changed?

Well, the State Higher Education Executive Officers (SHEEO)’s annual report found that in most states across the U.S., higher education funding has not fully recovered from the 2008 recession when adjusted for inflation. Though funding in Alabama (and across the U.S.) has trended upward over the last few years, there is still a significant difference.

In Alabama, as of 2020, state spending per student still lagged 27 percent behind 2008 levels when adjusted for inflation.[i]

When one source of funding for higher education suffers, university budgets are put in a tight squeeze. Universities do their best to protect students and families while offering the highest quality educational experience, but the lack of competitive funding creates challenges.

Reliance on tuition and fees to cover operational expenses has continued to grow over the last few decades. In 1991, the student and family portion of funding for operations was only about 29 percent, but by 2016 students and families contributed nearly half of all revenue for operational expenses. During that same period, the state's contribution to operating budgets

decreased from approximately 70 percent of expenses to only about half (Seen in Graph Above). These facts are further indicators of the challenges facing Alabama’s students.

In Alabama, in 2020, for 4-year schools, 75 percent of costs were covered by the students.

This change in Alabama dramatically outpaced reliance on funding from students and families across the U.S.

However, the news isn’t all bad – Despite rising costs, college degrees still pay off – the Georgetown Center on Education and the Workforce found that college graduates make an annual premium of 75% more than their peers without a degree. The Federal Reserve shows that Bachelor’s Degree holders are more likely to experience upward mobility and less likely to lose their jobs. Further, a 2022 survey found that the majority of Americans still think higher education strengthens our economy.

The Higher Education Partnership is grateful to legislative leaders who have worked diligently over the last few years to increase funding for Alabama's colleges and universities, but there’s still work to be done! For every $1 the state invests in higher education, the state's economy receives more than $12.50 back. Increasing state funding for higher education helps universities continue to provide world-class education to generations of Alabamians.

Learn more about this topic and other data relevant to higher education in our annual Resource Guide.


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