The State of Higher Education in the Midwest
Mattoon, Richard H., Chicago Fed Letter
Home to several excellent universities and colleges, the Midwest has long benefited from the region's strong higher education system. However, with projected demographic changes and state support declines, institutions of higher learning face significant challenges in the years ahead. These issues will be discussed at an upcoming Chicago Fed conference.
The Midwest economy has long benefited from a concentration of excellent private and public universities and colleges. The five states in the Seventh Federal Reserve District1 boast 513 universities and colleges in all. In particular, the region is well known as home to many significant private and public research universities, among them Northwestern University, the University of Chicago, and the University of MichiganAnn Arbor. The higher education system in the region has been responsible for educating the future work force, providing research breakthroughs, and increasingly supporting economic development through technology transfer and public-private partnerships.
Despite this impressive record, higher education in the Midwest region-and indeed the nation-faces some significant challenges in the years ahead. These challenges take two forms. The first major challenge to the existing system of higher education relates to changing demographics among the student population. Specifically, the pool of potential college students will be increasingly older and ethnically diverse. The academic needs of this student population will be somewhat different, and universities will have to develop programs to meet these needs.
The second issue is financial. State financial support for public higher education is eroding, as state budgets grapple with sky-rocketing Medicaid and health care costs as well as commitments to elementary education. In addition, rising tuition costs at both public and private institutions of higher education are raising concerns about reduced student access at a time when success in the labor market increasingly requires some college education.
Taken together, these challenges imply that our colleges and universities must develop new ways to meet the needs of students and the broader community, which is relying on these institutions to provide the skilled workers and leaders of tomorrow. These problems are not unique to the Midwest. The future of higher education is part of a larger discussion on education being held on college campuses and in state capitals nationwide. However, arguably, midwestern states, which bore the brunt of the last recession due to the region's manufacturing legacy, are facing tighter state budgets and slower state revenue recoveries than other parts of the nation. Therefore, the short-term pressure on public higher education in particular is likely to be more significant here than elsewhere.
Higher education in the Midwest
Figure 1 shows the enrollment distribution of institutions of higher education among the five states in the Seventh District. In 2004, the region accounted for just under 14% of all students enrolled in an institution of higher learning in the U.S. The bulk of the region's enrollment was in public schools (nearly 80%, which was the same as the national average in 2004), and public schools are the focus of the rest of this article. Because tuition rates at public institutions are highly favorable for state residents, these institutions rely heavily on in-state students for their enrollments, suggesting that changing demographic patterns represent a potential challenge. Current projections suggest that the Midwest may fall behind other regions in its share of high school graduates relative to total high school enrollment by 2018. As high school graduates are the primary consumers of higher education, fewer graduates will mean institutions may need to look outside the region or to older adults to fill their seats.
In addition, the demographic makeup of high school graduates is changing. …