Policy Briefs
In this brief, we examined how state-level financial aid policies relate to students’ enrollment and completion using detailed data on states’ financial aid programs available for first-time entering college students for fiscal years 2004-2020. We found little consistent evidence of a relationship between student outcomes and the amount of aid per recipient, though, we did find practically significant correlations with aid eligibility criteria. Among institutions located in states with aid disbursed based on financial need and academic merit, requiring a college entrance exam for eligibility was associated with smaller enrollments and lower graduation rates compared to institutions that did not require the exams. This finding was not replicated when we explored requiring exams for institutions in states with aid disbursed solely based on academic merit.
We compiled the first longitudinal dataset with detailed funding information to help us examine whether different funding strategies affect college access and completion, with a focus on outcomes among racially minoritized students. We found no relationships between funding mechanisms and student outcomes at community colleges. However, at public universities, we found that funding strategies with a base-plus component may bake in already-existing funding inequities. This leads to a system in which racially minoritized students, particularly Black students, face challenges when seeking to complete a degree.
This brief offers a detailed overview of how states and higher education systems allocate funding to public colleges and universities and how funding mechanisms have changed over time. We find growth in the number of “hybrid” funding models that incorporate enrollment, performance, and/or prior year allocation (base+) considerations in both the two- and four-year sectors. At the same time, funding formulas with a student enrollment component remained the predominant funding mechanism in the two-year sector. We find a decreasing number of four-year systems with funding provisions aimed at improving the research capacity of institutions since the Great Recession. We see a steady number of two- and four-year sectors that include provisions that seek to provide more equitable funding for institutions based on the institution’s characteristics or the characteristics of students enrolled at the institution.
In this brief, we explore the relationship between community colleges’ reliance on local funding and their total institutional revenue. We find that community colleges’ level of reliance on local funding is negatively related to their total institutional revenue for rural community colleges and community colleges serving an above-average share of low-income students.
As outstanding student loan debt has increased, institutions and states have taken steps to try to reduce student debt. At the same time, how states fund public higher education could affect the amount of debt that students have upon leaving college and whether they are able to repay their loans. In this brief, we provide the first examination of whether state performance-based funding policies affect student loan debt. We find no increases in debt among students who completed college, but students who left a college subject to performance funding without graduating had higher debt burdens than students attending non-performance funding institutions.
A substantial body of literature has examined the effects of PBF on college access and student success metrics, but less is known about the financial implications of PBF adoption. A serious concern pertaining to PBF in higher education is the potential for an inequitable funding system in which already under-resourced institution types, such as community colleges and minority-serving institutions, receive even fewer resources. In this brief, we leverage the InformEd States PBF Policies Dataset to examine the impact of various PBF policies on institutions’ revenue from state appropriations.
The majority of U.S. states have enacted performance-based funding (PBF) policies that tie a portion of state funds for public colleges and universities to student outcome metrics, such as retention and degree completion. A growing body of evidence, however, demonstrates that PBF policies have had little impact on degree production but have led to a number of unintended consequences, including restricted access among underserved students. Our findings do not indicate widespread decreases in college access among underserved students with the implementation of either low- or high-dosage PBF systems. However, at the most selective institutions, we find some evidence of decreases in enrollment among racially minoritized and low-income students with the adoption of low-dosage PBF systems. Across institutional types, our findings indicate the presence of equity metrics are not enough to boost enrollment among the subpopulations they target except for racially minoritized students and only at the least-selective colleges.
In 2020, 33 states had PBF policies that existed either through state legislation or higher education agency approval, and 41 states have had PBF policies in place at some point since 1997. Unsurprisingly, given the popularity and growth of PBF policies over time, a large body of literature has emerged that examines the intended and unintended consequences of PBF. This literature largely indicates PBF policies have done little to improve degree completion and have resulted in unintended consequences that are likely to widen racial and economic educational disparities. This brief summarizes literature that examines the intended and unintended consequences of PBF and highlights unanswered questions regarding PBF policies. We then offer insight into how new data that our InformEd States team has collected can be leveraged to examine these unanswered questions and inform policymakers regarding how to design equitable and effective PBF policies.
Due to concerns about college completion rates and the rising price of higher education, a growing number of states have sought to identify ways to hold public colleges and universities accountable for their outcomes. Despite the wide reach and considerable support of performance-based funding policies throughout the United States, prior research has shown that PBF adoption does not typically lead to improvements in the completion outcomes being incentivized. Additional work has reported that PBF policies can lead to unintended consequences, such as restricting access to higher education for historically underserved students. Given that PBF policies appear to be a firmly entrenched feature of higher education finance, the conversation surrounding PBF must shift from whether PBF systems will persist to how to design and implement more effective, equitable, and evidence-based PBF policies.
The economic pressures facing students are likely to intensify in coming years due to the long-term effects of the pandemic and the disproportionate burdens placed on students from historically underserved groups. At the same time, policymakers' concerns about return on investment in higher education have led several states to incorporate workforce metrics into their performance-based funding (PBF) policies. In this brief, we examine the impact of various types of PBF policies on college student earnings.
In Fiscal Year 2018, states allocated approximately $99 billion for appropriations for public colleges and universities and $12 billion for students through financial aid programs. States face an economic recession that is estimated to reduce state budgets by $200 billion in Fiscal Years 2020 and 2021 in the midst of the COVID-19 pandemic. In the coming years, state legislatures will grapple with difficult decisions regarding how to fund higher education. This brief highlights variations in state approaches to funding for higher education in three large and diverse states that together enroll around 30% of all undergraduate students in the United States: California, Florida, and Texas.
Student financial aid has comprised a rising share of states’ funding for higher education over the past two decades. In the midst of the COVID-19 pandemic, states are making consequential budget cuts that will impact higher education institutions and the students they serve. States have responded to recessions by slightly increasing the amount of aid disbursed based on financial need, though that has not changed the overall trend of states prioritizing merit-based aid over need-based aid. This brief examines changes in the share of funds states allocate toward need-based financial aid and the amount of state and local funding students receive at various institution types over the past two decades.
As a result of the coronavirus pandemic, public colleges and universities are facing unprecedented financial stress. Regardless of the path that a college is taking for the fall term, these losses are likely to continue with fewer students on campus and increased costs related to health and safety. State funding plays a crucial role in supporting public colleges, but funding generally declines during recessions as states prioritize protecting other budget areas (such as K-12 education and health care). Higher education’s use as a balancing wheel during recessions means that state funding cuts during economic downturns can be large, and it can take colleges years to recover.
In this policy brief, we detail the landscape of state performance funding policies in Fiscal Year 2020. Twenty-nine states currently have policies in place through which higher education institutions receive a portion of state funds based on student outcome metrics. The share of funds and types of metrics tied to student outcomes vary considerably across states. A majority of PBF states tie some funding to the success of students from low-income families and about half explicitly outline race as a consideration in their PBF formula.
In this policy brief, we highlight three states’ performance funding policies (Missouri, New York, and Tennessee) over the last few decades. We chose these states as examples of how PBF policies vary considerably across the country and how determining whether a state even had PBF in a given year can be difficult. By providing details about the history and mechanics of these systems, we hope to spark conversations among policymakers and researchers about the importance of identifying and understanding the nuances of funding policies across states.