Higher education is critical for economic mobility, but rising tuition costs and a decrease of public funding means that more of the financing responsibilities could be shifted to family wealth — a particular challenge in today’s economy, the Treasury Department’s top economist said Tuesday.
Tuition has more than doubled over the last three decades, said Jan Eberly, assistant secretary for economic policy at the Treasury. But underlying that trend is a “fundamental shift” in education financing, particularly at public schools.
As public funding has been withdrawn, tuition now accounts for more than 40% of revenue, up from only 20% in the late 1980s, Ms. Eberly said. During the same time period, state and local government support fell by almost the exact same share, she said.
Ms. Eberly cited Department of Education data that estimated of the 2.9 million people who finished high school in 2009, 70% enrolled in college that same year. A decade earlier, only 63% of recent graduates enrolled in college right out of high school.
The federal government has increased its support for higher education through Pell Grants and tax credits, but Ms. Eberly said those kinds of programs have not “completely offset the substantial decline in support from state and local sources.”
In a different economy, family wealth could have cushioned against this continuing financing shift. But now, as a result of the economic crisis, there is less available in home equity for personal financing.
“Linking educational access to family resources is even more problematic, as fewer families can tap home equity to provide the resources to fund their children’s education,” Ms. Eberly said.