Increase in State Investments for Higher Ed Yields Positive Financial Outcomes for Vulnerable Student Populations, New Report Finds

By Hugh T. Ferguson, NASFAA Staff Reporter

Financial outcomes for students, particularly those from low-income or disadvantaged backgrounds, were improved when state budgets increased their investments for institutions of higher education, according to a new report.

The working paper from the Federal Reserve Bank of New York touted its uniqueness by utilizing two previously unrelated data sets — the New York Fed's Consumer Credit Panel (CCP), sourced from Equifax, and administrative college enrollment and attainment data from the National Student Clearinghouse — which allowed them to draw insights into the causal effect of state appropriations on student outcomes.

Spanning from 1986 through the fourth quarter of 2018, the data set primarily focuses on outcomes among two age groups: 25-30 year olds and 30-35 year olds.

The findings were further broken down by highlighting outcomes for four- and two-year programs and found positive financial impacts for both student groups when state budgets were increased.

For four-year students the report concluded that increases in state funding for higher education led to “substantially lower” student debt obligations and shortened the time needed to attain a degree.

Two-year programs saw more collegiate and post-collegiate educational attainment. These students also had more educational debt consistent with the increase in program attainment but saw a lower likelihood of loan delinquency and default. Additionally, increased state investment for two-year programs led to more car and home ownership for students with lower adverse debt outcomes, and led to substantial increases in student’s credit score.

“Our results underscore the importance of state support for higher education in driving student debt outcomes and the long-run returns to postsecondary investments that students experience,” the report reads. 

The paper comes as institutions of higher education, along with state budgets, face significant financial strain due to the ongoing fallout of the pandemic.

There is currently a flurry of legislative activity on Capitol Hill with House Democrats seeking out continued negotiations with the White House over an additional bout of aid before the chambers adjourn for the presidential election. Stay tuned to Today’s News for more details.


Publication Date: 10/2/2020

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