For five years since the Great Recession, states have drastically cut funding for public universities, with long-lasting consequences for the U.S. economy. A new report from the Center on Budget and Policy Priorities finds that every state except North Dakota and Wyoming is spending less per student than before the recession. As a result, students are paying much higher tuition, while quality of education has suffered from faculty cuts, closed campuses, eliminated course offerings and shut down educational resources like libraries and computer labs.

Arizona has made the deepest cuts to higher education funding in the nation. Consequently, tuition has risen 78 percent since 2008, more than in any other state:

More than 75 percent of America’s undergraduate students attend public colleges and universities, which rely heavily on state funds. As tuition spikes, the student debt crisis has reached record highs, surpassing a total of $1 trillion in 2012. This debt has slowed the housing recovery and exacerbated the class divide between those who can afford to go to college and those who cannot.

Meanwhile, students have had to rely more on recently expanded federal funds for grant aid and higher education tax benefits. But even federal aid cannot offset the enormous cost burden states have shifted to students. Public colleges and universities that once received 3.3 times as much funding from state and local governments as they did from students now receive just 1.1 times as much as they do from students:

The CBPP report notes that much of the damage done to the higher education system could have been avoided if states had chosen to close their budget gaps with a more balanced mix of new revenue and spending cuts. But state governments seem unmoved by the burden they have placed on students; they will spend 10.8 percent less on higher education in 2013 than they did before the recession, according to one projection. Meanwhile, many of these states, including Florida, Idaho, Kansas, Indiana, and Ohio, are calling for new tax cuts for businesses and the wealthy.

Recipients of some federal student loans will have to pay increased fees on the loans because of the automatic budget cuts, known as sequestration, that took effect at the beginning of March. The Department of Education has sent letters to recipients of Direct PLUS loans, which go to graduate students and parents of dependent undergraduates, alerting them to a small increase in the fees associated with the loan.

According to the letter, rates will increase by a little more than 0.2 percentage points, Fox News reports:

“On August 2, 2011, Congress passed the Budget Control Act of 2011, which put into place automatic federal budget cuts, known as the ‘sequester.’ While this law does not otherwise change the amount or terms or conditions of your Direct Loan, it does raise loan fees on Direct PLUS Loans first disbursed after March 1, 2013,” reads a copy of the letter obtained by FoxNews.com.

“Specifically, the fee on your loan will increase from 4.0 percent of your loan amount to 4.204 percent. For example, the fee on a $10,000 PLUS loan will increase by $20.40 from $400.00 to $420.40,” the letter continues.

The amount of student loan debt held by Americans has skyrocketed in recent decades as the cost of college continues to rise. Americans now hold nearly $1 trillion in debt, according to the Federal Reserve, more than they hold in debt from auto loans or credit cards. Though the increase is small, it will only add costs to those loans, putting students and graduates further into debt and adding to the hindrances such debt has placed on the economy.

Sequestration, meanwhile, has begun hitting education at all different levels. In addition to these increased loan costs, low-income children across the country are being kicked out of preschool programs because of the budget cuts.

College tuition has been rising steadily for decades. Average tuition rose by more than 8 percent in 2012 and now tops $5,000 a year, a record high, according to a new report from the State Higher Education Officers Association, CNN Money reports:

Average tuition costs – the amount students paid in tuition and fees after state and institutional aid was taken into account — rose by 8.3% to an average of $5,189 in the 2011-12 school year, the State Higher Education Executive Officers Association reported. In the previous academic year, students paid an average of $4,793.

At the same time, state and local funding for operating expenses, research and student aid fell by 9% to $5,896, the lowest level in 25 years, said association president Paul Lingenfelter.

The upward trend is likely to continue in 2013, since state governments plan to spend 10.8 percent less on higher education this year than they did in the year prior to the Great Recession. Only 12 states now spend more on higher education than they did before the recession. The decrease in funding has contributed to the six-fold increase in college tuition over the last 30 years.

Still, Americans are graduating from college at record rates, but they are doing so while accruing more debt. The number of Americans carrying student loan debt is at record levels, and that has had consequences throughout the economy, especially since earnings for college graduates are declining.

The Consumer Financial Protection Bureau on Thursday unveiled a new initiative to help the nation’s 37 million former college students who are struggling to pay off a combined $1 trillion in student loans.

In a press release, CFPB Director Richard Cordray said he is instructing his agency to begin drafting possible proposals aimed at lowering monthly loan payments through refinancing and income-based payment models. As the cost of attending college has risen steadily over the last few decades, student loan payments have grown just as fast, surpassing credit card payments as the nation’s largest single contributor to household debt.

The CFPB’s new campaign on student loan payments comes less than two weeks after President Obama expressed concern over the issue during his State of the Union address. “Today, skyrocketing costs price way too many young people out of a higher education, or saddle them with unsustainable debt,” he said at the time.

A recent campaign launched by Campus Progress, (which, like ThinkProgress, is a project of the Center for American Progress) calls for Congress to pass legislation giving student borrows the ability to refinance their outstanding student debt in much the same way homeowners can refinance their mortgage payments or drivers refinance car payments. Doing so, says Campus Progress and the CFPB, would increase the likelihood of borrowers repaying their loans:

The CFPB has found that private student loan borrowers who wish to pay their loans, but face high payments, lack alternative repayment and refinance options.

“Too many private student loan borrowers are struggling with unwieldy debt that prevents them from climbing the economic ladder,” said CFPB Director Richard Cordray. “We will be analyzing plans for policymakers to consider that might help avoid a repeat of the mortgage meltdown for today’s student loan borrowers.”

Currently, the federal government backs roughly 85 percent of all student loans. The existing 6.4 percent interest rate levied against most borrowers is far higher than the typical rates for a 30-year mortgage, and higher still than the cost incurred by the federal government as well. As Time Magazine explains:

In other words, the government—standing behind these loans anyway—could refinance them at a lower rate without losing money on the loans. That doesn’t mean there wouldn’t be a cost. The government will show a profit this year of nearly $34 billion on these loans, the Center reports. This is a tough budget environment to ask Congress to kiss off a cash cow.

Refinancing typical interest rates down by less than 2 percentage points — to 5 percent from 6.8 percent — would save borrowers a cumulative total of $14 billion and inject more than $20 billion into the economy, Campus Progress estimated in its report.

A new report from the analysis firm Fair Isaac Corp. provides one more piece of evidence confirming that student debt is out of control. According to the report, average student debt grew 58 percent between 2005 and 2012, leaving students buried under more than $27,000 each. Delinquencies, of course, rose along with the debt load:

The delinquency rate today on student loans that were originated from 2005-2007 is 12.4 percent. The comparable figure for student loans that were originated from 2010-2012 is 15.1 percent, representing an increase in the delinquency rate by nearly 22 percent.

While the delinquency rate is climbing, the average amount of student loan debt is increasing even faster. In 2005, the average U.S. student loan debt was $17,233. By 2012, it had ballooned to more than $27,253 – an increase of 58 percent in seven years. By contrast, the average credit card balance and the average balance on car loans owed by U.S. consumers actually decreased during the same period.

“This situation is simply unsustainable and we’re already suffering the consequences,” said Andrew Jennings, chief analytics officer of Fair Issac. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.” This chart shows how student loan debt has outpaced other forms of debt:

“Our evaluation of credit risk patterns also reveals that high levels of student loan debt are now riskier than before,” the report said. (HT: Zero Hedge)