Student-debt increases correspond to trends in higher-ed tuition, state funding

Students who graduated from Minnesota’s colleges and universities last year carried $5,414 more debt on average than a graduate in 2005. And the percentage of those burdened with the debt rose during the same period from 68 percent to 72 percent, according to a report [PDF] from the Project on Student Debt.

The average debt load for a Minnesota graduate in 2008 was $25,558, which is a 27 percent increase over 2005.

You didn’t need to graduate with a math degree to relate those numbers to trends in tuition and taxpayer support for the state’s colleges and universities.

Between the years 2000 and 2007, in-state tuition increased by 68 percent at the University of Minnesota  and 55 percent in the Minnesota State Colleges and Universities (MnSCU) system, according to the Minnesota Budget Project, an initiative of the Minnesota Council of Nonprofits.

Meanwhile, state funding per full-time higher-education student dropped by 28 percent during the same period. And state grants, as shown in the chart below, did not rise as tuition soared.

Trends: U of M tuition and average state grants, 2000 to 2007.
Source: Minnesota Budget Project
Trends: U of M tuition and average state grants, 2000 to 2007.

If anything, those trends accelerated this year. Tuition rose again, while state higher-education funding was cut in the face of state budget shortfalls.

More debt, fewer jobs
For last year’s new graduates, the problem of the extra debt was compounded by the toughest job market in decades.

Employment prospects for young college graduates soured along with the economy, the Project on Student Debt noted in its report.

“The unemployment rate for college graduates aged 20-24 was a challenging 7.6 percent in the third quarter of 2008, the highest third quarter rate since 2002; by the third quarter of 2009 it had risen to 10.6 percent, the highest on record,” the report said.

Increases nationwide
Minnesota students aren’t alone in digging themselves into debt to pay for their degrees. Student debt rose nationwide in 2008 to an average of $23,200 per student.

Debt load for Minnesota college graduates, 2005-2008.
Source: Project on Student Debt
Debt load for Minnesota college graduates, 2005-2008.

Minnesota ranked 6th among the high-debt states in 2008, the latest year for which the analysis is available. The District of Columbia led the nation, followed by Iowa, Connecticut, New York and New Hampshire. The lowest debt states were Utah, Hawaii, Kentucky, Wyoming and Arizona.

In terms of the students needing loans, it is not surprising that they tend to come from low-income families. Pell Grant recipients, who generally have family incomes under $50,000, are much more likely to borrow and to borrow more, the report said. Among graduating seniors who ever received a Pell Grant, 87 percent  had student loans in 2008. Those Pell Grant recipients had an average debt of $24,800 — nearly $2,000 more than the average for all seniors graduating with loans.

Debt for 2008 graduates.
Source: Project on Student Debt
Debt for 2008 graduates.

Students who choose private institutions also tend to pile up more debt. That’s not true across the board, though.

As the chart above shows, graduates left Carleton and Macalester colleges in Minnesota in 2008 with lower average debt loads than their counterparts at many public colleges and universities.

Sharon Schmickle reports on science, international affairs and other subjects for MinnPost.

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Comments (10)

  1. Submitted by Ron Gotzman on 12/08/2009 - 09:06 am.

    The students who “pile up more debt” are just following the spending habits of the Obama administration.

  2. Submitted by Drew Geraets on 12/08/2009 - 11:07 am.

    How much have wages changed for college grads during that same time period?

  3. Submitted by Paul Udstrand on 12/08/2009 - 11:12 am.


    Bush inherited Clinton’s surplus. Obama inherited Bush’s deficit. Pawlenty came into office with surpluses, he’s produced nothing but deficits. Clearly debt is not an “Obama” thing.

  4. Submitted by Bill Gleason on 12/08/2009 - 11:49 am.

    Lots of interesting food for thought. I just want to re-iterate that even though state support has fallen by 28 percent, tuition has risen at the U of M by 68 percent. Something here does not compute.

    I have been trying – unsuccessfully so far – to obtain information about the cost of instruction at the U of M. External auditors reported at the last Board of Regents meeting that the cost of instruction is covered 85% by tuition and fees. It seems that this money plus the contribution from the state should cover the cost of instruction without large tuition increases.

    Tuition should not be viewed by the U’s administration as a revenue stream, but rather as something that realistically reflects the costs of instruction. Students and their parents should not be asked to foot the bill for “ambitious aspirations to become one of the top three public research universities in the world [sic].”

  5. Submitted by Ginny Martin on 12/08/2009 - 12:43 pm.

    After World War II, there were great fears that the country would once again go into a deep Depression that it had just emerged from during the war. It didn’t and a great period of prosperity–for everyone–followed. Why? Because President Roosevelt and Congress came up with the G.I. bill, which allowed millions of men (almost all men) to go to school who would never have been able to go before. They got good educations and were able to go out in the world and earn money.
    The second provision that made a huge difference was the part that guaranteed home loans to veterans, so they could buy homes–another thing they probably would not have been able to do before.
    We have seen this in our own state. Remember when Minnesota was called “the state that works.” Why? Because Minnesotans wisely–and that includes Democrats and Republicans who were surely a different species then–agreed that spending money on education and other things were critical to Minnesota’s prosperity. And they were. More evidence: look at the southern states, their expenditures for education and health care and the like, and then look at how prosperous they are. It goes right down the line: the less the state spends on such vital necessities as education and the health and welfare of their people, the poorer the state and its people

  6. Submitted by Dan Browning on 12/08/2009 - 01:17 pm.

    Good story, Sharon. I’d like to see the net present value analysis of a bachelor’s degree in liberal arts (or whatever field you wish) over time. I suspect a degree is still worth taking on debt, but the NPV has to be declining.

  7. Submitted by Howard Miller on 12/08/2009 - 01:18 pm.

    a university does two really important things – it’s faculty create new knowledge, and disseminate that knowledge to the rest of us, through publication, and classroon/online instruction. U of Minnesota does a lot of research relative to other universities in the state, but that’s a good thing for us all.

    it’s not just about the cost of instruction if you’re talking a university’s value to society

    we are blessed with very good public and private universities in Minnesota. The public ones have received a declining share of the public purse since 1980 at least. Unlike roads, criminal justice, and the k-12 education systems, the higher ed people can charge it’s clients more when the state cuts its support. The state knowlingly puts the squeeze on public higher ed every time there’s a budget problem because of higer ed alone can raise revenue through tuition and fee increases to students. But it doesn’t make it a good idea.

  8. Submitted by Bill Gleason on 12/08/2009 - 03:08 pm.

    No, it doesn’t make it a good idea, Howard.

    Because we can raise revenue through tuition increases does not mean we should. Ohio State University has not had a tuition increase in three years, they have had no layoffs, and staff will see a 2.5% increase in compensation this next year.

    Why is this, do you think? I suggest it is because Gordon Gee does a heckuva good job as president and the relationship between tOSU and the legislature and governor is much better than it is here. Leadership matters and we need some changes here both in Morrill Hall and at the state capitol, especially in the governor’s office.

  9. Submitted by Ginny Martin on 12/08/2009 - 08:39 pm.

    The net value of obtaining a B.A. is not the point here. The point is that the more educated our citizens, the more EVERYONE benefits, not just the individual. (I’m Virginia, by the way, not Sharon.)
    It’s another proof of the “We’re all in this together,” which has been forgotten by too many of our citizens–with the results we see all around us–a destroyed economy, deep in two wars we don’t seem to know how to get out of, stuck debating health care reform because the republicans, pharmaceutical and insurance companies are putting out false alarms and scaring people.

  10. Submitted by Jeremy Powers on 12/09/2009 - 12:16 pm.

    Our lack of support for public higher education is part of the whole problem in this country. When veterans returned from World War II with the benefits afforded them under the GI Bill, we saw this nation flourish. (Didn’t hurt that everyone else had to spend 10 years rebuilding everything.) We had teachers and engineers and experts. Then we decided that inexpensive college helped society, so for the next 25 years college in this country college was cheap – cheaper than anywhere else in the world. People came here from all over to get educated. Then we erroneously decided that government was evil and started reducing what we spent on this. Now it is cheaper to go to college in Europe than it is in America. It costs less for a student from OUTSIDE the EU to go to a college at Oxford than it does for a student from Minnesota to go to the University of Minnesota.
    And as a reminder to all the “I’m overtaxed and not going to take it any more” folks, you pay less in taxes as a percentage of your income than your parents and grandparents.

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