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Federal and State Funding of Higher Education

Pew, A changing landscape – “States and the federal government have long provided substantial funding for higher education, but changes in recent years have resulted in their contributions being more equal than at any time in at least the previous two decades. Historically, states have provided a far greater amount of assistance to postsecondary institutions and students; 65 percent more than the federal government on average from 1987 to 2012. But this difference narrowed dramatically in recent years, particularly since the Great Recession, as state spending declined and federal investments grew sharply, largely driven by increases in the Pell Grant program, a need-based financial aid program that is the biggest component of federal higher education spending. Although their funding streams for higher education are now comparable in size and have some overlapping policy goals, such as increasing access for students and supporting research, federal and state governments channel resources into the system in different ways. The federal government mainly provides financial assistance to individual students and specific research projects, while state funds primarily pay for the general operations of public institutions. Policymakers across the nation face difficult decisions about higher education funding. Federal leaders, for example, are debating the future of the Pell Grant program. The Obama administration has proposed increasing the maximum Pell Grant award to keep pace with inflation in the coming years, while members of Congress have recommended freezing it at its current level. State policymakers, meanwhile, are deciding whether to restore funding after years of recession-driven cuts. Their actions on these and other critical issues will help determine whether the shift in spending that resulted in parity is temporary or a lasting reconfiguration.”

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