Case Study: Economic Crisis and Higher Education in the United States
The 2008–2012 economic failure is considered by many economists and investors to be the worst financial crisis since the Great Depression of the 1930s. It results in the risk of total collapse from big financial firms, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis also plays a significant role in the crash of key businesses and collapse of housing market, results in the delayed unemployment. Higher education is a large and various venture in the United States, which has impacted by the economic recession in a number of ways, but these impacts have not been ...view middle of the document...
According to Ken Chabotar, author of The Economy and Higher Education, budget management is related to the most complicated set of relationships in higher education are among college costs, student tuition fees, financial aid, and enrollment. Quality plus financial aid and affordability are the issues that most colleges and universities worry how much economics will affect while thinking about to limit costs and prices.
In the current economic situation, adults and recent high-school graduates are willing to study for two years at a community college make more financial sense than going straight to a more expensive campus. Community colleges as known as lower cost institutions are recognizing a rise in enrollment levels while small, independent colleges and universities result in a fall in enrollment. As a result, the economic crisis creates hardship not only for students in paying their tuition and also difficulties for higher education institutions to maintain their enrollment level, especially their budget and revenue. Additionally, many of well-known universities such as Harvard, Yale, and Princeton etc. are facing difficult financial problems due to cut of endowment and donation from investors and alumni. Well-endowed institutions have suffered losses up to a third of market value and 30% of donated money compelling budget cuts, wage freezes, and borrowing to support the operating budget rather than increase endowment spending. In the United States, there are a lot of campus relied on endowment too much. Many universities have been delayed on cash funding of appropriations from state and federal government. The top managers have to suspense almost half of capital projects and research in order to balance their institutions’ budget. Loss of enrollment and endowment in higher education increases the financial needs of university in order to afford their expenses and keep operation going. Below are the Decline in Balance Sheet Strength and the Percentage Change in State Fiscal Support for Higher Education, according to Moody Investor’s Report (Figure 1 and Figure 2):
In order to do that, many universities have been accepting more students into their higher education programs and raise the tuition fee higher, almost three times the rate of inflation since 1983. Based on the government’s report, student debt has reached a record $1 trillion. It causes the leave of some student loan supplier or limiting their loan budget, resulted with an increased...