Equitable Distribution of Postsecondary Funds

By Danielle Zaragoza and Scott Boelscher -

As COVID-19 continues to impact students, teachers, families, colleges, and universities across the country, HCM Strategists is working to provide essential thought leadership on the range of issues in the field of education.

Our expert policy staff has launched a new series to identify emerging education policy ideas and practices aimed at addressing COVID-19. Stay tuned for more in HCM’s new series addressing COVID-19 concerns in education, and use #EdAfterCOVID19 to join the conversation on social media. Read more

The COVID-19 global pandemic has sent higher education into a period of uncertainty. States and institutions are grappling with the effects and are adapting policies to maintain student supports and instruction. Many students are struggling with the abrupt shift to online learning, coupled with financial uncertainty. Not to mention dealing with the stress of living through a global pandemic. To help ensure higher education institutions can support the neediest students, federal and state higher education funding should be distributed with a focus on student equity considerations.

As part of the CARES Act, Congress included approximately $14.25 billion for the Higher Education Emergency Relief Fund. While this influx of funding to states is undoubtedly vital, and the methodology emphasizes the enrollment of Pell grant recipients, there are still inequities in the formula used for the distribution. Specifically, the funding methodology is based on institutions’ shares of full-time equivalent (FTE) enrollment. Some have also noted that institutions like community colleges and regional public universities that traditionally serve the most vulnerable students also typically enroll a greater proportion of part-time students. As a result, these institutions receive less in the formula.

When considering future federal aid distributions, policymakers should give special consideration to the institutions serving the students who are most affected by COVID-19. These are students of color, low-income students, adult students, recently unemployed and other traditionally underrepresented groups. In order to help achieve a more equitable allocation, the Higher Education Relief Fund distribution methodology should be based on student headcount, instead of FTE enrollment. Additionally, weighing the enrollment of underrepresented minority students, adult students, or other priority populations should be included in the methodology, and even greater emphasis should be placed on the enrollment of Pell grant recipients.

It is also important for state policymakers to evaluate how responses to this pandemic will affect the most underserved students. In recent years, many states have increased their focus on equity by aligning higher education operating funding with the success of underrepresented students. For example, Oregon has tied universities’ state appropriations to the degree production of students of color, low-income students, veterans and rural students. Louisiana also distributes university and community college appropriations partially on the success of students of color, adults and low-income students. This way, institutions serving higher numbers of part-time students – and subsequently more underrepresented students – will receive a more equitable share from the funding allocation. HCM’s outcomes-based funding typology report shows other equity metrics used in student success focused funding models.

It is critical for state policymakers to evaluate the principles that underlie their funding methodologies and examine if the impacts of COVID-19 on their budgets have fundamentally changed those principles. Decisions to alter the policies should prioritize the access and success of the neediest and most underserved populations. 

Recommendations for states to maintain or increase a focus on student success and equity include:

  • Avoid across the board reductions to institutions’ state operating funding. This is often the simplest solution during a budget crisis, but it does not address equity concerns and is not aligned with any strategic principles. Across the board reductions also don’t take into account the differences in institutions’ levels of other financial resources such as tuition, philanthropy or endowments.
  • Employ a funding methodology that is focused on supporting equity and student success. States currently using these student success-focused models should maintain or increase incentives for priority populations. States without these models should explore ways to align state funding with the success of these students.
  • Examine methods of increasing financial stability while sustaining student success-focused funding models. Maintaining principles does not mean ignoring the fiscal effects of the pandemic. There is likely a greater need for stability in institution funding now compared to pre-COVID-19. There are ways to maintain or shift the existing funding policies while also increasing stability. For example, a state could implement a temporary stop-loss function that would limit formula reallocations to a set percentage. Another recommendation is to prioritize enrollment as well as student success. For example, the California Community Colleges Student Centered Funding Model allocates a portion of state appropriations based on student success and equity metrics, while also allocating a large portion based on enrollment. All of the components are explicitly aligned with the principles in the Community College’s Vision for Success

The disparate impacts of COVID-19 on the most vulnerable populations make ensuring postsecondary access and success all the more critical. Postsecondary education will be a key pathway to socio-economic recovery after COVID-19 subsides.  This pathway will lead to new workforce opportunities and economic mobility. However, without implementing these strategic practices, states will only further exacerbate the equity gaps that existed before and were made more glaring by COVID-19. 

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