The Financial Crisis in Higher Education

The sphere of higher education in the United States is at its problematic point as of the effects of the economic crisis. This theme gave birth to discussion of all pros and cons maintained and evaluated according to changes in financial support and their reflection (positive or negative) on the efficacy and credibility of the system of education in the country. The point is that a decrease in financing may cause a less level of general data of progress in studies. This, in return, may project a lack of gradual transition from one level of education to another and also a lack of professionalism in definite kinds of professions. The flow of privatization which was a stimulus for tuition hikes was one of the reasons according to Altbach, Berdahl, and Gumport (2005, p. 68). This negative process is deeper in conditions of economic crisis which gives less opportunity for students in their urge for gaining post-secondary education.

Before evaluating the issue and its prospects, it is quite important to point out the role of education and the educational system on the whole. The contributions of this field of peoples’ activities are enormous and provide society with a constant growth when the education is reformed and subdues the principles of humanity and progress when dealing with contemporary innovative changes or challenges which time presents every now and then. Christopher R. Edginton , Thomas M. Davis III , Larry D. Hensley (1994) are apt in brief and substantial estimation of higher education significance and promotion within the society.

…[the] window of opportunity is open and the optimistic future is reachable, but reaching it will require changes in our current behavior and institutions. This optimistic future will necessitate accepting the possibilities inherent in our emerging technologies and accelerating the transition to a high-technology, information-based society (Edginton , Davis III , and Hensley, 1994, p. 51).

Besides, the role of government should be felt on the processes of further perfection of the system of education due to the mechanisms involved in the framework of budget resources. This aid can be rather effective, but still it needs more time for current situation smoothing. (Levine, 1993, p. 43) It is so, because gaining stability in suchlike weighty issues requires more effort and time than it seems. On the way of recent changes a sort of speculations may appear with a harmful effect as for the financial restraints which students and their parents feel with every year. According to the report made by Altbach, Berdahl, and Gumport (2005) the governmental pressure on education is made out with a high level of taxation in education and in maintaining affairs concerned with family levels of incomes and current insurance. In the year 2005 the whole amount of governmental assets regarding educational establishments equaled less than 15%. (Altbach, Berdahl, & Gumport, 2005, p. 189) Moreover, the society reacted on this issue and fair enough a provoking question arose: Who should pay? Here one should also take into account the role of “substantial, diverse, and constantly changing” federal efforts for the purpose of grave improvements of higher education on the whole. (Altbach, Berdahl, & Gumport, 2005, p. 164) The alternative ways for students, such as grants and loan programs are constantly decreasing since the time of 1980s. This makes the rights and hopes of prospective students for “guaranteed student loans, and national direct student loans; converted educational opportunity grants into supplemental educational opportunity grants” render null, notwithstanding the Education Amendments of 1972. (Levine, 1993, p. 90)

The present situation among would-be students concerns, undoubtedly, the costs for education and a lack of the opportunity to continue studying for those layers of the American society which are placed in its lower or even lowest strata due to several reasons, one of which is different levels of means or living solely due to one-parent entitlements which are not enough. What is more, today’s costs for education increased for people living in America in contrast with previous periods of it. The rise of them contemplates a fast and unrestrained growth since 1980s (Archibald & Feldman, 2008).

Such a situation can be explained due to different kinds of theories implemented in frames of common discussion. The first, the cost disease theory, emphasizes the difference of educational branches from other industries which are rather vital for the society as well; the second, the revenue theory of costs, provides a field of peculiarities concerned with education as a separate branch of industries’ elaboration on the whole. (Archibald & Feldman, 2008) The approach of inflation and logical increase of costs and prices is quite appropriate to the issue under analysis. However, this factor is considered with many researchers trying to predict future steps of educational development in the United States. The reason can be signified in different forms of ownership among colleges and universities (Archibald & Feldman, 2006).

It is not surprising that private sector in this case is more concerned with proper financing without any delay and unfair calculations, but, on the other hand, state form of ownership provides more guarantees for population on the legislative level. This can be displayed under ideal conditions of internal relationships of the country, but, unfortunately, the lessening of scholarships for talented students provides an outbreak in students in contrast with their predecessors’ scholarships. Higher Education Act has a point for promotion of student counseling aid programs falling into TRIO and GEAR UP programs. The fact is that a recent tension emerged between these two due to the fact that “these programs compete for resources and as some policymakers question the potential redundancy of multiple federal early intervention programs.” (Altbach, Berdahl, & Gumport, 2005, p. 184) The nationwide state of funding initiatives preoccupies the sphere of public relations and the role of higher education is characterized by mere changes across the peculiarities of each state and policy provided at a local level of authority. Furthermore, owing to a perpetually changing picture of standardized models for higher education the assets may vary providing at the same time more tangle on the point of financial aids implying the significance of immediate and effective reforms implemented by means of the government. “In this new era, governments have adopted public policies advancing the democratic concepts of massification and universality of higher education and have generally rejected the more traditionally restrictive practices grounded in meritocracy and exclusion (Gumport, Iannozzi, Shaman, & Zemsky, 1997; Trow, 1974) (Cited in Alexander, 2000, p. 411).

In that period when the crisis of financial aids for education began, in the first half of 1980s, numbers of different statistical data pointed out controversial and rather striking details of how the government takes part in the process of education improvement. Thus, one of the reports of that time constituted the following information: “Overall, state revenue per hundred dollars of personal income increased from $7.41 in 1980 to $7.86 in 1987. By this measure state spending for higher education declined from $0.94 to $0.92 during the same period.” (Levine, 1993, p. 12) This point is rather outrageous when taking into account the fact that the educational programs and revenues are at the second place by its significance in the national budget’s planning and taking into account that “higher education tends to be the “budget balancer” (Altbach, Berdahl, & Gumport, 2005, p. 202).

The examination of efforts that government urges to implement is a thing of wide consideration due to the fact that most of all people and analytics tend to make blames because of constant and dramatic recessions in the US observed during last two decades. (Weerts & Ronca, 2006) No matter who takes responsibility for educating school leavers, it is rather important for would-be students to show their skills in different disciplines and their ability to make successes in learning and social work as well. Federal participation in higher education programs concerned with guaranteed grants and loans seems to be more formal due to less efficacy provoked by financial limitations for such initiatives. According to the statistics of 1993 provided by Arthur Levine the picture with so necessary programs showed the following data:

The Pell Grant program, our nation’s principal need-based program of student financial assistance, now provides 29 percent of the average tuition as opposed to 40 percent a decade ago. More important is that federal financial aid shifted dramatically from grants to guaranteed student loans, thereby subverting the original purpose of the loan program (Levine, 1993, p. 312).

The amount of money that appears to be the major motivation for student’s further assurance in his would-be diploma and profession, as a result, can be divided into four significant directions: parents, students, taxpayers, philanthropists. (Altbach, Berdahl, & Gumport, 2005, p. 370) This approach makes one follow the universally accepted principles of state and societal framing of the most vital spheres of life and education, particularly. The above-mentioned parties involved in the process of education are derived from the various types of income flows and due to the social stratum which belongs to this or that type of involved side. “While state appropriations are declining as a share of public institutions’ budgets, they remain an important revenue source and a major determinant of an institution’s financial well-being.” (Cheslock & Gianneschi, 2008, p. 208) Thus, in middle 1990s the apparent correlation of assets according to main sides supporting the financial aids for education was as such: 35% from local governments without costs for dormitories, hospitals etc; 16% from federal authority; 38% from parents and personal earnings; and 11% from other sources. (Altbach, Berdahl, & Gumport, 2005, p. 201) Here the fact of attitudinal approach is of great significance and needs more attention in terms of most argumentative for this or that community design for higher education expenditures. The reality shows that the tools for better development of the American education system lie not only in their material part, but deeper evaluation of the problem urges to depict, first of all, the rational part which represents the scheduling and constructive planning for higher education: “When institutions of higher education engage in market-like behavior, the consequences of such behavior may or may not be beneficial. Privatization in Europe has shown that increasingly market-like behavior brings with it the specter of greater regulatory intervention.” (Francis & Hampton, 1999, p. 626).

The dangers of state sometimes unpredictable indifference towards higher education presupposes the point on which regulatory mechanism of state power will be assumed to the optional and mandatory issues of educational institutions; and it will, in return, permit no autonomous actions of universities while resolving own problems. (Levine, 1993, p. 151). Moreover, it is fraught with serious consequences considering the probable problems in case of long-term study plans formation and control of day-to-day issues happening in two most significant areas of students mutual activities while studying and providing leisure, these are: the buildings of university or college and a campus. (Levine, 1993, p. 328)

The ways of possible solutions can be found, of course, in the reforms maintained with state influence on education system force and attention supported with the proper revenues adopted by the Congress with special glimpses on students’ support and further employment to be most viable guarantees for colleges and universities. Today the vast majority of higher education establishments confront with the situation of their own financing provision due to lack of government initiatives which can cause more dangerous consequences for society. In accordance with this approach Altbach, Berdahl, & Gumport (2005) point out in their textbook: “Unless higher education institutions work with low-wealth schools and communities to advocate for increased resources and to improve their students’ college readiness, U.S. society will lose the talents of a growing segment of the population” (p. 132).

It is a striking question which in the reality of capitalism can be interpreted as “sink or swim,” but, in fact the right to higher education does not concern only those citizens who have enough money. It should be appreciated by the state authority. It can be emphasized with more conviction when appealing toward the national well-known constitutional rights and amendments which are prescribed in it. By virtue of this thought it is quite fair to admit that “the right to education is a quintessential example of a positive right” (Elder, 2007) which cannot be refused in terms of human rationality.

Thus, the crisis of government financing of educational establishments is a fact that was caused due to various reasons. The details of them are considered with proper reference to the time prospects and the problematic internal circumstances of the United States during the last few decades. This was provoked due to constant instability with money currents and lack of reforms and governmental support with legislative adoption and proclaiming. The statistical data analysis shows negative development of the whole amount of revenues promoted by the government, thus, the crisis in higher education concerned with its financing becomes an obstacle or a burden, if one is fortunate, for would-be or current students. Tuition hikes, smaller grants, fewer loans, less scholarship offered for qualified students are the facts of nowadays situation with higher education. It should touch upon the government, first of all, and only then parents and students should make efforts for further post-secondary education. The funding factor is significant in this case for providing underprepared courses for students.


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