Type:Federations Magazine Article
Thirty Per Cent Hold Bachelor’s Degrees BY Arthur Hauptman
Beginning with the establishment of harvard
University in 1636, most early universities in the
United States were private institutions. Over the course
of the nation’s history, the number and scope of public
institutions has greatly expanded. In 1787, the new
U.S. Constitution gave responsibility to the states for
most important domestic functions, including education. This has
meant that almost all of these public institutions of higher education
– defined as those in which taxpayer dollars are a primary
source of funding and public authorities are primarily responsible
for their governance – are either state- or locally-governed.
System Grew in Surges
Federal legislation enacted in 1862 encouraged the
creation of land-grant universities in virtually every
state. After the Second World War, many public fouryear-
degree institutions were created or expanded to
accommodate rapid population growth. In addition,
in 1947, the report of a federally-sponsored commission
spurred the creation of community colleges.
These institutions now account for more than one-third of all
enrolments. Three-quarters of all college students now enrol in
To finance these public institutions, governments stepped in
by funding the basic operations including instruction and support
for research conducted on campus or in institution-sponsored
facilities, and by providing student financial aid such as grants,
scholarships, loans and work-study opportunities. The states
had the primary responsibility for funding instruction and basic
operations of public institutions, while the federal government
provided most of the funds for academic research and student
In the U.S., state income taxes, sales taxes and other state taxbased
revenues (such as lottery funds) are the primary form of
taxpayer support for public institutions. In 2006-07, state funds
for post-secondary education exceeded $70 billion, more than
one-half of a per cent of Gross Domestic Product (gdp). Most of
these funds come from the individual states. Total spending for
post-secondary education in the U.S. from all sources accounts
for nearly 3 per cent of gdp, which is the highest level of post-secondary
investment in the world. On a per student basis, state
funding now amounts to almost $10,000
per full-time equivalent student.
Tuition Fees Boosted Revenues
The growth in tuition and fees as a
proportion of total revenues of public
institutions is one of the most marked
trends in post-secondary education
finance in recent decades in the U.S. as well as in many other
countries around the world. Tuition fees now pay for more than
one-third of the educational activities of public institutions in the
U.S., as opposed to 10 per cent three decades ago. There is quite a
large variability among states in the reliance on fees, from 13 percent
in New Mexico to 77 per cent in Vermont.
To pay for their tuition fees, many students take out loans. The
1965 Higher Education Act established a number of student
financial-aid programs that form the basis for student financial
support in the U.S. today. Guaranteed Student Loans, one of
those programs, represented an interesting approach with respect to federalism. At the time, a dozen state agencies guaranteed
private lenders against the risk of default for loans made to
student borrowers who had little or no collateral to secure their
loans. The federally-guaranteed loan program worked with existing
state agencies to ensure that students in states without
guarantee agencies would be able to borrow. Today, the student
loan industry in the U.S. makes more than us$100 billion
annually in loans. The average amount borrowed by an undergraduate
student is about us$20,000 and graduate student
borrowing is much higher.
Research has been another major source of revenue for universities.
The federal government traditionally has been the
primary source of financial support for research conducted on
campus, including at federal laboratories. Total annual federal
spending in support of campus-based research is now about
$30 billion. The bulk of this federal funding of academic
research is based on peer review of proposals.
Rather than ensuring the overall quality of education, the
federal government’s primary responsibility has been to ensure
that the thousands of institutions attended by millions of federal
student aid recipients meet minimal standards and to
confirm that federal taxpayer dollars are appropriately spent.
Not Helping Low-Income Students
To improve the efficiency of higher-education systems, the U.S.
Secretary of Education’s Commission on the Future of American
Higher Education issued a report in September 2006 amid a
firestorm of controversy. A key theme of the Commission’s
report was that the student financial-aid system in the U.S. is not
functioning well because it is too complex, non-transparent and
not targeted on the needs of the lowest income students.
The report found that although U.S. participation rates have
traditionally been among the highest in the world, the proportion
of students who complete the program they began shows
the U.S. has had a mediocre record, with only half of the students
completing a four-year degree, and a much lower rate in
The Commission’s focus on low degree-completion rates
has led to a growing debate on a related subject, namely, the
U.S. ranking in attainment rates – the proportion of the adult
population with a post-secondary degree of some sort. The U.S.
continues to have the highest rates of attainment for bachelor’s
degrees, with 30 per cent of the adult population holding such a
degree – the oecd average is 19 per cent – although a number of
countries are catching up. But in the attainment for associate’s
degrees from community colleges, the U.S. has been in the middle
of the pack with roughly 10 per cent of the adult population
holding associate’s degrees (oecd average is nine per cent).
When the rates for both types of degrees are combined and the
trends over time are examined – by looking at differences
among different age groups – the U.S. position lags behind that
of many countries.
It is now clear that the faulty system of student financial aid,
the lack of student success, and the need to examine what students
learn and to improve quality will be central to the
debate on higher education in the U.S. for the foreseeable
future. These topics, of course, have been the subject of extensive
debates before, but with little to show for it. Maybe this
time, with the intense focus on global competition, the result
will be different.