Paying for Higher Education: Part 2

Part 1                         Part 3      

Budget Cuts and Colleges/Universities

State funding is the primary source of income for public higher education institutions. The recent recession has caused states to implement a number of budget cuts to higher education, putting financial pressure on these institutions.

What About Other Sources of Funding?

Though the state governments provide most of the funding for public higher education, these institutions receive additional revenue from tuition, grants, and endowments. With recent budget cuts, public colleges/universities have come to rely more and more on these ‘outside’ sources to support their programs and operations. Where increases in these funding areas have provided some financial relief, they do not completely cover the losses from budget cuts.

Of the the three ‘outside’ sources of revenue for public colleges/universities (tuition, grants, and endowments), tuition is the only one that institutions can directly change. As a result, tuition has become the main focus of institutions struggling with budget cuts. As budget cuts became more extreme during the recent recession, tuition rates began to rise at an exponential rate to soften the financial blow. Despite these hikes, increased tuition has only made up an average of 60% of the money lost by four-year colleges offering a graduate program due to budget cuts. For four-year colleges not offering a graduate program and community colleges, this gap is much bigger with tuition only covering 30% and 14% of the money lost respectively. With tuition levels already reaching a breaking point and in some states even overtaking state funding as the primary source of revenue, higher education institutions can no longer count on continued increases to close the financial gap.


Grants and endowments are other sources of revenue for public colleges/universities. I put these sources in the same category as both represent money given to a higher education institution for a specified purpose. For example, a grant may be given to a university in order to build a new section of the library. This grant represents a large sum of money and is being used for univeristy improvement however, this money can ONLY be used to build that part of the library. As a result, that new part of the library may be completed in a way that may be deemed ‘lavish’ despite the need for money in other sectors of the university. Since grants and endowments are are voluntarily donated to the university AND can only be used for specific purposes, they cannot be depended on to soften the blow of budget cuts.

Reducing Quality?

With other sources of revenue unable to cover the cuts in state funding, public universities/colleges have had to reduce spending in order to close the remaining money gap and prevent severe financial losses. In other words, public higher education institutions have had to make budget cuts themselves in order to balance state budget cuts. Cuts in college/university spending necessitates cuts in the programs and/or services that institution provides for its students.

Cuts in programs and services at higher education institutions have many concerned about a reducing quality in what these institutions offer. By eliminating programs and services, students become more limited in what they are able to pursue and will have trouble accessing essential services to help them be successful. Eliminating programs, and with them professors, also means eliminating a number of classes. As the number of classes offered decreases, class size increases as the same amount of students try to fulfill those class credits.


Just as public higher education institutions are tightening their belts, the demand for quality higher education programs is increasing. It is estimated by the year 2020, 65% of all jobs will require at least some college education. Given current trends, colleges will be producing approximately 5 million less educated workers than what the market will demand. In addition to the pressure for new high school graduates to pursue a college education, enrollment has been increasing as the recession has driven jobless individuals back to the classroom to acquire new skills as they wait for the job market to improve in addition to older workers trying to stay competitive. The increasing demand on shrinking programs has caused a great deal of concern over the sustainability of the current higher education system.

Though budget cuts have painted a bleak picture for higher education institutions, some could argue that such cuts do not necessarily sacrifice quality. The way that most colleges/universities are structured, money is not made by individual classes or programs but by entire departments. By properly merging certain departments together and focusing on departmental efficiency, an institution can reduce its spending while maintaining quality programs. In addition, expanding online programs allows colleges/universities to reach many more students without having to worry about the physical size restrictions or providing staff to cover numerous sections. Time will tell whether these solutions will be able to maintain education quality as some may think as public higher education continues to evolve to meet new demands with changing resources.

Inequality in Budget Cuts

Though the amount of money taken from public colleges/universities due to budget cuts is more or less equal across the board, cuts affect institutions differently. In general, Smaller colleges/universities and community colleges have a tendency to be more limited in their resources to begin with and as a result, have a harder time closing the financial gap caused by budget cuts.

During the recent recession, tuition hikes at institutions offering only a four-year bachelors program (no graduate program) only covered 30% of the money lost by cuts in state funding. Because they lack graduate programs, these institutions are more limited in the amount of students they attract, resulting in smaller overall student populations. By extension, these colleges/universities do not gather as much tuition as their larger counterparts with graduate programs. Even if tuition hikes occur, the smaller student body and the college/university’s inability to charge a higher rate for a graduate programs make these hikes less effective in closing large funding gaps. Community colleges follow similar trends but suffer more severe losses, tuition only making up 14% of the money lost by state budget cuts.

Size is not the only factor affecting how much tuition is able to subsidize funding losses. Both colleges/universities not offering a graduate programs and community colleges are more limited in how far they can hike tuition without seriously affecting student enrollment. With more limited programming, tuition levels must stay the same as, or even lower than, larger institutions in order to stay competitive and continue to attract students. This is particularly an issue for community colleges as they are notably different in what they provide. Though some community colleges offer a few four-year options, they also offer a variety of two-year programs and other courses that can be used to help accomplish or enhance other certifications/skills. Not only do community colleges differ in what they offer, they are also perceived to be (and often are) a more accessible means to access higher education. If tuition at community colleges rises to the point of matching other four-year institutions, they will lose the ‘accessibility’ image on which they are based.


Grants and endowments for colleges/universities without a graduate program and for community colleges tend to be significantly less than institutions with graduate programs. A large percentage of grants universities/colleges receive go towards either research or athletics. Research is extremely costly and larger projects are often associated with graduate and doctoral programs. Colleges/universities with research programs draw a lot of grant money to support the research itself as well as the related school facilities. Similarly, large athletic programs promote the college/university and draw in large amounts of money from fans. Colleges/universities without graduate programs may have research and athletic programs, but often not to the extent of their ‘larger’ counterparts. Community colleges often don’t have both of these programs and sometimes may not have either. Without these programs attracting additional funds for operations, smaller schools struggle more to close the funding gap.


“Budget Cuts and Educational Quality.” Budget Cuts and Educational Quality. N.p., n.d. Web. 21 Jan. 2015. <;.
“Center on Budget and Policy Priorities.” States Are Still Funding Higher Education Below Pre-Recession Levels —. N.p., n.d. Web. 17 Jan. 2015. <;.
Julia O’Donoghue, | The Times-Picayune. “Louisiana Higher Education Officials Say Campus Closures Are a Possibility.” N.p., n.d. Web. 20 Jan. 2015. <;.
“State Funding: A Race to the Bottom.” State Funding: A Race to the Bottom. N.p., n.d. Web. 20 Jan. 2015. <;.


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