The College Affordability Crunch in Kentucky

Meeting the Costs of College in an Era of Eroding State Support

A decade of state budget cuts in higher education,
rising tuition, underfunded need-based financial
aid and stagnating incomes are combining to make
college less affordable in Kentucky. Student debt
is on the rise, and Kentucky's college students
--particularly low-income and adult students--
face significant challenges in paying for college.
The state needs a new commitment to college
affordability for all its citizens.

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This from the Kentucky Center for Economic Policy:

Progress in higher education is essential to building a productive and innovative economy, an informed and empowered citizenry, and a higher quality of life among families and communities. However, affordability of higher education is a growing challenge. Over the last ten years, Kentucky has shifted the primary responsibility of paying for postsecondary education away from the state in the form of appropriations to institutions and over to students in the form of tuition and fees. State need-based financial aid reaches only a portion of those who qualify and has received shrinking priority relative to programs and tax breaks that benefit students with higher incomes. Adult students, among whom higher education needs are substantial, receive limited support. These problems are compounded by trends in federal financial aid and stagnating wages for families. To address these challenges, Kentucky needs a new commitment to college affordability for all its citizens.

Introduction

There is wide agreement that higher education is beneficial to Kentucky’s economic future. Greater educational attainment can increase productivity, attract investment and result in greater innovation and entrepreneurship. It can also help meet growing skills gaps; according to one estimate, by 2018 around half of jobs in Kentucky will require at least some form of postsecondary education.[1] Yet only 28 percent of Kentuckians age 18-64 have an associate’s degree or higher, ranking Kentucky sixth from the bottom.[2]
Higher education is also important to the quality of life for Kentucky’s families and communities. Workers with higher levels of education tend to have higher earnings, giving their families a better chance at a middle-class standard of living.[3] And increases in educational attainment have social benefits. A more educated population is less likely to commit crimes, more likely to be civically involved and more likely to vote.[4]

Since enacting postsecondary education reform in 1997, Kentucky has made important steps forward in higher education attainment. The share of adults ages 25 to 64 with an associate’s degree or higher has climbed from 25 percent in 2000 to 31 percent in 2009. More students are enrolling in college, and graduation rates have improved.[5]

However, huge gaps in higher education remain. Educational attainment levels are still too low. Less than half of those who enroll in four-year universities graduate in six years, while less than a third of those who enroll in community colleges graduate within three years. Thirty-four percent of whites in Kentucky had an associate’s degree or higher in 2009, but only 22 percent of minorities—a gap that has grown since 2000.[6] College attainment also varies widely by geography—30 percent of Oldham County residents ages 25 and older have a two-year degree or higher compared to only five percent of Knox County residents.[7]

There are many factors associated with success in postsecondary education, including: college readiness; the importance of education to career and personal goals; the accessibility of educational opportunities (due to time constraints and geographic location); the support services that make college attendance possible; and students’ aptitude and capacity to persevere. Another critical factor is the affordability of higher education. On that factor Kentucky has been losing ground.

State is shifting higher education costs to students

Over the past ten years, the primary responsibility of paying for higher education in Kentucky has quietly shifted away from the state in the form of appropriations to public universities and community colleges and to students in the form of tuition and fees.  Figure 1 shows that in 2000 the state paid two dollars of higher education expenses for every dollar paid by students. But since 2008, students have paid a larger share than state government. [8]

Sources: Office of the State Budget Director, Kentucky Revenue Department

Making students the primary payers of higher education was not part of the state’s vision for comprehensive postsecondary education reform contained in major legislation passed in 1997.[9] Instead, this shift was the byproduct of budgeting choices in the context of an inadequate state tax system in need of reform.[10] In the face of tight budgets, lawmakers in essence chose to increase taxes on students.

In inflation-adjusted terms, the state’s appropriation for public universities and community colleges was 14 percent lower in 2010 than it was in 2000. Over that same period, enrollment in higher education increased 32 percent in part due to greater recognition of the need for higher education for success in the workforce—and more recently, as people head back to school because of a lack of job opportunities. To keep up with costs in the face of climbing enrollments, higher education institutions dramatically increased tuition after a decade of relatively flat tuition rates.

In effect, Kentucky has gradually moved to a more market-based approach to higher education in which broad-based subsidies to lower the costs of college have declined. Kentucky did make a commitment to increase investment in financial aid, deciding in 1998 to dedicate almost all of its lottery revenues to aid programs. Most of those funds have gone to a three-pronged system—two programs based on need, the College Access Program (CAP) and the Kentucky Tuition Grant (KTG) program, and one program based primarily on merit, the Kentucky Educational Excellence Scholarship (KEES) program (see appendix for more on state financial aid programs).

While those funding increases were important, state funding for financial aid has grown more slowly than tuition. Figure 2 shows revenue from tuition and fees compared to state spending through the Kentucky Higher Education Assistance Authority, which operates state financial aid programs.[11] Institutional tuition revenues have grown 66 percent since 2004 while state financial aid spending has grown only 15 percent...