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Funding Principles

Increase College Completion

Funding Principles

How Can States Invest in Increasing College Graduation?

  • Prioritizing low-income students. Many states and institutions award financial aid to students who do not need the funding to complete a degree. Redirecting funds to address the needs of low-income students could free up funds to help improve completion rates by targeting aid more strategically. While tuition increases and cuts to financial aid are unpopular, research has indicated that completion rates for upper and middle income students are often not affected by higher prices, while those for low-income students are.  Additionally, institutions that serve large numbers of low-income students may need more support from the state budget than those with the leeway to raise tuition and fees. One unique approach is Indiana's 21st Century Scholars Program that guarantees tuition at a state four year institution for low-income 8th grade students who maintains their grades, graduates from high school and fulfills a pledge of good citizenship.
  • Redirecting existing dollars. States should consider rewarding institutions for completion of courses and credentials instead of more common funding methods based on student enrollment and previous funding levels. The Indiana Commission for Higher Education, for example, identified performance funding as a key priority and the legislature has linked funding to performance by shifting from funding based on credit hours attempted to successfully completed credit hours.  When budgets had to be cut in Indiana, the state took institutional performance in college completion into account in determining the amounts of the cuts, rather than allocating them across the board. Tennessee’s new funding formula makes progress toward degree completion the primary factor in allocating state subsidies to institutions, no matter whether the state budget is up or down.
  • Reinvesting savings from efficiency improvements or reductions in non-core programs. When savings can be found through improved business practices or new academic strategies that do not hurt quality, the savings become a resource to enhance (or at least protect) the core areas that improve students’ odds of success. The National Center for Academic Transformation promotes course redesign that can both improve quality and reduce cost.  States and institutions are also exploring ways to reduce costs in other areas, ranging from athletics programs to health care benefits, in order to protect expenditures on student instruction.
  • Providing incentives for completion. The Texas 120 Hour Statute, for example, is aimed at reducing the number of students who attempt more credits than needed for the degree.
    • Student gets $1,000 if they can complete their bachelor degree within three credits of the degree requirement
    • A college or university loses its state subsidy for students who exceed a certain credit-hour threshold
    • Students are charged out-of-state tuition if they exceed limits for repeating courses or if they take classes that are “substantively identical” to ones they have completed
    • The money these policies save in subsidizing courses taken beyond the degree requirements can offset the cost of the payments to students
  • Maximizing federal funds. States can consider how to maximize and/or supplement federal funding sources that support college completion
    • College Access Challenge Grant Program. The purpose of the College Access Challenge Grant Program (CACGP) is to foster partnerships among federal, state, and local governments and philanthropic organizations through matching challenge grants that are aimed at increasing the number of low-income students who are prepared to enter and succeed in postsecondary education. Recognizing that the key to impacting the future success of students is to reach them early, the Maryland College Access Challenge Grant Program (MCACGP) targets college awareness and career planning activities to middle school students and their families. The goals of the MCACGP are (1) to increase college awareness among underrepresented middle school students and their families; (2) to increase the number of underrepresented students taking Science, Technology, Engineering, and Mathematics (STEM) or Maryland Scholars courses in high school; and (3) to increase the number of underrepresented middle school students with career plans. 
    • Race to the Top Fund. One of the four reform areas included in Race to the Top was adopting standards and assessments that prepare students to succeed in college and the workplace and to compete in the global economy. Funded through Race to the Top, the Partnership for the Assessment of Readiness for College and Careers is comprised of 25 states committed to a common goal of creating an assessment system to help states dramatically increase the number of high school students who graduate ready for college and careers. Postsecondary involvement during the development and implementation is critical to meeting one of the core goals that colleges accept the high school assessments for course placement purposes.  
    • The Carl D. Perkins Career and Technical Education Act of 2006. Each year under Perkins, Congress appropriates more than $1.1 billion dollars in formula grant funds to states which must offer at least one of the following options, Maryland’s Hospitality Pathway is an example of all four components.
      • Incorporates and aligns secondary and postsecondary education elements
      • Includes academic and CTE content in a coordinated, non-duplicative progression of courses;
      • Offers the opportunity, where appropriate, for secondary students to acquire postsecondary credits; and
      • Leads to an industry-recognized credential or certificate at the postsecondary level, or an associate or baccalaureate degree.
    • Federal Student Aid.   Many students do not apply for all the federal aid for which they are eligible.  As a result, they may not enroll in higher education, or may take longer than they need to complete a degree.  States lose out on the resources these subsidies bring into their economies.  Relatively small investments in helping students and their families fill out the paperwork could yield big returns in resources available to lower-income students. [1]
  • Leveraging private funding. There are numerous nonprofit education foundations and organizations with funding opportunities for states and higher education institutions. The Bill and Melinda Gates Foundation and the Lumina Foundation for Education are two of the most prominent organizations influencing higher education policy through grant programs. Through its productivity grants program, the Lumina Foundation has helped seven states focus specifically on increasing numbers of degrees awarded in an environment of flat or declining higher education revenue. The resources the foundation has provided are intended to support resources, research, outreach, will-building, and education that will leave the states with increased capacity long after the grant funds have run out.  For example, see Tennessee’s “Making Opportunity Affordable” website.


[1] College Board. (2010). Trends in Student Aid 2010. New York: The College Board.


The Developmental Education Initiative , funded by the Bill and Melinda Gates Foundation and the Lumina Foundation for Education includes 15 colleges and six states working towards increasing the number of students who progress to college level courses.