Financing for equity in higher education
1. Education resources to subnational governments
2. Education resources to institutions
3. Education resources to students
4. Support for students' living costs
Introduction
Key financing indicators (UIS Data)
The gross enrolment ratio for tertiary education for both sexes was 79.36 in 2022. The initial government funding per tertiary student as a percentage of GDP per capita was 29.56 in 2021. The initial household funding per tertiary student as a percentage of GDP per capita was 3.22 in 2021.
Tuition-free status
Federal laws and policies do not mandate free public tertiary education in the United States. Legislative proposals such as the College for All Act, the Debt-Free College Act, and
America's College Promise have been introduced in Congress to establish federal-state partnerships to introduce tuition-free or debt-free college models, but none have become law.
Governance
Federal Level
At the federal level, the U.S. Department of Education (DOE) has historically been responsible for administering higher education funding, including distributing federal grants and loans to students and colleges, as well as managing various grant programmes for institutions. The Office of Postsecondary Education (OPE) manages higher education-specific grant programmes, institutional support initiatives, and oversight related to programme compliance and innovation.
OPE facilitates this work through two divisions: Higher Education Programmes (HEP) and the Office of Policy, Planning and Innovation (PPI). HEP manages grants to both institutions and to students, with an emphasis on supporting institutions that enrol large proportions of minority and financially disadvantaged students and supporting low-income students, first-generation students and individuals with disabilities. PPI develops Federal postsecondary education policy and regulations, including policy that supports the Federal student financial assistance programmes and programmes authorised by the Higher Education Act of 1965, as amended (HEA).
State Level
State governments play a central role as the largest direct funders for public colleges and universities. State higher education offices typically allocate budgets for higher education, set funding formulas, and oversee state university systems. These offices also coordinate appropriations and institutional budgets, monitor compliance with state legislation, and determine funding for individual campuses.
1. Education resources to subnational governments
Federal Level
Funding mechanisms for public higher education in the United States are primarily designed and administered at the state level. Federal funds, administered by the Higher Education Programmes (HEP) office, primarily flow to individuals as student aid or to institutions for targeted programmes and research.
State Level
Most state governments allocate funding directly to public institutions using a formula model. Higher education funding models for each of the 50 states have been compiled into a table by the Education Commission of the States that can be viewed here.
2. Education resources to institutions
Funding for private universities in the absence of public institutions
There is no mechanism for funding private universities when no public university is available.
Allocation and equity
Federal Level
At the federal level, Institutional Service (IS), located within the OPE’s Higher Education Programmes division, administers programmes authorised under Title III, Title V, and Title VII of the HEA. Title III, or Aid for Institutional Development, programmes support improvements in educational quality, management and financial stability at qualifying postsecondary institutions. Funding is directed to institutions that enrol large proportions of minority and financially disadvantaged students.
State Level
Most state-allocated funds to higher education institutions include equity-based considerations. A 2024 Brookings Institution study found that the states incorporated equity considerations into funding formulas based on both features of institutions themselves and on populations served. For example, many states included small-school adjustments to boost funding for rural institutions with lower enrollment. Others provided equalisation aid to districts with limited local tax revenue. Some states directed targeted funds to Historically Black Colleges and Universities (HBCUs) to account for previous instances of underfunding. Additional funds may be directed to colleges that enrol students from underserved backgrounds as part of performance funding models. As of 2020, virtually all states with performance funding models included at least one equity metric, most commonly for students from low-income families. Additionally, most states’ models include a metric for enrolling and/or graduating racially minoritized students.
3. Education resources to students
Admission for vulnerable groups
Federal Level
Higher education admissions in the United States are not regulated at the federal level. Admissions policies and criteria are set by individual colleges and universities but are subject to federal laws on nondiscrimination and specific requirements for institutions receiving federal funding.
Historically, many colleges considered race, ethnicity, and socioeconomic background as factors in admissions to promote diversity through affirmative action. However, following the U.S. Supreme Court decision in Students for Fair Admissions v. Harvard (2023), race-based admissions have been limited. Colleges may still pursue diversity through race-neutral criteria that indirectly benefit vulnerable populations, such as targeted outreach, holistic application review, or a preference for low-income or first-generation students.
State Level
At the state level, various policies exist to support admission for vulnerable groups. The Texas Top Ten Percent Plan, for example, guarantees admission to any state public university to any graduate in the top ten per cent of their high school class. The programme aims to support college admissions for students from low-income, rural, and communities of colour, who were traditionally denied access to higher education. Following Texas, California and Florida adopted similar programmes.
Scholarships, grants and loans for vulnerable groups
Federal Level
The U.S. federal government has historically promoted equitable access to higher education through a range of need-based grants and loans and work study programmes that support disadvantaged students. The Office of Federal Student Aid (FSA) in the U.S. Department of Education has historically been the primary government body responsible for federal financial aid programmes. Eligibility for federal aid requires completion of the Free Application for Federal student Aid (FAFSA) and compliance with regulatory standards, including citizenship/residency status, enrollment, and academic progress.
The Pell Grant is the primary federal grant programme providing funds for undergraduate students who demonstrate significant financial need. Eligibility and award amounts are determined by a combination of factors, including financial circumstances, cost of attendance, enrollment status, and duration of study. All eligible students receive funding.
The Federal Supplemental Educational Opportunity Grant (FSEOG) provides additional funds to students with exceptional financial need. The grant is administered directly by the financial aid offices of participating schools. FSEOG funds are provided to institutions by the Office of Federal Student Aid and are limited; not all applicants receive funding.
In addition to grant programmes, federal loan programmes offer low-interest, need-based borrowing options that further enable equitable access to higher education across the United States. Direct Subsidised Loans are available to eligible undergraduate students with demonstrated financial need, while Direct Unsubsidized Loans are open to undergraduate, graduate, and professional students regardless of financial need. Direct PLUS Loans allow parents of dependent undergraduates and eligible graduate or professional students to borrow up to the total cost of attendance, minus any other financial aid received.
The Federal Work-Study programme provides part-time jobs for undergraduate and graduate students with financial need, which allows them to earn money to help pay education expenses. The programme is administered by individual schools participating in the programme. The school’s financial aid office typically assigns jobs and work hours, in consideration of students’ academic programmes.
State Level
There are numerous state-level scholarship and grant programmes designed to promote equity by supporting students from low-income, minority, first-generation, and other underrepresented backgrounds.
Scholarships
The New York Excelsior Scholarship aims to make college tuition-free for lower and middle-income families and individuals making up to USD 125,000 per year, by allowing students to attend college tuition-free at all City University of New York (CUNY) and State University of New York (SUNY) two- and four-year colleges in New York State. The Tennessee Promise programme offers last-dollar scholarships to cover tuition and fees at community and technical colleges for all in-state high school graduates, with an intentional focus on closing access gaps for lower-income and first-generation students.
Grants
Nearly every state maintains need-based financial aid programmes, such as California’s Cal Grant, Illinois’ Monetary Award Programme, and the Texas Grant, which all provide need-based aid to students from lower-income households.
4. Support for students’ living costs
Transportation
The Department of Education allows students to use federal grants and student loan funds to cover transportation costs as part of their college expense budget.
Accommodation
The Department of Education allows students to use federal grants and student loan funds to pay for college housing and related living expenses.
Textbooks
The Department of Education allows students to use federal grants and student loan funds to pay for required textbooks and supplies.
