In fiscal year 2013, Education provided over $136 billion in  financial aid to students, including loans and grants. States may also fund public colleges through grants or contracts for  activities such as research projects. Students may receive grant  aid from the state, the federal government, or the college they are  attending. From Fiscal Years 2003 through 2012, State Funding for Public Colleges Decreased, while Tuition and Out-of- Pocket Costs for Students Increased

		State Funding for Higher Education Decreased by 12 Percent Overall and by 24 Percent per Student

In the decade spanning fiscal years 2003 to 2012, state funding provided  to public colleges decreased, both overall and when measured per  student. State funding declines may be attributable, in part, to prevailing economic  conditions and competing state budget priorities. Meanwhile, growth in tuition  revenue outpaced that of all other types of revenue over this period,  increasing from 17 percent to 25 percent and making tuition the top single  source of revenue for public colleges. Thus, when all grant aid is taken into account, out-of- pocket costs for students, or estimated average net tuition, increased by  19 percent across all public colleges from $1,874 in the 2003-2004 school  year to $2,226 in the 2011-2012 school year. Students and their families are now bearing the cost of college as a larger  portion of their total family budgets. However, the number  of certificates completed rose after the policy was introduced. Current Federal Higher Education Programs Engaging with States Are Limited, but Various Approaches Could Help Expand Federal Incentives to States to Improve College Affordability

		Federal Higher Education Programs are Targeted More at Student Financial Aid than Programs Involving States on College Affordability

Current federal funding for higher education is primarily targeted at  supporting students rather than on collaborating with states on higher  education policies affecting affordability. Several Potential Approaches Were Identified That Could Be Used to Incentivize States to Improve Affordability

Based on interviews with experts and organizations as well as our review  of Education documents and relevant literature, we identified three  approaches that could be used to incentivize states to improve college  affordability. Moreover, some experts and organizations cautioned that the approaches  could have cost implications for the federal government and  consequences for students. Creating new grant programs would also have cost  implications for the federal government and could have consequences for  students. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

	Overview

This report examines: (1) how state financial support and tuition have  changed at public colleges over the past decade, (2) how states’ higher  education policies have affected affordability, and (3) how the federal  government works with states to improve college affordability, and what  additional approaches are available for doing so. In conducting this work, we analyzed trends in state funding for public  colleges, state student aid, and tuition using public sector data from  Education’s Integrated Postsecondary Education Data System (IPEDS),  National Postsecondary Student Aid Study (NPSAS), and the National  Association of State Student Grant and Aid Programs (NASSGAP)  databases.
Why GAO Did This Study

There is widespread concern that the rising costs of higher education are making college unaffordable for many students and their families. Federal and state support is central to promoting college affordability; however, persistent state budget constraints have limited funding for public colleges. GAO was asked to study state policies affecting affordability and identify approaches to encourage states to make college more affordable.
This report examines, among other things, how state financial support and tuition have changed at public colleges over the past decade. It also examines how the federal government works with states to improve college affordability and what additional approaches are available for doing so. In conducting this work, GAO analyzed trends in state funding for public colleges, tuition, and state student aid using data from the U.S. Department of Education for all public sector colleges from fiscal years 2003 through 2012, the most recent data available at the time of this study. GAO also identified academic studies on state higher education policies and affordability published since 2011 and interviewed 25 academic experts and organizations in the fields of higher education or state policy. Finally, GAO reviewed Education programs and proposals and obtained perspectives from experts and organizations to identify approaches the federal government could use to incentivize state action.

What GAO Found

From fiscal years 2003 through 2012, state funding for all public colleges decreased, while tuition rose. Specifically, state funding decreased by 12 percent overall while median tuition rose 55 percent across all public colleges. The decline in state funding for public colleges may have been due in part to the impact of the recent recession on state budgets. Colleges began receiving less of their total funding from states and increasingly relied on tuition revenue during this period. Tuition revenue for public colleges increased from 17 percent to 25 percent, surpassing state funding by fiscal year 2012, as shown below. Correspondingly, average net tuition, which is the estimated tuition after grant aid is deducted, also increased by 19 percent during this period. These increases have contributed to the decline in college affordability as students and their families are bearing the cost of college as a larger portion of their total family budgets.
GAO found that federal support for higher education is primarily targeted at funding student financial aid— over $136 billion in loans, grants, and work-study in fiscal year 2013—rather than at programs involving states. GAO identified several potential approaches that the federal government could use to expand incentives to states to improve affordability, such as creating new grants, providing more consumer information on affordability, or changing federal student aid programs. Each of these approaches may have advantages and challenges, including cost implications for the federal government and consequences for students.

What GAO Recommends

GAO does not make recommendations in this report.