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.

Download a pdf of this report.

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...

Obama Invests in College Affordablity

This from Ed Week:

President Obama on Thursday proposed a huge expansion of the government's role in making college more affordable and putting it within reach of more students... The president was following through on a campaign promise to give every child the chance to go to college or pursue some form of higher education.

In his budget plan, Obama seeks to link growth of the Pell Grant program to inflation for the first time since the program began. It would grow by more than 75 percent over the next decade.

Obama seeks to save money and protect students from the current turmoil in financial markets by boosting direct lending by the government and discontinuing government-subsidized loans made by private lenders.

During the Bush administration, a massive student loan scandal exposed student lending companies that were improperly collecting hundreds of millions in federal subsidies. At the time, Education Secretaries Rod Paige and his successor, Margaret Spellings, argued repeatedly that under existing law they were powerless to stop the payments and that it was Congress that needed to act.

Obama apparently disagrees.

College choices get harder with downturn

This from the Austin American-Statesman, photo by Bret Gerbe:

Families having to put aside Ivy League dreams.

For years, Mike and Kelly D'Addeo planned to use their trove of Intel Corp. stock options to send their son Tony to a top college.

Tony would be a good candidate for any school: He's a straight-A senior at Bowie High School and captain of the football team, with near-perfect SAT scores. He's not interested in playing college football; instead, Tony talks about majoring in computer science or engineering. "I'd like to have my own business someday," he said.

But the plunging stock market has made their stock options worthless and crushed the D'Addeos' Ivy League dreams.

"I feel bad that my son has the potential to go to a top-tier school — he's worked hard; he's earned it — and we are not able to provide that for him," said Mike D'Addeo, an engineer at Intel's Austin operations.

Across the country, other families are confronting the same harsh reality as they watch the stock market and credit crisis erode careful plans to pay for college educations.

Almost every method of paying for college has been affected. The sinking stock market has shrunk investment funds. A soft real estate market means families will have a harder time tapping the equity in their homes. And private student loans have become harder to find. ...

Higher education task force to study affordability, access

FRANKFORT, Ky. – Proclaiming that no child of ability should be denied access to college because of cost, Gov. Steve Beshear today named a 25-member task force to tackle the tough issues of affordability and access to Kentucky higher education.

“It’s my belief that no person in this state with the drive and ability to succeed should be denied access to a college education because he or she can’t afford it,” Gov. Beshear said. “Yet because of cost, the door of opportunity is closed or beyond reach for too many of our children.”

Gov. Beshear said the Higher Education Work Group will be co-chaired by business leaders Mira Ball of Lexington and Pete Mahurin of Bowling Green. Other members will include business leaders, senior governmental officials and members from both houses of the state legislature. University presidents from across the state will advise the work group.

The group will be tasked with producing two reports with recommendations for Gov. Beshear. The first, due in January 2009, will among other things look at ways to reduce costs associated with college.

Gov. Beshear said he wanted ideas that were both bold and practical.

“Any recommendations for short-term action must recognize the budgetary constraints that we find ourselves in today. We can make some important steps in the short term, but they must be feasible.”

The second report, due by September 2009, will take a broader look at the long-term issue of how best to create stable state funding for public higher education. The discussion will include whether smaller tuition increases could be proposed in exchange for certain funding levels and meeting performance objectives.

“Year to year we have not been consistent in delivering the support needed,” he said. “A new roadmap must realistically consider the difficult budget circumstances we are in, but it must also create consistency, coherence and stability.”

Beshear said improving affordability and accessibility are important because more Kentuckians pursuing higher education is the chief factor in building a highly skilled and educated work force. Only 17 percent of Kentuckians have bachelor’s degrees. The national average, though, is nearly 25 percent. By 2020, the national average is projected to be 32 percent.

The governor cited four major areas of concern that the work group will address in its reports:
Making college more affordable. Residential tuition has increased by 10 percent a year over the last 10 years, compared to 7 percent in surrounding states.

Making financial aid more accessible and easier to understand.

Easing barriers to transfer from community and technical colleges to four-year institutions and graduate school. In 2006-2007, nearly 4,500 students transferred from a community or technical college to a four-year university. Although an increase over previous years, to meet goals the state has for 2020, 11,000 transfers per year will be needed.

Determining appropriate levels of state support for higher education and outlining more clear performance expectations for colleges and universities.

“We can’t be content with baby steps when other places are taking giant strides, not when we’re trying to compete with these states in the global marketplace,” Gov. Beshear said. “Rather, we must pursue new solutions to old challenges. We need dramatic and focused strategies that lead to transformational and enduring change. Today, in the critical area of building tomorrow’s workforce, we begin our important work.”

Members include:

• Joan Coleman, President, AT&T Kentucky, Louisville
• Gary Cox, President of the Association on Independent Colleges and Universities of Kentucky
• Richard Crofts, Interim President, Council on Postsecondary Education
• Edward Cunningham, CEO, Kentucky Higher Education Assistance Authority
• David Grissom, Chairman, Mayfair Capital, Louisville
• Jean Hale, Chairman & CEO & President, Community Trust Bank Corp, Pikeville
• Larry Hayes, Secretary of the Governor’s Executive Cabinet and Acting Secretary, Cabinet for Economic Development
• Ed Holmes, President, EHI Consultants, Lexington
• Alice Houston, President & CEO, Houstin-Johnson, Inc, Louisville
• Ronnie James, President & CEO, James Marine, Paducah
• Robert Lekites, President of UPS Airlines, Louisville
• Jonathan Miller, Secretary, Finance and Administration Cabinet
• Helen Mountjoy, Secretary, Education and Workforce Cabinet
• Jim O’Brien, Chairman & CEO, Ashland Oil, Covington
• Paul Patton, former Governor, Pikeville
• Ben Richmond, President, Louisville Urban League
• Steve St. Angelo, President, Toyota Kentucky, Georgetown
• Vic Staffieri, CEO, Chairman & President of EON, Louisville

Read the Governor’s Executive Order (228KB PDF)

Listen to Governor Beshear's statment at the press conference (6.33MB MP3)

SOURCE: Governor's press release

Is college no longer affordable?

This from H-L:

The Price of Higher education

Without financial aid, Jonathan Curry describes his chance of attending the University of Kentucky in a single word. ”Impossible,“ said the senior from Henderson. ”I wouldn't be here at all.“

With the help of federal, state and UK scholarships, Curry is on schedule to graduate next spring.

Still, college has hardly been free from struggle. He works 15 to 20 hours a week taking tickets at Comedy Off Broadway, and donates blood plasma as often as twice a week.

”Sometimes I need groceries, and I have $5,“ he said.

His mother, Cynthia Curry, works two jobs and they still don't have enough to cover college bills. So on top of the $10,000 he has already borrowed, he expects to take out $16,000 more in loans this year.

”It's more and more debt,“ he said. ”There's something wrong somewhere.“

What's wrong is that the cost of a college education has mushroomed in Kentucky over the past decade.

Meanwhile, the state has more than doubled the amount it spends on financial aid programs, but that doesn't offset the increasing costs.

This summer, the Kentucky General Assembly's Joint Interim Committee on education has begun a series of meetings that lawmakers hope will come up with some solutions by the time they reconvene during the regular session in January 2009.

There are no easy — or cheap — answers...