Addressing the Inequity Gap

Community colleges with many low-income students should receive additional funding, as high-poverty schools in the K-12 sector do, new report urges.

May 28, 2015

Community colleges tend to receive the least amount of public financial support compared to other institutions, yet they are asked to push high numbers of low-income students into the middle class with few resources. A report released by the Century Foundation today -- "How Higher Education Funding Shortchanges Community Colleges" -- calls on states to reform funding models to better help two-year institutions jump-start social mobility.

"We're in this strange situation where students who have the greatest need receive the fewest resources and those who have had lots of advantages in life then have additional resources showered on them in higher education," said Richard Kahlenberg, a senior fellow at the foundation and author of the report. "What this report is trying to do is bring together some of the earlier findings on the inequality that community colleges face with recent research on hidden subsidies that wealthy institutions receive and provide a call for action to remedy this situation."

More people are going to college, yet not enough are graduating. So the challenge has become how to redirect resources to help those students who need the most help to complete.

"There's a growing awareness that for the first time we're educating large numbers of low-income and working-class students. In the report, I note that 86 percent of high school graduates go on to some form of college. This is relatively new for higher education," Kahlenberg said. "A century ago you only had something like 5 percent of students who went on to higher education and received bachelor's degrees."

Yet the most funding tends to go toward highly selective four-year colleges. The report notes that per-student public funding for public community colleges stood at about $7,400 in 2011 compared to about $16,300 for public research institutions (although funding per student in public master's degree programs came in at about $7,900).

"Direct public funding is more than twice as high at public sector research universities than at community colleges; that is, more-affluent students who can afford to attend a more prestigious program are then rewarded with their school receiving an outsized portion of public support," the report says.

The report does note that research universities are advancing studies as well as educating students, but argues that when scholars remove research from the data and only include education-related expenses, large gaps in expenditures still remain between institutions. So per-student spending in 2011 at a public community college was about $9,500 compared to $16,000 at a public research institution and $35,000 at a private research university.

Wealthy colleges also receive huge tax subsidies that are often hidden from the public. Kahlenberg points to the Nexus Research and Policy Center study released in April that found the richest universities sit on hundreds of millions of dollars in tax-exempt endowments and government subsidies. Among America's 10 most endowment-rich colleges, the benefit is $41,000 per student, according to Nexus.

"There is going to be increasing pressure on very wealthy universities to justify their full tax-exempt status. The most selective institutions, four-year institutions, which tend to be the wealthier ones, have an extreme imbalance among students," he said. "Rich kids are 14 times as likely to be found on campuses of selective four-year colleges as low-income students."

And some wealthy universities have stepped up in recent years to provide more financial aid to economically disadvantaged students. Most recently, for example, Stanford University announced in April that it was raising the income threshold for students to receive free tuition. Those whose parents made less than $125,000 in annual income wouldn't have to pay anything, and for any making less than $65,000, room and board would also be free.

But wealthy institutions still aren't admitting very many economically disadvantaged students, Kahlenberg said.

Higher education officials don't need to devise some new funding formula or plan to address the inequity; they only need to look toward the way states have adopted funding formulas to help low-income students in the K-12 sector, he said.

"At the K-12 level, two-thirds of states have funding formulas that provide extra funds to schools that have large numbers of low-income students," Kahlenberg said. "Our K-12 system has long grappled with economic diversity."

Kahlenberg said a number of states are devising performance-based funding approaches that recognize low-income students have additional needs and need additional support.

For example, performance-based approaches have been the norm for the past few years in Tennessee, which is among more than 30 states that have developed some form of performance-based funding. Tennessee weighs students older than 25 and low-income students more heavily in the funding formula. Retention, degree attainment and completion of remedial courses are some of the performance-based measures.

"Most of the changes due to the funding formula were changes housed in student affairs offices, not financial aid," said Mike Krause, executive director of the Tennessee Promise and Drive to 55 initiatives.

The state's colleges focused on hiring more professional advisers or creating one-stop shops where financial aid and registrars' offices were housed in a single location, all in an effort to increase student success, Krause said.

"It was a culture change on campuses," he said. "Before everyone altruistically agreed we need to provide these interventions… now we have a funding structure to match up and it's put our state in a unique place."


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