EdStat: Every Year, the Federal Government Spends More than $100 Billion on Higher Education, Mainly in the Form of Grants and Subsidized Loans to Students

Every year, the federal government spends more than $100 billion on higher education, mainly in the form of grants and subsidized loans to students. Without federal subsidy, students from low-income backgrounds in particular would struggle to afford higher education. Although federal spending has expanded access, it has also had an unintended effect: Because federal funds are available on a pay-for-enrollment basis, students can enroll in programs with low course-completion and graduation rates as long as the degree or certificate program is eligible. This means that funding is not tied directly to a program’s track record of placing students into good jobs, and inevitably, some students end up with debt that they struggle to repay. With the pending reauthorization of the HEA, policymakers have an opportunity to craft a framework that unleashes innovators and stimulates them to focus on creating value for students and society. The key, though, isn’t to debate whether there is too little or too much regulation but to concentrate on paying innovators for outcomes instead of constraining them by regulating inputs.

Michael Horn and Alana Dunagan’s article is part of a forum on federal higher-ed spending. For an alternate take, please see, “Strong Hand of Regulation Protects Students,” by Kevin Carey.

—Education Next

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