Priced Out: Higher Education out of reach for low income Michigan families

“Perfect storm” of state funding cuts, rising tuition, and weak state financial aid create college affordability crisis

By: Michael Hubbard

College is not the only road to the American Dream, but it is a proven one. With each successive degree, graduates are more likely to be in the workforce, to be employed, and to earn more. Yet, even as the importance of a college degree has increased, so has the cost of one. College prices have soared across the board, at two-year and four-year schools, and at both public and private institutions. This leaves college financially out of reach for many Americans, puts a large financial burden on those that do attend, and leaves many students with high levels of debt.

On average, yearly tuition, room/board, transportation and fees at a 4-year public college (in-state cost) is $25,000, while at a two-year school is it approximately $17,800.  Take into consideration that the per capita income in Michigan is $30,000, and you’ll see how out of bounds a college education can be.

In past generations, Americans could work through the summer to save enough money to pay their tuition and living expenses. The reality today is that students often must take out tens of thousands in debt to cover their costs and pay their living expenses. The average student loan debt carried by a college graduate is $30,000. For those that end up with valuable degrees, their monthly payments might preclude them from buying a home or starting a business. For those that don’t end up with a degree, that debt can haunt them for the rest of their lives.

A new study shows the state is facing a “college affordability crisis” marked by sharp cuts in state funding to public institutions, rapidly rising tuition levels, and a weak state financial aid system that doesn’t cover the widening gap in students’ unmet financial needs. The report from researchers at The Century Foundation (TCF), a leading national think tank, reveals that the crisis is especially severe for Michigan’s black, Latinx, and low-income families, and has been exacerbated by the state’s worst-in-the-nation wage declines over the last two decades.

According to the report, the core of the affordability crisis is state policy. Lansing has cut state appropriations per student by 40 percent since 2000, and the state invests little in need-based grant aid. Michigan now ranks close to the bottom nationally in terms of the share of state budget spending that goes toward higher education. Michigan also has some of the highest public tuition levels in the nation, forcing many students and families to take on significant debt to attend college.

“Michigan is facing a perfect storm in college affordability,” said Jen Mishory, senior fellow at TCF, and co-author of the new report. “You have a state government that has sharply cut funding to students and failed to address a weak and poorly designed financial aid system. On top of that, tuition, fees, and living costs continue to climb faster and faster, while real wages for most Michigan families have actually fallen. What you’re left with is a system of higher education that is increasingly unequal, unsustainable, and out of reach, especially for those Michiganders most in need.”

The new study, Michigan’s College Affordability Crisis, presents data and analysis on areas such as: state appropriations year-over-year; the structure and scale of state, federal, and institutional financial aid in Michigan; tuition, fees, and the cost of attendance across institutions; and variations due to family race and income and the location and type of institution, among other factors. Taken together, the findings (summarized below) underscore the urgent need to improve college affordability and access in Michigan, particularly for underrepresented students.

“Michigan needs a holistic and bold strategy to address its college affordability crisis,” said Peter Granville, TCF senior associate and co-author of the report. “There are steps that lawmakers in Lansing can begin to take today to strengthen the state’s financial aid system and ease the crushing burden of debt faced by students, all the while paving the ground for more significant affordability reforms and state funding increases down the road.”

The report is the first in a series on the economics of higher education in Michigan. It comes as Governor Whitmer has pledged to prioritize the issue of college affordability in the state, including releasing a plan for tuition-free community college earlier this year.

Michigan Higher Education: By the Numbers

1. State Funding: Cutting what is already small 

• Currently, the state allocates $5,492 per public university student (12th lowest in the nation) and $3,265 per community college student (15th lowest in the nation).
• In 2018, higher education comprised just 4.1 percent of Michigan state budget expenditures (9th lowest in the nation), compared to a 50-state average of 10.1 percent.

2. State Financial Aid: Meager, cumbersome, and ill-designed to meet state needs

• Most Michigan student aid dollars come from federal funds. Without TANF dollars allocated to student aid, Michigan would have the nation’s third-lowest state aid per student.
• The design of the state aid framework means that many students struggle to obtain aid (e.g. due to obscure eligibility requirements), and programs reach only a fraction of students in need (i.e. mid-career adults are virtually locked out of state aid programs).

• • Combined, state and local aid reaches only 18.9 percent of community college students and 17.5 percent of public university students.

• Michigan is a particularly high-cost state for housing and transportation, meaning that the total “cost of attendance” is often more than double the tuition sticker price.

• • Yet, nearly all state aid in Michigan is tied exclusively to tuition and fees, leaving non-tuition costs unaddressed.

3. Tuition: Rising fees, costs shifting to families 

• Michigan is one of the most tuition-dependent states in the nation, and the amount of tuition that Michigan public universities collect per student is the highest in the nation.
• To make up for disappearing state dollars, Michigan’s institutions are being forced to significantly raise tuition prices.

• • Since 2000, the tuition “sticker price” at the median public university has doubled; at community colleges, it has risen by 55 percent.
  • Tuition and fees at the median public university consumed 9 percent of median household income in 2000, compared to 21 percent in 2017.

• Tuition as a share of school revenue has also grown by roughly one-third at community colleges and by nearly one-half at public universities in Michigan since 2000.
• Rising tuition means rising debt: Michigan borrowers graduate from bachelor’s programs with more than $31,000 in debt, on average.

• • Since 2000, the average debt burden among borrowers graduating from Michigan’s public bachelor’s degree programs has increased 43 percent.

4. Disparities by Race and Income 

• Black and Latinx Michiganders continue to be underrepresented at every credential level at Michigan’s public institutions.

• • As of 2017, the number of black and Latinx Michiganders earning bachelor’s degrees would need to more than double to match state demographics.

• Historically under-represented students also attend institutions that receive lower-than-average state funding.

• • TCF estimates that the median black student enrolled in a public university in Michigan is supported by $4,461 in state appropriations, compared to $5,466 for the median white student.

• Michigan low-income families pay significantly more as a share of family income.

• • The average net tuition price (cost of attendance less grant aid received) at the median public university demands roughly 32 percent of income for a family making $30,000, compared to only 16 percent for a family making $110,000.