THE ECONOMICS OF HIGHER EDUCATION - Report prepared by the Department of the Treasury and the Department of Education - December 2012

Oct 15, 2026

Examines the economics of higher education, focusing on socioeconomic mobility, workforce needs, enrollment trends, and the affordability challenge facing families. Analyzes how education affects earnings and unemployment risk, compares public and private nonprofit and for-profit enrollment growth, and reviews shifts in higher-education financing from state support toward tuition and federal aid. Evaluates the financial aid system and recent Obama Administration changes such as Pell grants and the American Opportunity Tax Credit.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages43

Reading Time1 h 48 min

AccessFree to download

Executive Summary

Total College Enrollment Has Grown Since The Mid-1980s

College Educated Workers Have Higher Expected Earnings

Posted Tuition Has Increased Significantly But Increases In Net Tuition Have Been Milder

THE ECONOMICS OF HIGHER EDUCATION A REPORT PREPARED BY THE DEPARTMENT OF THE TREASURY WITH THE DEPARTMENT OF EDUCATION DECEMBER 2012 “We can't allow higher education to be a luxury in this country. It's an economic imperative that every family in America has to be able to afford.” – President Barack Obama, February 27, 2012 Executive Summary Higher education is a critical mechanism for socioeconomic advancement among aspiring individuals and an important driver of economic mobility in our society. Moreover, a welleducated workforce is vital to our nation’s future economic growth. American companies and businesses require a highly skilled workforce to meet the demands of today’s increasingly competitive global economy. Higher education is provided through a complex public-private market, with many different individuals and institutions participating. While postsecondary education has become increasingly important, there have also been growing concerns about the cost and affordability of higher education. This report discusses the current state of higher education, with a brief high-level overview of the market and a more detailed discussion and analysis of the financial aid system. We also discuss the important changes the President has made to make higher education more accessible and affordable. Our key findings are: • The economic returns to higher education remain high and provide a pathway for individual economic mobility; • Public colleges educate the vast majority of the nation’s students enrolled in institutions of higher education but private, for-profit schools are growing the most rapidly; • Historically, society provided a significant subsidy to young people through the widespread availability of inexpensive public higher education. However, over the past several decades, there has been a substantial shift in the overall funding of higher education from state assistance, in the forms of grants and subsidies, to increased tuition borne by students; • The Obama Administration has offset some of those increased costs with recent increases in educational support through increased Pell grants and the American Opportunity Tax Credit ; and • The combination of decreased state subsidies for higher education and increased federal spending on financial aid represents a shift in the responsibility for paying for college toward a greater onus on students, families, and the federal government. Total College Enrollment Has Grown Since The Mid-1980s • The total number of students enrolled at institutions of higher education increased from under 13 million in 1987 to over 21 million in 2010. 1 o Almost 73 percent attend a public college, a broad category that ranges from local two-year community colleges to graduate research institutions. o Approximately 18 percent attend a private non-profit college, a sector that ranges from research universities to small liberal arts colleges and specialized religious institutions. o Approximately 9 percent attend a private for-profit (i.e.,“proprietary”) institution. Enrollment growth is fastest at for-profit schools, which have increased in size from 200,000 students in the late 1980s to nearly 2 million students today. 1 Snyder & Dillow (2012) . College Educated Workers Have Higher Expected Earnings • There is substantial evidence that education raises earnings. The median weekly earnings of a full-time, bachelor’s degree holder in 2011 were 64 percent higher than those of a high school graduate ($1,053 compared to $638) .2 o The earnings differential grew steadily throughout the 1980s and 1990s. Recent evidence suggests that the earnings differential observed today is higher than it has ever been since 1915, which is also the earliest year for which there are estimates of the college wage gap. o Moreover, the earnings differential underestimates the economic benefits of higher education since college-educated workers are less likely to be unemploye

FAQs

Why does the report argue that higher education matters economically?

Higher education is presented as a key mechanism for socioeconomic advancement and economic mobility. It also supports national economic growth by providing a highly skilled workforce for a competitive global economy.

How has college enrollment changed since the mid-1980s?

Total enrollment increased from under 13 million in 1987 to over 21 million in 2010. The share attending public colleges is about 73%, private nonprofit about 18%, and private for-profit about 9%, with the fastest growth at for-profit schools.

What does the report say about tuition and the role of financial aid?

Posted tuition rose sharply over the past two decades, but increases in net tuition were milder due to greater financial aid. The report also notes that for in-state students at four-year public schools, net tuition is only slightly higher than in 2008 because grants and tax benefits increased.

Oct 15, 2026

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