Thanks to rapidly rising tuition costs, America has a $1.2 trillion student debt problem.
That's caused a lot of finger pointing, with some blaming soaring administrative hiring and pay, or the rash of expensive building projects on campuses. But when it comes to public universities, the real culprit is a more insidious force: cuts in state support for higher education, according to a new report from the left-leaning think tank Demos.
Declining state appropriations for higher ed is responsible for more than three-quarters of tuition hikes between 2001 and 2011, the analysis found. Increased spending on administration and building projects accounts for only about 12 percent of the tuition increases over that time. During the recession, when many states scrambled to cope with shrinking coffers, lawmakers slashed spending on public universities. But appropriations haven't returned to prerecession figures despite an improving economy.
"Normally, funding would have recovered to relatively high levels given where the economy is, but we haven't seen that," Demos senior policy analyst Robert Hiltonsmith told CBS MoneyWatch. "I think that's because we're seeing a divergence in the way states are viewing their responsibilities to fund their public schools."
Take Wisconsin, where Gov. Scott Walker earlier this year proposed a plan that called for slashing $300 million, or 13 percent, in state funds for the University of Wisconsin system, which enrolls about 180,000 students. The state's budget committee is now trying to reduce his proposal. His plan sparked a backlash in his state, given widespread support and pride in its public education system.
Walker's argument is that the cuts will make the public university system more efficient, while also protecting taxpayers. Underneath the rhetoric is often the idea that taxpayers shouldn't pay for individuals' education, Hiltonsmith noted.
Those arguments are a common thread among states that are slashing support for public universities, but Hiltonsmith called that a "wrongheaded and incorrect view of public education," given that it benefits American society as a whole to have a highly educated workforce.
The rewards are evident in annual income for college grads. College-educated Millennials earn a median of about $45,500, while those with only high school degrees take home $28,000, according to Pew Research.
The outcome of reduced state support hasn't been pretty for college students at public universities as they get socked with a greater share of tuition costs. Demos estimates that about half of education and related expenses is now paid through tuition, compared with 35 percent in 2001.
On a dollar-per-student basis, state support for research institutions has declined by more than $3,000 from 2001 to 2011, while declining more than $2,000 for master's and bachelor's universities. Some of the states where funding has suffered the most include Colorado, Michigan and Arizona, Hiltonsmith noted. Those that better weathered the recession include Alaska and North Dakota, which were buoyed by their booming energy industries.
Across the U.S., tuition at public four-year colleges has more than doubled during the past 20 years, according to the College Board. Private colleges have increased tuition by about 66 percent during the same time period.
That's forcing students at public universities to take on more debt, which Hiltonsmith noted could have negative implications for the economy in years to come.
"This is the primary reason we've seen student debt explode to $1.2 trillion," he said. "Every student is paying $4,000 more in tuition, plus room and board and fees. That in turn is already having a big effect on the economy. Part of the reason the growth in the housing sector is slow is that people are coming out of school with a pile of debt and can't afford to buy a house or make as large of a down payment."
Adults with student debt may also be less likely to have the extra money to save for retirement, and building wealth becomes more of a challenge on many levels, he added. In the end, America's system of public universities has transformed into what Demos calls "subsidized private institutions."
Hiltonsmith added: "It's going to take increased public support and realizing if we don't invest in our infrastructure, including the higher education infrastructure, we are torpedoing our future growth."