Pew Report: Federal Investing in Higher Education Increases as States Pull Out

Quick Takeaways:

  • Since the Great Recession, the difference in spending between the federal and state government have “narrowed dramatically” when compared to the past two decades;
  • State spending during the Great Recession for general-purpose appropriations for institutions dropped by 21 percent, while federal funding for the Pell Grant increased by 72 percent;
  • Total federal revenue for higher education increased by 92 percent from 2000 to 2012, while state revenue dropped 9 percent.

By Brittany Hackett, Communications Staff

Federal and state investments in higher education are more equal today than they have been in the last 20 years, largely due to the steep disinvestment in state funding compared to federal spending, according to a recent brief from the Pew Charitable Trusts.

In examining the relationship between the federal and state governments and higher education funding, Pew reports that investment in higher education makes up only about 2 percent of the total federal budget, totaling $75.6 billion in 2013. State spending on higher education, in comparison, totaled $72.7 billion in 2013, and local spending that largely supports the operating costs of community colleges totaled just $9.2 billion.

Traditionally, federal and state governments have provided higher education resources in different ways, with the federal government providing financial assistance to students and research projects individually, and the states providing funding for the general operations of public institutions. States have also in the past provided up to 65 percent more in assistance to postsecondary institutions than the federal government. 

However, since the Great Recession that started in 2008, that difference has “narrowed dramatically” as states have pulled out of funding higher education in their budgets and the federal government has increased its investments the major higher education programs, according to Pew. For example, federal spending for the Pell Grant Program increased by $13.2 billion – or 72 percent – from 2008 to 2013. Veterans’ educational benefits also increased substantially, up 225 percent or $8.4 billion during the same time period.

State spending during the Great Recession saw the biggest decline in funding for general-purpose appropriations for institutions with a 21 percent, or $14.1 billion, drop.

According to Pew, the increase in spending per full-time equivalent (FTE) student at both levels of government represents a “major shift” in higher education funding. Between 2008 and 2013, the number of FTE students increased by 1.2 million, or 8 percent, while between 2000 and 2012 the number of FTE students grew by 45 percent. Federal revenue per FTE student by 2010 was higher than that of states for the first time in 20 years, growing by 32 percent in real terms between 2000 and 2012. State revenue per FTE student fell during that time period by 37 percent.

When enrollment growth was not factored in, Pew reports that total federal revenue for higher education increased from 2000 to 2012, in real terms, to $83.2 billion, up 92 percent from $43.3 billion. State revenue, meanwhile, dropped to $70.8 billion after inflation, down 9 percent from $77.8 billion.

The Pew brief also looked at federal and state lending trends, reporting that the federal government, as the nation’s largest student loan lender, issued $103 billion in loans in 2013. State loans totaled only $840 million, less than 1 percent of the federal amount, in 2013. Between 1990 and 2013, federal loans increased by 376 percent in real terms, compared with a 60 percent growth in enrollment.

The actions of policymakers on higher education funding and related issues “will help determine whether the shift in spending that resulted in parity is temporary or a lasting configuration,” Pew said in the brief, adding that they “will need to consider whether there are better means of achieving shared goals, including student access and support for research.”


Publication Date: 6/17/2015

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