Understanding Higher Education Finance

Every year, the United States invests more than $800 billion in postsecondary education, if the budgets of postsecondary institutions and students and the cost of federal and state tax credits are all included. Yet the total extent of the investment is rarely discussed. This report, produced with support from the Bill & Melinda Gates Foundation, covers the full range of funding sources our postsecondary system depends upon, from state appropriations to institutions to support students receive from parents, to state and federal tax expenditures.

The report looks at finance through the lens of low-income student success in particular , and points out how most of postsecondary education’s revenue is driven by other, competing priorities. The result is a set of incentives and a competitive economic environment that makes it difficult for low-income students and the institutions that serve them to thrive. It concludes with implications for policymakers and institution leaders at all levels and a discussion of how different types of postsecondary reform align with potential sources of revenue. Get overview brief, expert interviews, and descriptions of primary data sources here.

Initial Evaluation of Indiana Financial Aid Reforms Finds Positive Effect of Incentives to Complete 30 Credit Hours

The Indiana Commission for Higher Education hired Postsecondary Analytics to evaluate the effect of reforms to the state’s primary financial aid programs. The reforms, implemented in 2013, required students to complete 30 credit hours per year to receive the maximum award, with reduced aid levels for students who completed 24 hours. Using a quasi-experimental “difference-in-differences” approach, we found significant increases in credit hours attempted and completed. Students affected by the new policy increased their course loads at significantly higher rates than students who were not directly affected. Read the report here for complete results, description of the methodology, and discussion of the study’s limitations.


Lumina Foundation Paper Examines Institutional and Student Incentives in Higher Education Business Model

2016-07-16 Lumina Incentives screenshotIn a paper commissioned by Lumina Foundation for a series on outcomes-based funding, Nate Johnson examines the role of institutional and student incentives in higher education finance. Nationally, the primary driver of revenue for colleges and institutions is the credit hour, a measure of short-term student enrollment. Credit hours produce revenue for institutions primarily through the tuition transaction (student payment, with or without financial aid offsets) and in some cases by determining the amount of state funding received as well. This “cash-for-credit” model fosters institutions that can increase revenue through raising prices per credit, increasing student enrollment, or selling more credit hours per student.

Such a financial structure does not, however, provide a sustainable and scalable revenue source for other things that public higher education needs to do—focus on low-income students who cannot afford the full cost, offer courses in technical and scientific disciplines whose costs exceed tuition rates, invest in advising and long-term academic planning, or award credit for what students have accomplished at other institutions or through alternative instructional pathways. As states continue to focus on increasing educational attainment and fulfill the growing technical and advanced workforce needs, policymakers are examining and making changes to the funding system that shapes how they invest in higher education outcomes.

The full text of the paper is available here as well as on the Lumina Foundation website.

When Is Higher Education Productivity an Institutional Issue and When Is It Systemic?

CaptureIn a paper published by TIAA Institute and NACUBO as part of a series examining higher education productivity, Nate Johnson argues that much of higher education’s output is a function of its systemic structure and composition, rather than simply the sum of its institutional parts. Historically, gains in total outputs have happened both by adding new institutions and by growing existing ones, while some of the biggest gains in efficiency (or its conceptual cousin, productivity) have come from the addition of new types of institutions that have had different objectives and missions than their pre-existing competitors.

A focus on systemic productivity requires a population-based approach to measurement, which makes students and potential students in a given metropolitan area, state or nation the target of analysis, rather than a particular set of institutions. And when students are the focus, their own contribution to higher education outputs, in the form of time devoted to postsecondary study, becomes a critical input in productivity measurement.

The paper is available here as well as on the TIAA Institute website.

Analyzing the Relationship Between Higher Education and Jobs at CAPSEE by Nate Johnson

This year’s Center for Analysis of Postsecondary Education and Employment (CAPSEE) Convention featured four plenary and 12 breakout sections all centered on the idea of The Value of Education—And How to Further Strengthen It. Specifically, we came together to review emerging research on the relationship between higher education and jobs. There has always been tension between higher education’s role in vocational training and its broader educational and cultural function…more

Thoughts on Quebec’s Pre-University System by Nate Johnson

Quebec’s system of “General and Vocational Colleges” or “CEGEPs” in French, combine what in other places in the U.S. and Canada would be the senior year of high school and the first year of college into a two year pre-university program that is free to students and covers most of the general education and major prerequisite courses…more

Three Strategies that Moved the Needle in Kentucky by Nate Johnson

With its commitment to higher education reform and measurable, systemic goals that have proven attainable, Kentucky has become a model for other states. Though there are many reasons for the success, three key factors stand out: strong leadership for whom education is a top priority, …more

Presentation on Results of Survey on Uses of Unit Cost Analysis on Campus

This survey study, funded through a grant from the Japan Society for the Promotion of Science (the Basic Research B category of the Grants-in-Aid for Scientific Research, Project Code: 25285236),  is part of a multinational research project examining how unit instructional cost expenditure measures are defined, calculated, and used in campus-level decision making across higher education institutions in the United States. In order to help answer those questions, we developed and distributed an institutional survey, and followed up with interviews at several institutions to learn more about their uses of unit cost analysis.

Results from the first stage of the survey are summarized in an AIR Forum presentation here. Your feedback is much appreciated!

AIR Forum 1 – Full-Time vs. On-Time: Results from a Survey of Student Course Load Intensity Commissioned by Complete College America

Results from the survey of course enrollment patterns are summarized in an AIR Forum presentation here. The original Complete College America brief and related materias are available on the CCA website. The associated database may be accessed here.

Postsecondary Analytics comments on Proposed College Ratings System

The Department’s proposed distinction between consumer information and accountability in its ratings system is important. The focus should be on minimum standards across all institutions, especially for low-income students. The full text of Nate Johnson’s comments on the proposed ratings system is available here.

New York Times Op-Ed: Stop Penalizing Poor Students

Nate Johnson of Postsecondary Analytics, Kristin Conklin of HCM Strategists, and Sandy Baum of the George Washington University and Urban Institute argue that the design of the Pell grant program may further disadvantage some low-income students. Read the op-ed here.

New Research Brief Describes Different Tuition Structures at Flagship Universities and Community Colleges

A new research brief finds that “linear” tuition is most common at public community colleges, while flat rate tuition prevails at state flagship universities. The complete research brief is available here.

Complete College America Course Load Intensity Survey: CCA Release Policy Brief to the Public

We are pleased to announce the release of a policy brief on ‘hidden part-timers’ in US higher education. ‘Hidden part-timers’ are students who are taking 12 credits to satisfy financial aid requirements, but will likely fail to complete their degrees on time. The brief summarizes the results of a recent nationwide survey commissioned by Complete College America and offers advice to policy makers to address the shortfall using insights from recent behavioral economics and exemplary strategies from Hawaii, Florida and other states.

Nikkei Business Daily showcases Postsecondary Analytics and Ken Hoyt’s Optimizing Academic Balance (OAB)

New Trend in Higher Education Marketing (6) “Utilizing For-profit Consulting Firms to Improve Institutional Management”

In the US, there are many consulting firms that provide universities with institutional research services. Mr. Takeshi Yanagiura is one such consultant. As one of a few Japanese professionals in institutional research in the US, he has participated in many projects in a variety of higher education settings such as states, institutions, and non-profit organizations. Mr. Yanagiura currently serves as the Director of Research at Postsecondary Analytics, LLC.

US higher education institutions highly value analytics, but not all institutions have sufficient IR capacity to deliver high quality analytic products and services due to lack of staff, skills, or both. Furthermore, grant-funded programs usually require an external evaluator. It is for these reasons that the demand for analytics consulting firms has been consistently high in the US.

Postsecondary Analytics began offering institutional research consulting services on the Japanese higher education market in April, 2013. One of their new products is Optimizing Academic Balance (OAB), a unique IR process developed by Dr. Kenneth Hoyt, who has served in various leadership roles at American universities, and is the current CEO of Higher Education Practice, LLC. OAB evaluates academic programs in light of their education quality and the institution’s mission. It also includes budget analysis and a supply and demand study for each program, helping the management team make data-driven decisions for effective resource allocation in student recruitment and program opening, closing, or consolidation. OAB has proved its effectiveness in US institutions. Its potential impact on the management of Japanese institutions cannot be overstated. (Transl. Takeshi Yanagiura)

Complete College America Program Requirements Survey Now Available

To get a better picture of the extent to which program requirements are responsible for extended time-to-degree, Complete College America commissioned HCM Strategists and Postsecondary Analytics to conduct a survey of 189 different degree programs at 310 institutions nationwide. The results of that survey and the associated report are now available here.


Postsecondary Analytics has recently released Attrition Cost Model, a SAS-based program that automatically calculates state’s annual cost of attrition. Attrition Cost is defined as the proportion of annual higher education expenditures spent on undergraduate students who do not complete a degree. The program is downloadable from here.

Delta Cost Project Makes New Student Attrition Policy Resources Available

The Delta Cost Project at American Institutes for Research (AIR) presents the results of new research to measure and manage the institutional costs of student attrition. The package includes:

Measuring (and Managing) the Invisible Costs of Postsecondary Attrition…a policy brief, summarizing the study and its findings.

The Institutional Costs of Student Attrition…a detailed analytical paper that explores the problem of student attrition in some detail and presents the techniques used to generate attrition cost estimates.

Attrition Cost Model Instruction Manual…a programmers’ manual to assist institutions and states to create their own student attrition cost measures.

Benchmarking Attrition: What we Can Learn from Other Industries…a brief that compares student attrition in higher education to analogous processes in other industries.

Three Policies to Reduce Time to Degree

In “Three Policies to Reduce Time to Degree” principal of Postsecondary Analytics, LLC, and senior consultant for HCM Strategists LLC, Nate Johnson suggests several strategies to address lagging college completion rates.

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What Does a College Degree Cost?

Nate Johnson of Postsecondary Analytics argues that depending on how the question is framed, the direct and indirect cost of providing instruction for the average bachelor’s degree at a public college or university is between $25,000 and $40,000, from a mix of public subsidies and student tuition. Where it falls in the range depends on how the question is framed. No matter how the question is addressed, however, there will be wide variations around the average depending on the student’s major and the institution attended. For a student, by contrast, the average cost of obtaining a degree from a public institution will fall between $35,000 and $70,000, depending again on which costs are included.

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