Strengthening the Partnership: A Survey of Proposed Higher Education Funding Solutions

By 2020, the state of Colorado is on track to have completely withdrawn every dollar of public support from its higher education system. Current budget battles in Louisiana could mean a similar, more immediate fate for the more than 30 public institutions in the state. While these two examples are some of the most extreme, over the last decade especially, many states across the nation have shirked their responsibility to adequately fund public higher education with disastrous consequences for students and families. From 1996 to 2012, the share of college costs covered by states dropped from about 40 percent to just over a quarter for dependent students.

In an effort to reverse these trends, higher education thought leaders from think tanks, membership organizations, universities and government agencies have all worked to devise their own solution to rebalance the amount states, the federal government, institutions and families contribute toward the cost of college. In February, New America joined this growing chorus. In our paper, Starting from Scratch, we call for a new federal state-partnership in higher education to ensure college is within reach for all students without having to turn to debt. To situate our own plan within this growing conversation and to make sense of how this dizzying array of proposed funding solutions compare to one another, today we released a follow-up paper, Strengthening the Partnership.

While all plans we reviewed in Strengthening the Partnership share the single unifying goal to restore state funding for higher education, and while most agree that this goal should be achieved through a federal matching grant program, important questions around the specific design and objective of each plan have elicited markedly different responses. The biggest question -- what to do with our current federal student aid system -- separates the New America plan from every other. Instead of building atop the current college voucher system that underlies federal aid as every other plan does, we opt to eliminate Pell Grants, tax credits, and other forms of federal aid. Instead, we would guarantee that all students’ need is met with new formula funding and a state matching requirement.

Strengthening the Partnership not only provides a look back at the plans that precede our own -- it offers a roadmap for future conversation like the debate we are hosting today about the appropriate structure for federal higher education funding going forward. While students and families have taken on record levels of debt to finance college as a result of this continued disinvestment, the federal government has ineffectively attempted to backfill eroding local funds by increasing the amount it contributes in the form of college vouchers, like Pell Grants and tax credits. New data released yesterday demonstrate that the share of federal contributions have increased over 10 percent, tripling from 5.1 percent in 1996 to 14.8 in 2012. But while the share of costs that the federal government covers has grown, these funds have failed to make up for the state retreat and growing tuition bills that families must pay. Some research suggests that voucher funding and student loans may have even perversely impacted institutional behavior, actually leading to higher costs. One of the most vocal opponents of voucher funding and someone who is on the front lines of state disinvestment at this very moment, LSU chancellor, F. King Alexander will lay out his vision at this morning’s debate.

But aside from a fundamental question about the most basic structure of federal funding going forward, we also weigh other key questions that each proposal had to tackle. These questions include: How to address the burden of student debt; whether to include private institutions in a new funding scheme; how targeted or simple any new plan ought to be; which students should benefit; and what expectations there should be for states, institutions, and students to receive funding.

 In evaluating the robust heterodoxy that has arisen in response to rising college costs, it has become clear that every decision in these plans comes with certain unavoidable policy tradeoffs. But aside from these differences, Strengthening the Partnership should primarily highlight the near universal consensus that states must once again play their part in funding colleges and universities at a level that ensures all students can afford it. "