Two Decades of Change in Federal and State Higher Education Funding

Abstract

States and the federal government have long provided substantial financial support for higher education, but in recent years, their respective levels of contribution have shifted significantly.1 Historically, states provided a far greater share of assistance to postsecondary institutions and students than the federal government did: In 1990 state per student funding was almost 140 percent more than that of the federal government. However, over the past two decades and particularly since the Great Recession, spending across levels of government converged as state investments declined, particularly in general purpose support for institutions, and federal ones grew, largely driven by increases in the need-based Pell Grant financial aid program. As a result, the gap has narrowed considerably, and state funding per student in 2015 was only 12 percent above federal levels. This report illustrates the existing federal-state relationship in higher education funding, how that relationship has evolved over time, and the significant variation in federal and state support across states.