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6 challenges facing state universities

(MoneyWatch) While elite private universities tend to attract the most media attention, the bulk of American students attend public institutions in their own state.

That is why it's important to understand the economic and political forces that are impacting the thousands of state colleges and universities scattered across the country. Every year the American Association of State Colleges and Universities releases a report that discusses the most important issues facing these state institutions, as follows:

1. Performance-based appropriations. State legislators will continue exploring ways to improve state universities by developing performance-based funding. Thirty-three states have expressed an interest in this approach, versus just 10 states two years ago. States want universities and colleges to do a far better job of retaining students and making sure they graduate.

2. Shrinking dollars. States have dramatically de-invested in public higher education in recent years. According to the College Board, inflation-adjusted state appropriations per full-time student decreased 25 percent since the 2006-2007 school year. The institutions will continue to face financial challenges.

3. Rising tuition. Since 1987, tuition and fees have doubled at state universities, while state funding has shrunk by a third. Several states also are exploring what entity should have the power to raise tuition rates, which could mean taking such authority away from schools. Tuition caps and freezes will also be on the table in some states.

4. Grant aid. Student demand for state grants will continue to outstrip supply, while an already widespread policy of rewarding rich students continues to grow. In the 2010-2011 school year, for instance, state funding for need-based financial aid rose 1.7 percent, but merit assistance that isn't linked to need-based aid rose 11.2 percent. Universities are effectively recruiting students who don't have financial need at the expense of those who do.

5. College readiness. State legislators are expected to continue to focus on reforming college remedial education. Twenty-one states prohibit remedial education at four-year institutions or strongly discourage it through lack of funding. Experts fear that could reduce graduation rates among weaker students.

6. Immigration. Lawmakers will continue to debate whether undocumented students should receive in-state tuition at public universities.

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