How States are Taking the Lead on Instructional Spending in Higher Ed
by Shelbe Klebs, Education Policy Advisor
A new student enrolling at a federally-funded college or university would reasonably assume that a large proportion of their tuition dollars would go to funding the instruction their institution plans to deliver. But at many institutions, it’s common to have only 25 cents of every dollar paid in tuition and fees dedicated to helping students learn. At others, that amount drops to 5 or 10 cents. The truth is institutions have always had to make decisions about how they spend tuition revenue by weighing what proportion of those dollars go directly to student learning versus other external costs. But with looming budget shortfalls and declining enrollment likely a new norm for many colleges and universities, there are growing concerns that schools looking to stay afloat in the years ahead may prioritize their bottom lines over the quality of teaching and learning of their students. We’ve already seen schools begin to ramp up their marketing and advertising budgets in the wake of COVID-19, particularly in the for-profit sector.
Yet this trend began long before the pandemic, as colleges across the country have increased what they spend on advertising over the last couple of decades. With the way our financial aid system works, colleges spend money on advertising because they are committed to getting students — and the grant and loan dollars that come along with them — in the door. But they lack financial incentives to get students across the finish line to graduation or prepare them to get a good job that will enable them to pay back their loans. And until recently, there have been no guardrails at either the state or federal level to ensure that students’ (and taxpayers’) hard-earned money actually goes toward the instruction they expect to receive when they sign their tuition checks.
Luckily, state legislators around the country are aiming to combat this problem by experimenting with instructional spending requirements that would place limits on how much institutions can spend on items unrelated to teaching and learning — like marketing, recruitment, CEO or administrator salaries, or payouts to shareholders. Currently, there are 639 federally-funded institutions that spend less than 25% of tuition and fee revenue on instruction and there are 48 institutions that spend less than 10% on instruction. There are some schools that spend less than 5% on instruction. That means there are higher education institutions allowing 75% or more of student and taxpayer dollars to be allocated on items that have nothing to do with their primary goal: teaching students. These instructional spending policies can help protect students from colleges that might try to mislead them with false marketing claims, cash their tuition check, and offer them little in return.
That’s why as federal policymakers look to prioritize students’ and taxpayers’ return on investment in higher education, they would be wise to pay attention to three states — Maine, Maryland, and New York — that have already started to experiment with the promise of instructional spending as a measure to ensure tuition revenue goes toward what matters most: teaching and learning.
The most successful case study to date can be found in Maine, which successfully passed a bill in 2018 that requires 50% of each in-state for-profit college’s total spending be put toward instruction, which they define as separate from advertising or executive salaries. The state also stipulates that less than 15% can be spent on advertising. If the college exceeds that 15% threshold or fails to spend 50% on instruction, then they will not meet adequate educational standards, and can have their degree-granting authority in the state terminated. To enforce this bill, the board of education and its commissioner will look at each for-profit college’s spending annually to make sure they comply. Unfortunately, this law can only cover schools with a physical location in the state even though Maine students attend institutions across the country and fully online.
The success in Maine has also spawned similar efforts in Maryland and New York, although neither state has been able to get their instructional spending policies across the finish line. Last year, a bill was introduced in Maryland that would have required the state’s for-profit institutions or any institution enrolling Maryland students in online programs across the country to spend at least 50% of their tuition revenue on instruction. Like the legislation in Maine, if a school didn’t meet that minimum, they would eventually lose their degree-granting status in the state. But this bill was withdrawn because some of the lowest-spending for-profit colleges in Maryland put up strong opposition to the bill, so the sponsor tabled the bill for the time being. The committee may take up the legislation again in a subsequent session. And most recently, New York Governor Andrew Cuomo (D-NY) included an instructional spending requirement in his 2020 budget proposal that would have required for-profit schools in the states to spend at least 50% of revenue on the direct instruction of students. (It wasn’t included in the final state budget.)
Although Maine remains the only state to have an instructional spending law on the books, efforts in Maryland and New York show how other states and the federal government can push institutions to use their tuition revenue to prioritize teaching and learning. And there is a growing appetite for instructional spending requirements to extend beyond for-profit colleges, even to help discern between schools with poor outcomes that are trying to help their students but need more resources to do so and those who can but simply won’t. A proposal from Senator Chris Murphy (D-CT) attempts to do exactly that by setting clear bottom lines on metrics like completion and value and considering institutions’ spending choices to determine the appropriate federal intervention. This proposal would allow policymakers to invest in schools that are well-intentioned but underfunded and stop sending taxpayer checks to ones that are cashing them on everything other than students.
As tuition revenues tighten and budget shortfalls become the norm in the wake of COVID-19, institutions will continue to be forced to make spending choices about how to keep their doors open while still providing quality instruction to the students they serve. Getting students into college is the first step in helping them toward a better future, but it accomplishes little if students don’t graduate or gain the skills they need to find economic success post-enrollment. States are starting to take the lead on finding ways to incentivize colleges to invest more in student success, and the federal government would be wise to head in this direction, too.
