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Making a Wise Investment

Amid declining state support for higher ed, a plan to stretch the dollars and bolster graduation rates nationwide

September 29, 2016
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State funding of higher education isn’t going where it’s most needed, according to a new paper from education economist Bridget Terry Long. Highlighting the dramatic declines in state support and the disparities in what top public flagship universities and community colleges receive, Long shows that funding patterns follow students who are already likely to enroll and graduate, leaving higher-need students without the resources that would bolster their success.

To meet the national goal of developing a workforce that is majority college-educated, states will have to direct more funding to the nonselective four-year institutions and community colleges that serve the least academically prepared students — precisely those most at risk of dropping out.

Unequal Spending Affects High-Need Students

While FAFSA and federal aid programs often receives more attention, state appropriations to public colleges and universities are actually the most significant source of education funding in America. Instead of aiding individual students on a need-based system, state funding lowers the sticker price at public institutions for all students.

But those funds are not allocated evenly. Using data from the Integrated Postsecondary Education Data System, Long, the academic dean at the Harvard Graduate School of Education, found that flagship universities and other four-year schools receive much more money per student than community colleges. In the 1990s in California, for instance, the state’s flagship university, University of California–Berkeley, received nine times more in state subsidies per student than community colleges did.

Research institutions generally do need more money than other colleges, to fund medical schools and other expensive STEM programs. But these different schools also end up educating very different students. White, affluent students are more likely to attend flagship schools, while their lower-income, black, Latino, and first-generation peers are more likely to attend community colleges. Higher SAT scores also correlate with higher state funding.

The result, writes Long, is a higher education system that allocates “the smallest state subsidies to our most vulnerable students — students who might benefit greatly from additional resources used to bolster their persistence and likelihood of degree completion.” Students attending community colleges receive less financial aid and enjoy fewer academic and social opportunities and resources, all of which makes them less likely to graduate — perpetuating an inequitable system of educational attainment.

Four Policy Fixes to Expand Access, Completion

While it’s clear that high-need students require more financial assistance, the issue isn’t quite so simple. In the past 25 years, state funding for higher education has dropped across the board, making a college degree a greater financial burden for all students. From 1988 to 2013, flagship universities across the United States saw a 52 percent decrease, and community colleges a 42 percent decrease, in the proportion of state funding they received. So while the gap in state funding between four-year and two-year colleges has narrowed slightly, prices have gone up significantly for all students — which inevitably hits the hardest for low-income students.

Because growing evidence links a school’s resources to student outcomes, simply redistributing funding so that flagship universities receive less isn’t the answer. Instead, Long has four suggestions for policymakers to make college more financially accessible to all students, and increase graduation rates nationwide:

  1. States do need to reallocate higher education aid “with greater awareness of the repercussions of funding patterns,” writes Long. But states will have to increase funding at all schools to ensure that all students are equipped for success.  
  2. States could also target financial aid directly at students, offering more need-based grants and loans, rather than giving it to schools as operational subsidies. In this approach, the government is more intentional about helping the state’s neediest students enroll and graduate, instead of giving all students the same amount of aid regardless of financial need.
  3. If states do give money directly to schools, then they can still focus on using those funds to improve student outcomes. “Funding should be geared toward institutional efforts to help at-risk students make progress towards their degrees,” writes Long.
  4. Lastly, the fact that the White House has set a goal of increasing the number of post-secondary degrees nationwide “may justify a stronger federal role” in public higher education. The federal government may have to provide aid to colleges serving high-risk students in order to improve educational equity, especially in instances where state funds are declining dramatically.
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