More States Using Performance-Based Incentives to Improve College Affordability
Higher education leaders told a committee of Senators Thursday that more states are using performance-based funding to incentivize postsecondary institutions to increase completion rates and lower costs by increasing the number of students who graduate on time.
The Senate Health Education Labor and Pensions (HELP) Committee convened a panel of higher education leaders for a hearing Thursday to examine state level strategies to improve college affordability and the federal government’s role in incentivizing states to pursue such strategies.
“The dilemma, of course, is that the new focus on what the states can afford has tested the limits of what students and their families can afford,” David Longanecker, president of the Western Interstate Commission for Higher Education, said. “I encourage you to recognize that affordability is now more confounded by the financial limits of state government than it traditionally has been.”
Longanecker explained that many states, during these difficult budget cycles, have begun addressing the issue of college affordability by providing financial incentives for institutions to graduate more students. He noted that if institutions focus on graduating more students on time, they can reduce college costs and better improve access and completion for future students.
“The Washington State Community and Technical College system has developed a performance-funding process that rewards institutions based on the success of their students in achieving various persistence benchmarks,” he said. “Again, while this may not seem like affordability policy, it is, because students who persist at higher rates reach their educational goals quicker and thus more affordably. “
However, HELP Committee Chairman Sen. Tom Harkin (D-IA) noted this strategy can punish well-meaning institutions that serve non-traditional student populations- which often take longer to graduate.
“The shorter period of time you’re in college, the more you save. That we know,” Harkin said. “But how do you accommodate these other things, in terms of finances, in terms of illnesses, changing your majors.”
John Morgan, chancellor of the Tennessee Board of Regents, noted that performance-based funding incentivizes schools to put more resources into student services.
“In difficult budget times, historically, student services have been one of the first things to be cut,” Morgan said. “In an outcome based world, suddenly student services become one of the last things you want to cut.”
Improving student services better allows the institution to reach out to at-risk students, provide more financial and academic counseling and career guidance that ultimately can help the student take the right courses and avoid lapses in enrollment.
Longanecker also noted that this strategy should provide institutions the flexibility to determine what tactics will benefit their unique student population and improve graduation rates.
In response, Muriel A. Howard, president of the American Association of State Colleges and Universities, cautioned states and institutions to be sensitive to accelerated graduation incentives as it concerns adult learners and continuing education.
“I do think in terms of higher education we’re going to have to have a more expansive view of it and stop looking at it [as] some end and beginning. I think we’re all going to be involved in continuing education the rest of our lives when we look at the society we’re developing and how competitive it is,” she said.
Howard urged that the performance-based approach should be sensitive to the fact that nontraditional students are becoming a growing portion of the student population and higher education should provide many pathways to advancement, such as online education.
“Many of our colleges and universities are beginning to have their own e-University within the walls of the traditional university--so that we do have this hybrid role that students can take advantage of to garner the education that they need,” she said.
Members of the panel acknowledged the benefits and cost savings of technology and online education, often in combination with the traditional classroom setting.
The panelists also emphasized the importance of focusing resources more towards need-based aid than merit-based aid.
“Unmet financial need is still a major hurdle for college enrollment and completion for low-income students,” Howard said. “Merit-based programs often distribute aid to students from higher-income backgrounds- awarding taxpayer funds to students who would have likely enrolled in, and finished college without, the help of the subsidy.”
Sen. Harkin and Ranking Member Sen. Mike Enzi (R-WY) acknowledged that Congress has a role to play in providing guidance and incentives to states to address college affordability in the next reauthorization of the Higher Education Act. Federal law mandates Congress review and "reauthorize" the Higher Education Act every five to seven years; the next reauthorization is scheduled for 2014, although the actual date will likely be later.
“We have the Higher Education Act next year, I think [there are] a lot of things we can do,” Sen. Harkin said. “We’ve got to look at how [we can] incentivize states to do the kind of things you’re doing.”