April 4, 2016
By Paul Fain
Most states now have some form of performance-based funding for higher education on the books. Policy makers use performance formulas to prod public colleges to be more efficient in their spending and, in some cases, to work harder to improve student retention and graduation rates. A new academic paper, however, found an early indication of an unintended consequence of the policies: less revenue from Pell Grants on a per-student basis, which could indicate that colleges are seeking to game performance-based funding by enrolling fewer low-income students.
A growing body of research has tried to determine whether state funding formulas actually are improving graduation rates or other student outcomes, with mixed results. But the new paper by Robert Kelchen (pictured below) and Luke J. Stedrak, both assistant professors of education at Seton Hall University, may be the first to explore whether the policies have affected colleges’ revenue and spending patterns.