A Conceptual Analysis of State Support for Higher Education: Appropriations versus Need-Based Financial Aid
Robert K. Toutkoushian
School of Education, Indiana University
M. Najeeb Shafiq
University of Pittsburgh
February 4, 2009
In this paper, we use economic concepts to examine the choice that states make between giving appropriations to public colleges or need-based financial aid to students. We begin by reviewing the economic justification for state support for higher education. Next, we introduce a simple economic model for comparing and contrasting appropriations and need-based aid for supporting higher education. We then provide a graphical depiction of the model and simulate the effects of each policy on access to higher education. We show that it is in the best interest of states to provide need-based aid and not appropriations. Finally, we conclude with a discussion of the factors that complicate the reallocation of state funding away from appropriations and towards need-based aid.
Number of Pages in PDF File: 44
Keywords: Appropriations, education finance, higher education, economics of education, need-based financial aid
JEL Classification: D78, H23, H39, H40, H52, H70, I2, I3, J18
Date posted: February 4, 2009 ; Last revised: June 23, 2009
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