Why Performance-Based College Funding Doesn't Work

For the better part of the past century, elected officials have sought ways to improve the performance of public sector operations, such as fire departments, libraries, health clinics, job training programs, elementary schools, and traffic safety. Interest in performance management has only grown over time, to the point today that it is nearly impossible to talk about government finance without also talking about performance. The idea of attempting to measure outcomes and paying for those results is compelling because of its simple logic. Proponents believe setting clear performance goals and tying funding to them will create incentives for public organizations to operate more efficiently and effectively, ultimately resulting in better delivery of public services. Fire departments, they reason, should not be funded according to the number of engines they own, but according to the number of fires they put out. Hospitals should be funded not by the number of patients admitted, but by the health outcomes of their patients. Schools should not be funded by the number of teachers they employ, but by each teacher's contribution to student learning.In recent years, advocates seeking to increase the number of college graduates in the United States have promoted the idea that states should finance their public universities using a performance-based model. Supporters of the concept believe that the $75 billion states invest in public higher education each year will not be spent efficiently or effectively if it is based on enrollment or other input measures, because colleges have little financial incentive to organize their operations around supporting students to graduation. When states shift to performance-based funding, it is hoped, colleges will adopt innovative practices that improve student persistence in college. The appeal of performance-based funding is "intuitive," its proponents argue, "based on the logical belief that tying some funding dollars to results will provide an incentive to pursue those results."However, while pay-for-performance is a compelling concept in theory, it has consistently failed to bear fruit in actual implementation, whether in the higher education context or in other public services

Borrowing and Repaying Student Loans

This essay synthesizes the most recent and rigorous research on student loan debt. It focuses on basic questions about who borrows, how much, and whether debt affects behaviors. Answers to these questions are necessary for informing federal student loan policymaking, yet the research findings are surprisingly mixed because of poor data quality, research design challenges, and the growing heterogeneity of borrowers. This ambiguity makes federal policymaking difficult when questions about the benefits and burdens of student loan debt are left unanswered. By synthesizing the current research, this essay helps answer some of these questions while calling attention to others

Tuition discounting for revenue management

Journal ArticleOver the past decade, institutionally-funded financial aid (or "tuition discounts") have been the fastest-growing item within most public four-year college and university operating budgets. One explanation for this trend is due to the changing structure of public colleges' revenue streams, as tuition and fees have replaced state appropriations as a viable and predictable source of funding. This analysis explores the extent to which expenditures on institutionally-funded financial aid generates additional revenue for public four-year colleges and universities. Using institutional data (n=175) from 2002 to 2008, the analysis implements a generalized method of moments (GMM) technique and concludes that aid indeed can be leveraged for revenue generation. However, this relationship is only sustainable to a certain point. When unfunded tuition discount rates exceed approximately 13 percent, institutions may experience diminishing revenue returns to this financial aid investment

The ethical dimensions of awarding financial aid

ManuscriptAbstract In countries charging tuition fees, and those that are considering adopting tuition fee policies, recent economic conditions are making education less affordable and accessible for students (Johnstone & Marcucci, 2010; Schwarzenberger & Opheim, 2009). To combat these challenges, nations, state/regional governments, and universities are experimenting with financial aid programs by providing non-repayable grants and scholarships to reduce price barriers (Usher & Medow, 2010). This paper synthesizes the underlying political and ethical motivations driving these financial aid policies. Aid providers interested in pursuing market prestige may prioritize ?merit-based? aid policies that are influenced by neoliberal norms; alternatively, those interested in equalizing opportunities for price-sensitive students may prioritize policies guided by egalitarian values related to social justice. The political economy of aiding students has profound effects on educational opportunity, so this paper offers policymakers, researchers, and practitioners a model from which to frame these crosscutting and timely ethical issues

Who Benefits from Tuition Discounts at Public Universities?

Descriptive statistics show how tuition discount rates differ according to student characteristics such as academic level, race, residency, family income, and institution type. This study examines national patterns and also makes use of the 12-state representative samples available in NPSAS:04

Education Deserts: The Continued Significance of "Place" in the Twenty-First Century

The purpose of this brief is to explore the importance of place even further, and to raise important questions about how geography shapes educational equity and opportunity

Paying for Default: Change Over Time in the Share of Federal Financial Aid Sent to Institutions with High Student Loan Default Rates

Both federal spending on financial aid and student loan default rates have increased over the past decade. These trends have intensified policymakers’ concerns that some postsecondary institutions— particularly in the for-profit sector—maximize revenue derived from federal financial aid without helping students to graduate or find employment. Prior studies have analyzed federal financial aid disbursements and student loan default rates in isolation from one another. Therefore, little is known about how much federal aid flows through colleges with high student loan default rates. The present study examines change over time and across sectors in the share of federal financial aid disbursed to institutions with “low,” “medium,” and “high” student loan default rates. We found that the share of federal student aid flowing through colleges with medium and high student loan default rates increased substantially from 2007-08 to 2012-13, but declined in 2013-14 as the national job market improved. However, the reduction in federal financial aid disbursed to for-profit institutions with high student loan default rates occurred prior to the national job-market recovery, suggesting that federal regulations helped to divert federal financial aid from poor-performing institutions

The impact of state appropriations and grants on access to higher education and outmigration

pre-printEducation policymakers at all levels of government have long been interested in finding ways to entice more students to go to college. This goal has been driven by the belief that, as people acquire more education, they not only reap personal benefits from their investment in education, but they also create spillover benefits for others in society (referred to by economists as "positive externalities") in ways such as raising their community's standard of living, reducing crime rates, and enhancing the region's quality of life

Preparing for the silver tsunami: the demand for higher education among older adults

Journal Article(Over the next decade, Baby Boomers will be reaching retirement age in large numbers and the U.S. will be undergoing one of the most significant demographic shifts in its history. This demographic shift has important implications for the role of higher education as a provider of lifelong learning and for the changing composition of postsecondary institutions. Using data from the 2005 National Household Education Survey, the results of this study informs the higher education community about this emerging student market segment as a way to help us better respond to older adults? demand for formal learning in postsecondary institutions. Key words: Educational demand, Older adults, Baby Boomers, Consumer preference theory, Hurdle model

What matters in student loan default: a review of the research literature

Journal ArticleFederal higher education policy has shifted over the past few decades from grants to loans as the primary means for providing access to postsecondary education for low and moderate-income families. With this shift, policy makers have begun tracking student loan default rates as a key indicator of the efficacy of student loan programs. This effort requires a closer examination of how to define default and what default signifies: What is an acceptable rate of default? What factors contribute to default? Should default rates be used as indicators of institutional quality or loan program efficacy. These questions lead to further investigation of factors influencing default, such as whether default is a function of the characteristics of students or of the institutions they attend, and whether the types of loans borrowed influence the probabilities of default. To help answer these and related questions, this study reviewed the literature of research on student loan default conducted between 1978 and 2007, and identified 41 of the higher quality studies, the findings of which are summarized here