Government Spending on Higher Education Reaches an All-Time High

Shepard, S., & Agresti, J. D. (2018, February 12). Government Spending on Higher Education Reaches an All-Time High. Retrieved from
Shepard, Stuart, and Agresti, James D. “Government Spending on Higher Education Reaches an All-Time High.” Just Facts. 12 February 2018. Web. 13 April 2024.<>.
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Stuart Shepard, and James D. Agresti, “Government Spending on Higher Education Reaches an All-Time High.” Just Facts. February 12, 2018.
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Shepard, Stuart, and Agresti, James D. “Government Spending on Higher Education Reaches an All-Time High.” Just Facts. February 12, 2018.

By Stuart Shepard and James D. Agresti
February 12, 2018

It’s a common theme in the news media: Education needs more money. Always.

In keeping with that storyline, a recent Washington Post article about higher education reports:

To the alarm of many educators, nearly every state has cut funding to public colleges and universities since the 2008 financial crisis. Adjusted for inflation, states spent $5.7 billion less on public higher education last year than in 2008, even though they were educating more than 800,000 additional students, according to the State Higher Education Executive Officers Association.

The Post limited its field of view to state funding of public colleges and universities, but a broader outlook reveals a very different picture.

Funding Streams

Historically, states have provided most of the money for higher education, “65 percent more than the federal government on average from 1987 to 2012,” according to an analysis by the Pew Charitable Trusts.

Support takes different forms, with federal money mainly going toward assisting students and specific research projects, while state dollars usually fund general operations. But after the Great Recession began in 2007, as states were struggling to keep spending in line with decreased tax revenue, the federal share increased to the point where it exceeded what states were contributing.

Per the Pew analysis, “In 2013, federal spending on major higher education programs totaled $75.6 billion, state spending amounted to $72.7 billion, and local spending was considerably lower at $9.2 billion. These figures exclude student loans and higher education-related tax expenditures.”

While the Post directs attention to state reductions totaling $5.7 billion from 2008 to 2016, it fails to reveal the other side of the coin relayed by Pew: Federal “Pell Grant program and veterans’ educational benefits … surged by $13.2 billion (72 percent) and $8.4 billion (225 percent), respectively, in real terms from 2008 to 2013.” In short, increases in federal spending were much greater than decreases in state spending.

Examining the full picture, data from the U.S. Bureau of Economic Analysis and the U.S. Department of Education show that inflation-adjusted government spending on higher education increased by 23% from 2008 to 2016, hitting a record high of $183 billion in 2016. On a per-student basis in the same period, this spending increased by 16% and also reached an all-time high of more than $9,000 per student:

The same Washington Post article states that “educators fear the drop in government spending is making schools harder to afford for low- and middle-income students.” Yet, such funding has actually increased by substantial amounts.

Given that only 37% of higher education spending is used for functions that directly contribute to the education of students and the general public, government funding now amounts to 84% of higher education spending on these functions. This includes all such spending by public, private nonprofit, and private for-profit institutions.

Clashing Views About College

Beyond the issue of government funding, this Post article focuses on the differing viewpoints of Democrats and Republicans about higher education. It begins by quoting Frank Antenori, a Trump-supporting, former Green Beret who says:

Why does a kid go to a major university these days? A lot of Republicans would say they go there to get brainwashed and learn how to become activists and basically go out in the world and cause trouble. …

You want to create someone who’s going to be a contributor, not a moocher. Go out and generate revenue; that’s what it’s all about.”

As a foil to Antenori, the Post quotes Democrat Steve Farley, an Arizona state senator and candidate for governor, who says:

Government should be run like a family. We should be raising our children to be the best people they can be. We should not be manufacturing them to be products to be consumed. That is a basic ethical and moral flaw in this whole argument, that everything’s got to have financial payback so we can reduce taxes for the Koch brothers. …

Public education at every level is the only tool we’ve ever invented to effectively allow people to lift themselves from poverty. In Arizona, one in four children live in poverty right now. If you take away that tool there is no hope for our future—none.

The Post accurately notes that Americans’ opinions on these topics have become sharply divided along political lines. A 2017 national survey of 2,504 people by Pew Research asked if colleges and universities have a positive or negative “effect on the way things are going in the country.” With margins of sampling error ranging from 3 to 4 percentage points, the poll found that:

  • 58% of Republicans and Republican-leaning independents think the impact is negative.
  • 72% of Democrats and Democratic leaners think the impact is positive.
  • the portion of Republicans and Republican leaners who think the impact is negative increased from 32% in 2010 to 37% in 2015 and 58% in 2017—an increase of 26 percentage points in just seven years.

The Post uncritically quotes Farley saying that “the whole liberal bastion idea is just absurd,” but that claim is belied by a study published by Econ Journal Watch in 2016. This study examined the “Democratic-to-Republican voter registration ratios among faculty in five fields (Economics, History, Journalism/Communications, Law, and Psychology) at 40 leading universities.” It found that 54% of these professors were registered as Democrats or Republicans, and among them, the ratio of Democrats to Republicans for:

  • all of these professors was 12 to 1,
  • economics professors was 4 to 1,
  • law professors was 9 to 1,
  • psychology professors was 17 to 1,
  • journalism/communications professors was 20 to 1, and
  • history professors was 34 to 1.

The True Value of a Diploma 

The core of the Post’s article is about the value of higher education, but it is nearly devoid of facts that inform this debate. Instead, it mainly presents dueling opinions on this issue sprinkled with half-truths about government funding and some accurate data about college costs. While this is a very wide-ranging subject, the following facts provide a broad overview of it.

First, higher levels of education are associated with higher earnings. In 2015, U.S. residents aged 25 and older with only a high school degree had 56% less cash earnings than those with a bachelor’s degree. However, this association may be caused in large part by factors that are related to education but not necessarily caused by education. Individuals with high intelligence and discipline tend to excel in education and obtain more of it, but they also tend to earn more money regardless of their education. Hence, the higher earnings of college grads may be caused by factors beyond their education.

Likewise, Princeton University Press just published a book by Bryan Caplan entitled The Case Against Education: Why the Education System Is a Waste of Time and Money. The title is surprising given that Caplan is a graduate of Berkeley, earned a Ph.D. at Princeton, and is a long-time professor of economics at George Mason University. As he describes it, he’s been “in school” for more than 40 years. He explains in the book’s introduction:

Personally, then, I have no reason to lash out at the education system. Quite the contrary. Yet a lifetime of experience, plus a quarter century of reading and reflection, convince me that our education system is a big waste of time and money. Almost every politician vows to spend more on education. As an insider, I can’t help gasping, “Why? You want us to waste even more?”

He goes on to say what many college graduates already know: “Typical students burn thousands of hours studying material that neither raises their productivity nor enriches their lives.”

Caplan argues that a diploma is primarily valuable because it “signals” to potential employers that graduates have certain levels of intelligence, ambition, willingness to follow instructions, and ability to tolerate boredom, which is an element of many jobs. After 20 years as a college professor, he estimates that at least a third and “more like 80%” of a student’s time is spent doing work that only amounts to “signaling” as opposed to acquiring useful job skills.

In 2014, Professor Richard Arum of New York University and Assistant Professor Josipa Roksa of the University of Virginia published a study using the Collegiate Learning Assessment to measure the “critical thinking, complex reasoning, and writing skills” of 1,666 full-time students who entered 4-year colleges in the fall of 2005 and graduated in the spring of 2009. The authors found that if the test “were rescaled to a one-hundred-point scale, approximately one-third of students would not improve more than one point over four years of college.”

College students are also devoting significantly fewer hours to academics than in years past. Between 1961 and 2003, the average time spent by full-time college students on educational activities such as attending class and studying dropped from roughly 40 hours per week to 27.

During the 2005–06 and 2006–07 school years, full-time students at 4-year colleges spent an average of 27–28 hours per week on educational activities. In comparison, they spent an average of 43 hours per week on leisure and sports.

A 2007 Association of American Colleges and Universities poll of 301 employers who hire people with bachelor’s degrees assessed their views of recent college graduates. On a scale of 1–10, in “none of the 12 areas tested does a majority of employers give college graduates a high rating (or ‘8,’ ‘9,’ or ‘10’) for their level of preparedness.”

In 2017, the U.S. Government Accountability Office found that over the past 20 years an increasing number of college graduates are earning low hourly wages:

Our estimates showed that the percentage of workers earning $12.01 to $16 per hour with college degrees increased from 16 percent in 1995 to 22 percent in 2016. A similar trend occurred in the other low-wage categories.

Looking at recent college grads overall, 43% are underemployed, according to an analysis of U.S. Census data by the Federal Reserve Bank of New York.

The rate of underemployment varies by what students chose to study. Topping the list are majors such as criminal justice at 76%, public policy and law at 66%, performing arts at 66%, leisure and hospitality at 64%, and anthropology at 61%. Times are especially hard for anthropology majors, given that 48% of them hold a graduate degree.

These underemployment figures might lead parents to urge their young scholars to more carefully choose their field of study, but a look at other majors with less underemployment is still troubling: The rate of underemployment for computer science majors is 26%, pharmacy 27%, architecture 29%, and journalism 42%.


A broad view of higher education funding and value underscores these key points:

  • State government funding cuts in recent years have been more than offset by federal government increases.
  • Total government spending on higher education is at an all-time high of more than $9,000 per student per year.
  • Government funding of higher education amounts to 84% of all spending by public and private schools on functions that directly contribute to actual education.
  • Professors at leading U.S. universities are much more likely to be Democrats than Republicans.
  • Conservative attitudes toward higher education have become increasingly negative.
  • People with more education earn more money, but this may be caused in part by the person’s abilities and traits instead of their education.
  • The main value of diplomas may be that they serve as “signals” to employers that graduates have desirable characteristics. These characteristics may be inherent to the people rather than a result of their formal education.
  • A third of 4-year college graduates don’t measurably improve their critical thinking, complex reasoning, and writing skills throughout their entire college career.
  • Anywhere from 30% to 80% of formal education could be spent on activities that don’t raise productivity or enrich lives.
  • Full-time college students are spending about 50% more time on recreation and sports than academics.
  • Employers do not highly rate college grads’ preparedness for the workplace.
  • Recent college grads have high levels of underemployment, and growing numbers of them are earning less than $16 per hour.
  • February 12, 2018 at 11:23 PM

    Thanks for another excellent article. Wish our policy makers would take advantage of your work.

    • February 13, 2018 at 1:04 AM

      Thank you for your kind words. Please let your elected officials know about our work. The more they hear from people about it, the more likely they are to take notice.

  • February 13, 2018 at 2:03 PM

    I spent 34 yrs in public education, 1974–>2008, teaching Sci & Math; mainly 2nd yr Alg & Physics. What’s wrong is that public education is a mass production industry charged with producing a unique hand crafted product, with no clear product parameters, no well defined method of production and no control over raw materials. Also there is the problem of constant meddling by ‘educators’ who embrace nonsense like self-esteem, testing for standards and accountability. Also there’s the problem that it’s virtually impossible to reliably identify and get rid of an incompetent teacher or administrator. What’s needed is a new ‘model’ based on end user needs that creates measurable levels of progress (improved knowledge & skills) and lets teachers focus on teaching & not testing. As for higher ed, the big push for everyone to go to college is merely to increase professor pay & support major universities in their primary task of training commercial (so called “professional”) athletes.
    Ultimately, the reality is that most Americans do not value education (book learning). They value ‘street smarts’ (another way of saying stupidity) and ‘common sense’ (“A set of prejudices acquired by age 18.”, Einstein). There’s much more I can state on this subject… thanks for trying to inject some reality and rationality into a declining culture.

    • March 31, 2018 at 2:05 PM

      Right on target…


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