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Will the Rising Cost of Tuition Put a College Education Out of Reach
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Indiana University Bloomington recently announced a 5.5 percent increase in tuition and fees in response to declines in state funding, and it is not alone among Indiana colleges and universities. What will the continuing decline of state funding for higher education mean for Hoosier students?

State funding for public colleges and universities

In a strong economy, public colleges and universities receive funding from the state, which allows schools to keep costs for students relatively low. Yet, when the economy weakens, state revenues decline, and state support for higher education diminishes. Colleges and universities must raise tuition, cut costs and find other revenue sources to cover the reduction in state funding.

Indiana University President Michael McRobbie addressed concerns over decreased state funding, rising tuition costs and increased amounts of student debt in his annual State of the University speech in September. According to President McRobbie, state support for Indiana University has “decreased by 30 percent in constant dollars over the last two decades.” During the current budget year, Indiana University will receive only 18 percent of its funding from the state, as opposed to approximately 50 percent twenty years ago. This reduction in state funding has been significant. Indiana public colleges and universities need to reduce costs and find ways to generate revenue from other sources.

Cost cutting and alternative funding – including tuition increases

Indiana University has responded to the continued decline in state funding by containing costs. These responses included reducing its base budget by $36 million over the past two years and offering an early retirement plan that will save Indiana University almost $10 million. The university also achieved an upgraded credit rating of AAA which lowered the cost of the university’s debt service. The upgraded credit rating has saved the university more than $30 million.

Even with those savings, further efficiencies and additional revenues are needed. Indiana University’s 5.5 percent increase in tuition and fees at the Bloomington campus exceeds the 3.5 percent increase recommended by the Commission for Higher Education. In fact, according to the State Budget Committee, every higher education institution in Indiana, except for Ivy Tech Community College and a few of Purdue University’s regional campuses, exceeded State Commission for Higher Education guidelines for tuition increases.

How will the changes in funding impact Hoosier students?

While it is completely rational for universities to raise tuition in an effort to stay in line with competing schools, President McRobbie recognizes that higher tuition rates and, as a result, increased student debt, “are both serious issues that have the potential to threaten the very foundations of public higher education.”

According to President McRobbie, it is inevitable that “reductions in state funding mean that the financial burden of higher education has been passed in part from the state as a whole to individual students and their families.” Unfortunately, it is during hard economic times that higher education is the most necessary in order for an individual to advance, but a college degree can become out of reach for many middle- and low-income students. As more of these potential students look to lower-priced options such as for-profit colleges and online programs, higher tuition rates may eventually price a public university education out of existence.

Decreased state funding, rising tuition costs and other topics in higher education will be discussed in further detail at the annual Legislative Conference on Thursday, December 15, 2011. Don’t miss this opportunity to gain valuable insights into the issues at stake for Hoosiers. Registration for the Legislative Conference, which includes continuing legal education credit, and information on this year’s lineup of speakers is available at https://www.bgdlegcon.com/. 

  • Of Counsel

    Brenda is a member of the Economic Development Department and concentrates her practice in the areas of government services and public finance law. She regularly works with cities and towns all over Indiana and advises them in a ...

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