State Appropriations: Implications for Tuition and Financial Aid Policies

Abstract

Over the past 30 years the costs of higher education have climbed faster than the rate the inflation. As these costs have risen, state appropriations for public institutions have not kept pace. While not declining in real dollars, as a portion of meeting the expenses of funding public higher education, state appropriations have been steadily falling over the past three decades. Not surprisingly, during this period tuition at public colleges and universities has risen dramatically, leading to concerns about access to higher education, in particular for students of low income backgrounds.The literature contains many studies highlighting the increasing costs and tuition charged by public colleges and universities. Little has been written about the specific relationship between the level of state appropriations at a particular institution and the pricing and financial aid policies it then adopts. By analyzing the data for public institutions in the Integrated Postsecondary Educational Data System (IPEDS) as well as data for specific students in the National Postsecondary Student Aid Survey (NPSAS) for five school years spanning 1989-1990 to 2003-2004, this study conducts a quantitative analysis to create a predictive model capable of forecasting the impact of changes in state appropriation on institution pricing and financial aid policy. In an environment where the continued decline of state appropriations as a portion of meeting educational costs is a real possibility, such forecasting ability may prove invaluable in crafting policies to insure access to higher education for certain student populations.