Policy Matters is a series of reports that provide timely research and guidance on issues that are of concern to policymakers at the local, state, and national levels.

Volume 6, Issue 2 by Luciana Dar is entitled: The Politics of Higher Education Finance: The Role of States and Institutions.



Executive Summary

The past 40 years have seen growing inequality of access and attainment of college degrees by socioeconomic status and race/ethnicity. As higher education continues to lose status in the policy priorities of most states, a larger share of college costs are being shifted to students and their families. Low- and middle-income students are being priced out of higher education due to a combination of increasing tuition prices, declining purchasing power of student aid programs, and a growing focus by colleges and universities on attracting wealthy, high-achieving students via the strategic use of institutional aid. For example, in California between 1990-91 and 2013-14, tuition and fees have increased more than threefold at the CSUs and more than fourfold at the UCs, whereas state spending per FTE in both sectors is close to its lowest point since 1980-81.

This brief explores two related questions about the roots of this growing inequality in higher education affordability with a view towards potential solutions. First, how do state higher education financing policies affect the pricing strategies of public universities? Second, how do pricing strategies differ across institutions?

The evidence so far indicates that, in the context of decreased state appropriations, public universities have intensified the strategic use of institutional aid resources by favoring wealthier, high-achieving students over their low-income peers as a means to maximize prestige and generate revenues. Attempts by states to mitigate these impacts are only partially successful. Indeed, increases in state student aid spending are associated with increases in both average out-of-pocket costs paid by students in public four-year institutions (i.e., average institutional net price) and tuition levels (i.e., “sticker price”). Finally, increases in state student aid spending are also associated with decreases in average institutional aid awarded to in-state students.

In sum, the research findings presented in this brief suggest that solutions to the college affordability issue demand better coordination between federal, state, and institutional financing policies. In particular, there is a need to develop policies to address the existing misalignment between the priorities of state governments and individual higher education institutions, with effects that vary according to changes in state institutional appropriations to universities and state financial aid to students.

LUCIANA DAR is Assistant Professor of Higher Education at UC Riverside. Her research interests fall into three interconnected areas of inquiry: comparative political economy of higher education, the relationship between higher education and social inequality, and the politics of higher education. She can be reached by email at luciana.dar@ucr.edu or by phone at (951) 827-2751