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Risk of Recession Highlights Need for States to Support Higher Education

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The economy is showing resiliency despite predictions of a potential recession soon, but the mere threat of one should be sign enough for states to shore up their public, postsecondary education programs. Demand for postsecondary education typically grows during recessions, and research has proven the benefits of postsecondary degrees and training in reducing unemployment and underemployment rates while improving people’s health outcomes, savings, and civic engagement.

Public postsecondary programs — including community colleges, apprenticeships programs, trade or vocational schools, and public universities — are crucial elements of state success in both good times and bad. They can increase long-term opportunities for students and workers and help make state economies more resilient.

And when a recession looms, state support for higher education becomes even more important. However, some states are recklessly using temporary surpluses to justify permanent tax cuts this legislative session, which would reduce critical funding for services like public higher education. States should be taking this opportunity to strengthen postsecondary education and make it more accessible and affordable. States with weaker higher education systems should expand funding for them, and states where those systems are more adequate should at the very least seek to protect their current funding levels.

Workers who lose their jobs or see their hours reduced often seek additional training and education to improve their skills and future job prospects. Affordable, well-funded postsecondary programs are particularly critical for those most impacted during economic downturns to have opportunities when the job market is weak. Expanding access to postsecondary education and training during a downturn can help workers come out of the recession better equipped to succeed during the economic recovery and can put the states’ economy overall in a stronger position with a better-trained workforce.

Accessibility remains a challenge at many public institutions of higher education, due in large part to inadequate state support. Notably, after the Great Recession states made sharp cuts to higher education funding and shifted tuition costs onto students. Between the 2008 and 2019 school years, 37 states cut per-student funding, six of them by more than 30 percent: Alabama, Arizona, Louisiana, Oklahoma, Mississippi, and Pennsylvania. In the years leading up to the pandemic, 32 states still had not recovered to pre-recessionary funding levels for higher education.

Those decisions led to reduced course offerings, cuts in student services, closed campuses, and higher costs for students and families. And they’ve made it harder for prospective students — disproportionately students of color and students with low incomes, among other historically excluded groups — to obtain the benefits of a college degree or other credential.

Exorbitant costs associated with public higher education programs pose a significant barrier to economic opportunity, as well as to state prosperity broadly. They prevent some prospective students from pursuing a credential altogether, and those who do pursue them often face higher debt loads. That debt makes it harder for them to achieve economic stability, save for the future, and afford basic needs. The high cost of attendance is often exacerbated by other significant expenses such as housing, food, supplies, and child care, and financial aid options and families’ income have not kept pace with these expenses.

These barriers are especially prevalent for those who have been systematically excluded from income- and wealth-building opportunities: students with low incomes, students of color, formerly incarcerated students, non-traditional students (such as those who delay enrolling in postsecondary education), and students who don’t have a documented immigration status. Some states worsen racial and income disparities by awarding an overwhelming majority of their financial aid in a way that disregards need.

Many states have yet to provide financial aid to individuals who are incarcerated (in contrast to some positive federal reforms recently) or in-state tuition to people regardless of immigration status. The inclusion of the federal Pell grant to people in prisons beginning in the 2023-2024 school year will help, but that still leaves other steps states will need to take to improve affordability for people who are incarcerated. In-prison postsecondary education programs strengthen career pathways beyond the carceral system, better equip formerly incarcerated people with competitive skills and qualifications for the workforce, and increase their likelihood of successful reentry into communities.

All told, these affordability challenges make it harder for prospective students from these groups to avail themselves of higher education that can help them prepare for economic success, especially compared to higher-income students with the resources to access higher education more easily.

To strengthen higher education and make it more accessible to everyone in good economic times and bad, states should:

  • Shift state-funded assistance from merit-based to need-based aid. Traditional measures of merit (typically high school GPA or college entry exams) favor those who already benefit from well-resourced K-12 schools and expensive college test prep. Need-based aid is a more targeted approach to reducing the cost of attendance for students facing systemic disadvantages so that they have opportunities to attend college, occupational, or technical programs during and after recessions.
  • Expand options for more students to begin or re-enter postsecondary pathways. More inclusive state grants for students who lack a documented status, such as the CA Dream Grant, and in-state tuition rates for such students provide opportunities for the transition from public K-12 schools to affordable colleges. Thanks to a ballot measure approved by Arizona voters, the state joined 21 others and D.C. that offer in-state tuition to students regardless of immigration status. States can complement funding with initiatives to re-enroll and support students in degree or credential programs, especially with a disproportionate share of students of color and those from families with low incomes undertaking caretaking and financial roles in the last few years.
  • Shore up state revenues, for instance by taxing wealth and high incomes, to offset budget shortfalls that lead to under-investment in postsecondary programs. Given the economic uncertainty ahead, states should prioritize targeted revenue raising, especially on the highest-income households and profitable corporations, to maintain affordable postsecondary programs. For example, Massachusetts voters recently passed a 4 percent tax on incomes over $1 million to create revenue for public services. With the additional forthcoming revenue, the state’s Board of Higher Education approved doubling state-funded financial aid, from $200 million to $400 million, for public college and universities students.

Sustaining and expanding opportunities for people to pursue degrees or training in the face of an economic downturn has long-term implications for people’s well-being and state economies. With a divided Congress, there’s no guarantee of federal aid in case of a recession, as there was in response to COVID-19. That’s another reason why, during 2023 legislative sessions, states should proactively strengthen higher education and ensure that those who wish to seek educational and skills programs during a recession have affordable, high-quality options.