The State of Higher Education in Today's Economy

Younes Mourchid, Ph.D., explains why, in tough economic times, it makes perfect sense for members of the fire service to go back to school.


Every college and university president across the country can readily testify that the current economic meltdown has impacted just about every line in their budget sheets. Public colleges and universities are in bad shape, as state budgets across the country are reeling from the effects of an...


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Every college and university president across the country can readily testify that the current economic meltdown has impacted just about every line in their budget sheets. Public colleges and universities are in bad shape, as state budgets across the country are reeling from the effects of an economy that has gone into crisis mode. As unemployment and underemployment accelerates in almost every part of the country and businesses slow down, state and local governments have seen tax revenues plummet. Private colleges and universities have seen their endowments shrink precipitously. As of December 2008, the Harvard University endowment had shrunk by some $8 billion â?? a loss of 22%, and Harvard officials predicted that the loss could be as much as 30% by the end of the fiscal year in June.

In California, where the recession hit harder than in most other states, most private colleges had seen their endowments shrink by 20% to 30% by the end of 2008. The governor slashed the University of California and California State University budgets by 10% in 2008 fiscal year and more cuts are on the way as the state's budget sinks deeper into more deficits every day. On the other hand, students have received the bad news that another 10% increase in tuition is on the way. Besides, most aspects of college and university operations have been deeply affected by reduced income. Building projects have been put on hold, library hours have been reduced, part-time faculty have been laid off and class sizes have been increased. At Stanford University, top administrators have voluntarily taken a 10% pay cut.

However, it is the students and their parents who are asked to bear the consequences that have befallen America's institutions of higher education from the country's economic deep recession. The costs to attend America's colleges and universities, both private and public, have been rising at a rate that has far outpaced inflation for many years. Furthermore, students whose family income has dwindled thanks to layoffs and inability to borrow money to cover college costs have had to put their education on hold. The private student loan market has dried up and other financing options have been frozen out by the tuition and fee increases at public colleges and universities. In California, the governor has proposed to cut the financial assistance provided by the Cal-Grant program, while at the same time asking University of California and California State University to increase tuition by 10%.

Current data about the financial health of colleges is not readily available. Unlike publicly owned corporations that are required to report their financial results on a quarterly basis, 501c (3) organizations report only annually and with a significant delay on the IRS Form 990. These forms do not predict the future that we are now living, but they do allow us to make some inferences about the current financial health of higher education institutions. According to higher education economists, the current cash shortage conditions are likely to have a detrimental impact on independent colleges and universities with the following characteristics:

  • States with large numbers of private institutions
  • The Northeast and high-growth regional or local urban cores and corridors now slowing
  • Serving economically disadvantaged students.
  • History of low fund-raising performance
  • Serving high proportions of minority students
  • Founded by a religious group and now serving a wider clientele

However, the reality is not all grim for adults seeking to further their education. Currently, the federal government has taken viable steps to loosen the credit market and inject money into student loan programs. This is certainly good news for anyone who is considering going back to school. As a matter of fact, in times of recession, it is recommended that those individuals who lost their job, those who never earned a higher education degree and those whose skill sets are outdated to consider going back to school. This recommendation is certainly germane to the fire and emergency personnel who serve as volunteers and who have earned a number of national and state certifications, but possess no academic degrees that better represent their qualifications in an increasingly competitive market with limited jobs.

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