Doing Good and Doing Well: Performance-Based Funding in Higher Ed

The New England Board of Higher Education released a policy brief that encourages states to tie a portion of higher education appropriations to institutional outcomes. Currently, New England states tend to apportion institutional funding based on enrollment levels—a practice that rewards quantity, but not necessarily student success and degree attainment.

From President Obama to private foundations like Lumina and Gates, higher education stakeholders increasingly stress the significance of college persistence and degree completion to the national education agenda. If the U.S. is to thrive in a knowledge-based economy and remain globally competitive, American institutions must retain and graduate more students.

NEBHE—in its report entitled “Catalyst to Completion: Performance-Based Funding in Higher Education”—suggests that performance-based funding strategies can encourage student success. States should earmark at least 5% of higher education appropriations to reward institutional improvements in areas like: remediation, retention, degrees conferred, research and service dollars, and six-year graduation rate.

To make its case, the report examines performance-based funding strategies at work in three states: Ohio, Indiana and Tennessee. Each state, in consultation with institutional leaders and in light of state-specific goals, overhauled its enrollment-based funding model in favor of a formula inclusive of outcomes.

While not a silver bullet, performance-based funding stands to improve college persistence and completion in New England, especially among low-income students and other “at risk” populations. States should consider such funding strategies alongside college access initiatives, increased aid and financial literacy programs, partnerships between education and industry, and other student success efforts.

NEBHE unveiled this research in a webinar held by its Policy and Research Department late last week.


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