the most overlooked trend in U.S. higher education
State defunding of public higher education has received a lot of attention in recent years. And budget cuts like the $250 million one Scott Walker made this year to the University of Wisconsin mean this trend continues to get media play.
Less visible in the media, but still well known, is that as public funding has eroded, colleges have become more dependent on tuition dollars for revenue. For public institutions, this has meant both tuition increases for in-state students and, where possible, a greater percentage of out-of-state and international students. While the net price of college hasn’t increased nearly as much as the sticker price, it’s still beat the cost of inflation year after year.
Both of these narratives are completely true. Yet this story of a shift from public to private funding overlooks one critical factor: the expansion of federal student aid.
During the past two decades, as state appropriations per postsecondary student flattened then declined, federally supported financial aid made massive gains. In 2002 its volume passed that of state appropriations, and by 2010 it was twice as large.
Stunning, right? This suggests a very different story than the one about the privatization of public universities we hear so much about. Instead, it looks like there’s been a shift from state funding of higher ed to federal funding. So what’s going on here?
Well, a couple of things. First, the federal aid figures include both grants and loans. Data sources like the College Board and the Delta Cost Project include loans as part of net tuition, not as federal funding. That makes sense, if you’re interested in the financial burden of college on students and their families. And the loans don’t cost the government anything like their face value.
But counting this way downplays the fact that those loans ultimately exist because the federal government makes them possible. Colleges are doubly dependent in this scenario: on students’ choices about where to attend, but also on the feds to make them available in the first place. And if you’re coming at this from an organizational perspective, we should expect resource dependence — whether on students, on the feds, or both — to have effects.
Second, this chart collapses public, private non-profit, and for-profit institutions together. The state appropriations are only going to publics (which also enroll about three-quarters of the students). But as of 2010, more than a quarter of student aid was going to the 10% of students enrolled in for-profit institutions. Moreover, because private colleges are so much more expensive than public colleges, they also receive a disproportionate fraction of federal loans. I haven’t pulled these numbers apart by institution type. But if we just compared state appropriations and federal aid to students at public institutions, the chart would surely be less dramatic.
It would be misrepresenting reality to say that public institutions have experienced a substantial shift from state to federal dependence (at least without substantially more number crunching). And it would be similarly wrong to argue that schools haven’t become more tuition dependent (since loans do come to schools via individual students).
But you can absolutely make the case that at the field level, higher education has increased its dependence on the federal government relative to state governments. And this makes colleges susceptible to a whole wave of federal demands that simply weren’t there before. The college ratings system Obama proposed and then abandoned is one example of this. Education Secretary Arne Duncan’s drumbeating for accountability is another.
Colleges have a lot of political clout and are well-organized. They ground the ratings proposal into a shadow of its former self. And it will take a lot of doing before we see No College Student Left Behind.
Nevertheless, if organization theory tells us anything, it’s that resource dependence matters. When, five years down the road, we get a Race to the Top rewarding colleges that meet completion and job placement goals at a given tuition cost, I know where I’ll be looking: at that point in 2002 where higher ed waved goodbye to the states and hello to the feds.