The Indiana Commission for Higher Education has released the state’s go-to-college data for 2023, the most recent year available. It is terribly disappointing news for the health of our economy.

After two relatively stable years, the share of students who attended college dropped to 51.7%, a full 10 percentage points below the national average. Indiana’s educational attainment—ranked 42nd in the U.S. and likely falling—is poised to begin a slow decline that will drag our economy down.

Since 2010, 101.5% of GDP growth in the United States occurred in counties above the average level of educational attainment. That means all the economic growth occurred in places with above-average educational attainment, while the economy in the other half of counties shrank.

The jobs picture tells an even starker story. Since 2010, the U.S. has not created any net new jobs for workers with only a high school education, even as the college wage premium remains near record levels.

Indiana mirrors this trend. From 2010 through last fall, the state created 269,506 jobs for people with college experience, with most going to college graduates. Meanwhile, Indiana actually lost 1,791 jobs for high school graduates during that same period.

Low educational attainment not only dooms a location to slow growth, but also it makes a place less attractive to college graduates, worsening brain drain.

The good news is that there’s growing acknowledgement of the damage this will cause to Indiana’s economy. The bad news is that most people who understand the damage have misidentified the cause of the problem and are offering prescriptions that do more harm than good.

One widely held belief is that college is too expensive and that “woke” colleges are driving students away. I’ve criticized the ideological bias in universities and offered some tractable solutions (see https://commentaries.cberdata.org/1252/sb202-offers-the-wrong-solutions-to-a-real-problem and https://commentaries.cberdata.org/1302/the-end-of-dei-and-a-call-to-action). I even criticized tenure in an early column before I was tenured at Ball State, singling out the cost of keeping unproductive scholars on campus (see https://commentaries.cberdata.org/19/tenure-not-relevant-in-a-modern-university).

Still, the problem is not that tuition is too high, or that colleges are too woke. In fact, the data on school attendance clearly rejects both of those claims.

From 2010 to 2023 (the most recent data), the cohort of kids turning 18 each year has remained stable, and is now at 78,089, near the peak of 80,040 in 2019. Indiana hasn’t had a demographic cliff like many states. It is the share of kids going to college that plummeted.

Here’s the rub: The declines have only occurred among our state colleges and universities.

The number of kids going to Indiana’s public universities has dropped by 7,398 over that time period—a whopping 21% loss. Over the same time, private colleges and universities in the state saw a 15% increase and the share of kids going to out-of-state schools grew by 12%.

If it isn’t immediately obvious, these data make clear that cost and wokeness aren’t driving down college enrollment in Indiana. In-state public universities are far less ideologically biased, and a whole lot less expensive, than private institutions, while out-of-state universities are significantly more costly to attend.

The problem is wholly isolated to Indiana’s public universities. That means the problem is about state funding and tuition freezes.

In 2010, Hoosiers spent about 0.61% of GDP supporting higher education. By last year, that dropped to 0.48% of GDP. That is a historic reduction in funding.

If Hoosiers spent the same share of our economy on public higher education today as we did in 2010, it’d mean an additional $660 million per year. If we adjusted for the slightly larger cohort of students, it would be over $710 million more.

Now, cutting college budgets due to enrollment declines makes sense, but that gets the chicken and egg problem backwards. In inflation-adjusted terms, Indiana colleges have been cutting tuition long before enrollment peaked back in the 2008-09 school year. Reductions in state support are reducing enrollment, because tuition is only a small part of the story.

Universities use scholarships, which are really just tailored tuition reductions to attract students. This has been going on as long as we’ve had higher education in the country. The ability of schools to offer these scholarships is typically tied to the amount of extra funds each school gets from the state, from an endowment and other funding sources (like research contracts and grants).

As state funds have dried up, and tuition restrictions pay for a smaller share of overall costs, it becomes increasingly difficult for schools to offer scholarships. As an example, since 2021, the increase in total cost of attendance for scholarship recipients at Purdue ranged from $1,218 to $6,218, depending on family income. For Indiana University the range is $469 to $730. Ball State University saw those changes range from a $469 cut to a $658 increase.

Today, the total cost differences between Indiana’s three big universities are negligible, and schools are adopting new strategies to keep the lights on. Pay is essentially frozen for most instructional faculty and staff. At Ball State, where I work, inflation-adjusted pay is below 2017 levels. It is the same in most schools.

In some schools, class sizes have become gargantuan. Some online classes now run to 1,000 students and I’ve heard repeated (credible) reports of in-person classes of 2,500 students. That’s a far cry from the 80-plus students I hope to attract to my first-year economics class this fall.

Studies on the effectiveness of large classes don’t even examine classes larger than 750 students, so we don’t yet know what the effect might be (see https://www.jstor.org/stable/pdf/90017056.pdf). It appears Hoosier families aren’t waiting for that research. They’re voting with their feet to go elsewhere in larger numbers—or worse, not considering college at all.

There’s some reason for hope. Perhaps the 21st Century Scholars expansion will open more doors for poor students. Maybe the sloppy thinking that attempted to turn public education into a culture war meme will dissipate (see https://www.indystar.com/story/opinion/columnists/2025/02/07/j-d-prescott-ball-state-woke/78302812007/). Maybe the coming economic slowdown will push more kids back into college.

I hope, rather than expect, these outcomes. We are now a full decade into the first meaningful reversal in educational opportunity in Indiana history. That is more than ample time to have adequately identified the problem and implemented real solutions. We’ve done neither.