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ED 202 405 HE 013 926

AUTHOR Gladieux, Lawrence E.; And-Others TITLE The Federal Government, the States, and Higher

Education: Issues for the 1980s. INSTITUTION College Entrance Examination Board, New Yorx, N.Y. SPONS AGENCY National Inst. of Education (ED), Washington, D.C. PUB DATE Apr B1 NOTE 27p.: Prepared at the request of the National.

Conference of State Legislatures, with supplemental assistance from the Ford Foundation.

AVAWBLE FROM College Board Publication Orders, Box 2815, Princeton, NJ 08541 ($4.00).



rF01 Plus. Postage. PC Not Available from EDRS. Educational Finance; *Federal Aid; Federal Regulation; *Federal State Relationship; Governance: *Government School Relationship:- *Higher Education:, Need d-AnalysiS (Student Financial Aid); Policy. Formation:. Public Policy: *State Government; Student Financial Aid

Federal policies toward higher education and their interaction (or lack of interaction) with state policies are described. Characterized are the differing historical. roles,Tlayed by the state'and federalgovernments in shaping American. higher education. AdminiStrative arrangements, types, and dimensions of federal funding for students and institutions are outlined, alohg with the trends.and proSpects for such support during the T980s. The discussion on state and federal roles examines- federal programs in terms of bypassing the states, the types and dimensions of federal support, federal regulation-, 'and. some assumptions about the .1980s.

The'section on student aid focuses on: the dilemmas caused by the expansion of federal programs, state responses, expansion of state aid, the creation of no-need awards, the shift in-focus to the private sector, cutbacks,-changing features of. the federal /state partnership, enrollment shifts, and the reauthorization of the Higher Education Act. Federal funds'and state prerogatives are discussed with focus on the federal budgetary outlook, fiscal control and the issue of reappropriation, and the status of education:in the federal establishment. Among the conclusions are: the principal object of federal funding will remain the individual student; federal dollars for the most part will not wind their /way through the states; and key decisions affecting colleges and universities will be made uy or at least within.. the States, not by the federal government. (LC) .

*****:%**************************************************************** * Reproduct-ions supplied-by EDRS are the best that caa be made *

* from the original document. *



The Federal Governhient,* the States, and Higher Education: issues for the 1980s

Lawrence E. Gladiebx Janet S. Hansen t,

with Charles R. Byce












College Entrance Examination Boa- New York, 1981





The College Board is a nonprofit membership organization that provides tests and other educational services for stu- dents, schools, and colleges. The membership is composed of more than 2,500 colleges, schoolsi-zschool systems, and education associations. Representatives of the members serve on the Board of Trustees and advisory councils and committees that consider the programs of the College Board and participate in the determination of its policies and activities.

The Washington Office of the College Board conducts re- search relevant to public issues in education, with emphasis on the financing of postsecondary education. The office is located at 1717 Massachusetts Avehue, N.W., Washington, D.C. 20036.

Additional, copies of this report may be obtained from College Board Publication Orders, Box 2815, Princeton, New Jersey 08541. Please send $4.00 to cover the costs of postaci, and handling.

Copyright ©1981 by College Entrance Examination Board. All rights reserved. Printed in the United States of America:

Staff of the Washington'Office

Lawrence E. Gladieux, Executive Director o f the Washington Office Charles R. Byce, Policy Research Associate Pamela IL, Christoffel, Research' and Development Associate .

Martin A. Corry, Program and Policy Assistant Janet S. Hansen, Policy Reseg.Th Associate.' Nancy Carlson, Research Assistant Julia M. Gordon, Secretary. Diane C. Erving. Secretary/Receptionist

Washington Office Advisory Panel

Donald M. Stewart, President Spelman College (Chairman)

Gregory R. Anrig, Commissioner of Education Commonwealth of Massachusetts

Joseph A. Chalmers, Senior Consultant American Management Systems, Inc.

Eileen D. Dickinson, President New York. State Higher Education Services Corporation

Margaret S. Gordon, Economist Emeritus Institute of Industrial Relations,, University of California at Berkeley

Robert P. Huff, Director of Financial Aids Stanford University

William J. Maxwell, President Jersey City State College

Heidi Todd, Student Carnegie Mellon University

James W. White, Director of Financial Aid Oberlin College








State and Federal Roles: Pgst, Present, Future 3 Federal Programs: Bypassing the States 5

Types and Dimensions.of Federal Support 6 Federal Regulation: The Backdoor Issue 6 The 1980s: Some Assumptions 9

Student Aid: The Uneasy Partnership Dilemmas Caused by the Expansion of

Federal Programs State Responses Changing Features of the Federal/State


Federal Funds and State Prerogatives The Federal Budgetary Outlook Fiscal Control and the Issue of

Reappropriation The Status of Education in the Federal



12 15


19 19




The Washington Office of the College Board con- ducts research on public policy issues in education, with an emphasis on postsecondary finance and the evaluation of programs designed to broaden access and choice in higher education. Legislative and policy analyses.are shared-With the membership of the College Board, state and federal policymakers, and other researchers.

Grants from the Ford Foundation have enabled the office to focus particular attention on the interaction of federal and state student assistance policies.

This study was prepared a.t the request of the National Conference of State Legislatures (NCSL) as part of a project, funded by the National Insti- tute of Education (NIE), designed to help state legislators concerned with problems of financing higher education in the 1980s. NCSL plans to pub- lish a handbook on the subjectin 1981, including a version of this paper by the Washington Office of the College Boird.

Support from NCSL and NIE helped make the study possible, supplementing assistance by the Ford Foundation. The material is printed here with permission of NCSL.

LaWrence E. Gladieux and Janet S. Hansen pre- pared the study, with the assistance of Charles R. Byce. The authors are grateful for the comments and suggestions of Lois D.Rice, David Breneman, and Richard Ramsden, as well as Sandra Kissick and Harlan Cooper of NCSL and the state legislators they brought together iih two workshops examining the issues of higher education finance.

The work presented hereinddesriot reflect-e. policy or position of the College-Board, NCSL, or ME, nor any endorsement by the Ford Founda- tion.



Constitutionally and historically, the primary gov- ernmental responsibility for higher education in America has rested with the states. The federal role has been secondary, though nonetheless substantial in particular periods and areas, such as the land- grant college movement in the nineteenth century, the post-World War II GI Bill, research support in recent decades, and, since the mid-1960s, student assistance to equalize educational oppOrtunity.

The federal government now spends about $15 billion annually on postsecondary education: $9 billion to students to help them meet college-costs, $2 billion to institution§ for a variety of programs, and $4 billion to pay for research at universities.

For the most part, federal dollars go directly, to individuals and institutions rather than to state governments as intermediaries. Federal and state policies toward higher education are largely made independently of one another; and federal policy itself is fragmented, with only about one-fourth of Washington's estimated 400 postsecondary pro- grams and less than one-third of all federal post- secondary expenditures centralized in the recently established U.S. Department of Educatron. Money and accompanying. regulationsthus flow from a variety of federal agencies.

This overall pattern will likely continue in the 1980s, a decade that poses difficult problems for postsecondary education because of population changes and fiscal restraints. Governmental policy- making for higher education can be expected along the following lines:

The key decisions affecting colleges and uni- versities will be made by, or at least within, the states, not by the federal-government. General federal aid to institutions is not likely, although the federal government may recognize and help to shore up institutions in particular areas of need, such as renova- tion of aging physical facilities. The federal government will direct particular attention to maintaining the capacity and quality of research in the universities; a num- ber_of emerging problems need to be ad-_ dressed, such as the importance of insuring an adequate flow of young scholars into the academic ranks of major research irstitu-' tions.

There will be continued protest about the burden of federal requirements on col.',!eges and universities, but progress toward "de- regulation will be incremental; the problem will have to be dealt with agency by agency, issue by issue, case by,case. Federal dollars will continue to wend their way through various channels to students and colleges, but not for the most part by

ay of the states.. .

e principal object of federal funding will ref 4ain the individual student.

Federal student aid policies will raise many issues for states, which are themselves quite heavily committed to this kind of assistance. Some states have a much longer history in student financial as- sistance than the federal government, though fed- eral expenditures now dominate the student aid system. Current appropriations for the major federal programs of need-tested aid to students total close to $4 billion, compared to state funding of something over $1 billion.

Federal-state relations in the student Ulu arena have become strained in recent years by two devel- opments. First, the explosive growth of the federal Basic Educational Opportunity Grants (recently .

renamed Pell Grants), a nationally administered pmgram, tends to give -the federal government in-

-. creasing influence over the entire aid system, including state and institutional programs. Second, mixed sii-mals abOut federal plans for student loans have left states confused about the future of their own loan guarantee agencies. –

States face a number of dilemmas as they ad- just to federal student aid expansion. State policy- makers must ask themselves how much additional aid students need above that provided by federal programs. State responses to date have included:

coordination with federal programs; expansion of state scholarship assistance; creation of "no-need" awards for students; cutbacks in state grant aid; and I.

a shift in state aid toward students in private colleges (insuring student "choice").

Some observers have worried that states may also be increasing tuitions in public institutions to "cap-


ture" federal student aid dollars, though there is little evidence, of this at present.

One uncertainty for States has been the outcome of the 1980 congressional reauthorization of the Higher Education Act. Even though Congre3s has now authorized more generous student benefits, the reality of budgets may not match the promise of the legislation. The legislation also attempts to consolidate and simplify operating procedures in federal assistance programs, with unclear implica- tions for state policies.

A question mark hangs over the entire budget process in Washington:' Research expenditures may grow because of increasing concern. over Anierica's competitive technological position in the world, but student aid spending Could; plateau after the enormous increases of the 1970s. The budget squeeze in student aid is likely to be aggravated by the rapid (growth in mandatory costs of the,Guar- =teed StUdent Loan program, which could drain resources-lrom federal need-based programs into, subsidies for loans that are not based on the finan- cial need of borrowers.

Frustration with the complexities and distor- tions of intergovernmental aid has led some legislatures in recent years to "reappropriate" or otherwise monitor federal funds flowing into the states. State legislatures will have to take care not to jeopardize federal student aid funds by imposing pro forma review processes. Student. assistance is at the heart of equal access and 'opportunity for

Introduction States, rather than the federal government, have' the primary governmental responsibility for higher learning in America. -Yet Washington contributes significantly to financing colleges and universities, providing close to one-fourth of the total national bill for postsecondary education.' In the process, agencies of the federal government also impose a variety of requirements, some costly, on institu- tions of higher eduba.tion. The — federal –impact on the campuses is substantial, it is diverse, and it has important implications for the states. This study explores these implications.

During the 1970s, many state legislatures de- voted considerable attention to school finance reform. During the 1980s, state legislatures are likely to be increasingly concerned with higher education finance as an era of population decline finally arrives on the campuses and competition for enrollments and resources intensifies among all

types of postsecondary institutions. States have


individuals. The timing of such assistance is critical. Research- support to higher education institutions and faculty is also appropriately exempted or treated specially, linked as it is to national research agenda and policy objeCtives.

Finally, what are the implications of the ad- ministrative restructuring-of education programs in Washington? Education has recently been eleimied 'to cabinet status in the executive branch, only to face reappraisal and possible reorganization once again_under a newly elected Administration.

Realism should temper expectations for consoji- dating or "rationalizing" federal activities in educa- tion through bureaucratic reshuffling. On balance, the new. U.S. Department of Education is not apt substantially to alter intergovernmental relations in financing and governing edUcation. The department is not in a position to bring about a single, coherent set of federal policies toward education, nor will it be able to streamline regulatory and funding prac- tices affecting eduCation that ,stem from a variety of federal laws and agencies.

Whatever the fate of the new department, a continued pattern of decentralized, fragmented sup- port is likely to characterize federal involvement in higher education. Such support will not be tidy or without 'headaches for colleges and states. But the pattern serves a range of national purposes, and it better serves to protect academic independence and diversity than would a monolithic national policy or plan.

relatively little control over federal funds for higher education. But the patterns of support flowing from Washington, as well as the ramifications bf federal regulations, are important for state policy:' makers to recognize as they come to grips with higher education planning and budgeting in the current decade.

This paper describes federal policies toward higher education and their interaction (or lack of

1. This estimate- is derived from analysis by the National Commission on Financing Postsecondary Education, FinancingPostsecondary Education in the United States. Washington, D.C.: Government Printing Office, December, 1973. The analysis takes into account all forms of financing; including parental support and student aid from public and private sources. Other estimates reflect primarily institu-, tional financing and show a smaller federal contribution. For example, the National Center for Education Statistics publishes data on current fund revenues of postsecondary institutions, about 15 percent of which are accounted for '. by federal payments.

interaction) with state policies. After-characteriz- ing the differing historical roles played by the state and federal governments in shaping American higher education, it outlines the administrative arrange- ments, types, and dimensi6ns of federal funding for students and institutions; and the trends and prospects for such support during the 1980s. The

discussion then centers on direct student assistance, where federal ,activity has increased most rapidly and recent developments pose important policy questions for many states. The paper concludes with a look at.budgetary constraints and some ob- servations on fiscal federalism in postsecorldary education.

State and Federal Roles: Past Present,. Future That the' states have the basic responsibility,; for higher educationindeed,. for .education at all levelsis an .American tradition. Historically, the Tenth Amendthent and the fact that "education" is nowhere mentioned in the U.S. Constitution pointed toward a .secondary role for the federal

. government in this field. While some of the Found: ing Fathers urged a 'national system of education run by the central government, the majority favored state, local, and private control, perhaps with a national university to cap the system. All proposala to establish such a university in the capital city failed, despite the fervent support of George Washington and several of his successors in, the presidency, and to this day the federal government does not directly sponsor institutions of higher learning apart from the military academies and a few other Specialized institutions. Nevertheless, early federal policy was important in, promoting higher education as an adjunct _of western migra- tion and.,public land development in :the late eigh- teenth and nineteenth centuries, and the Morrill Land-Grant College Act of 1862 was instrumental in founding what are now some of the nation's great public, as well as private, universities.2

The federal investment .n university-based re- search ,,and development boomed following World War II; Congress in the 1960s funded a variety of categorical aids for postsecondary education; and, in the 1970s, the federal government became the largest source of direct 'aid to individual students for financing their college costs. But fundamentally federal expenditures have remained supplementary to state and private support of higher- learning. Terry Sanford, former ,governOr of North Carolina and now president of Duke University, once'ptit it this way:'

The money for the, extras came from the national funds. . ,This is the glamour money.. .. It is needed, it has improved the quality. . .. It ip proper to re- member, however, for all the- 'ailvantages'brought by the extras, the train was put on the track in the first place by the states, and continues to be moved by', state fuel and engineers.3

Over the past two centuries the states have moved with varying speeds and approaches to create and expand public systems of higher educa- tion and, more recently, to assist (or purchase educational 'services from) private colleges and universities. Today, the major 'public support of postsecondary institutions continues to come from the states. Figure 1 illustrates the proportionate contributions of the different levels of government to public financing of higher education' (for the most part excluding student aid). The states now provide 65 percent of governmental revenues to colleges and universities, more than twice the fed- cr eral share.

The traditional division of responsibilities ,between the federal and state governments was reaffirmed in the early 1970s, when Congress di- bated and ultiinately rejected proposals for general– purpose federal institutional aid. In passing the 1972 amendments to the Higher Education. Act:

Congress pulled up short of a plan that amounted to federal revenue sharing with institutions of higher educationacross-theboard general operating sup- port distributed on the basis of enrollments. It was unwilling to underwrite the entire system without reference to any national objective other than pre- serving and strengthening educational institutions… .. The responsibility for general support of institutions, it was decided, should continue to rest with the States

The federal_ government would continue to aid higher education indirectly, by supporting programs in areas of special national concern.

2. For the Historical develoiiment of federal involvement .C.,:with higher education, see George N. Rainsford, ngress

and Higher Education in the Nineteenth Century. kbs…ville, Term.: University of Tennessee Press, 1972. .

'3. Quoted in Thomas R. Wolanin and Lawrence E. Gladieux, "The Political Culture of a Policy Arena," in Matthew Holden, Jr. and Dennis L. Dresang, eds., What' Government Does. Beverly Hills; Calif.: Sage Publications, 1975, pp. 184-5. 4. Lawrence E. Gladieux and Thomas R. Wolanin, Congress and the Colleges: The National Politics of Higher Education. Lexington, Mass.: Lexington Books, 1976, p. 226.

9 3

FIGURE 1, Governmental Sources of Current Fund Revenues to Higher Education Institutions, FY 1978

Source: U.S. Department of Health, Education, and Welfare, National Center for Education Statistics, Financial Statistics of Institutions of Higher Education, 1978, based on data gathered in

the Higher Education General Info'rmation Survey (HEGIS).

Instead of aid to institutions, the 1972 amend- ments established .aid to students, based on finan- cial need, as the primary mechanism of federal support for higher education. A central objectiVe of federal policy came into clear focus: to broaden and equalize opportunity by helping to ensure that students had the resources to obtain a college ed- ucation best suited to their abilities and interests. The 1972 legislation created the Basic Educational Opportunity Grant (BEOG) program, recently re- named Pell Grants, as a floor of direct support for all' needy students and State Student Incentive Grants (SSIG) to provide federal matching for need-based state scholarship programs. BEOG and SSIG rounded out the federal commitment to student aid, which in the course of the 1960s had already come to include the National Defense Student Loan.(NDSL), College Work-Study (CWS), Guara' tPed Student Loan (GSL), and (as renamed in 19'. supplemental Educational Opportunity Grant .1.20G) programs. The "consumer not the conduit" of higher education was to be the major focus of federal support, in the phrase ofSenator Claiborne Pell of Rhode Island, one of the chief sponsors of the 1972 law.

This is not to say that the federal government has been totally unconcerned with tile health and capacity of institutions. Certain types of institu- tions have been the object of special federal atten- tion because 'of their particular contributions to the national interest. The major research and graduate-oriented universities, particularly their medical schools, are one such category. They draw heavily on grants and contracts from multiple federal agencies. The,. historically black colleges are another, many or them drawing, substantial operating support as "developing institutions" under Title III of the Higher Edfication Act. In 1972 Congress authorized federal assistance for the establishment and expansion of community col- leges, though this provision was never funded and was allowed to lapse in the Education Amendments of 1980.

In addition, some of the black colleges and other institutions serving substantially low-income populations, notably independent institutions with little access to the state fisc, have become increas- ingly dependent on federal aid to their students especially on BEOG. And the same is true of some proprietary postsecondary vocational schools, `whose students make extensive use of the Guaran- teed Student Loan program as well as of BEOG. Student aid in some measure is an indirect form of institutional subsidy,, and the vigorous politics surrounding congressional reauthorization and re- vision of the student aid programs in 1980 attest to the high stakes involved for postsecondary institu- tions. Representatives of the various sectorspublic and private, two-year and four-year institutions struggled over scores of amendments to the alloca- tion formulas, eligibility criteria, and definitions of student need that determine who gets what, where, and how from the several billion dollars now spent annually in student aid programs under Title IV of the Higher Education Act.

But the broad historical delineation of federal and state roles persists in the early 1980s: The states are still primarily responsible for maintaining the structure of higher education, mainly through the maintenance of systems of public colleges and universities. The federal government provides par- ticular kinds of support to meet perceived national objectives, without distinguishing for the most part between public and nonpublic recipients of this support. The federal government purchases services (research), fills gaps (whether in college library sup- port, foreign language and area studies, health pro – fessions' development, or undergraduate science curricula), and channels the bulk of its aid directly- to students rather than to institutions, with the aim of removing financial barriers facing individuals who aspire to higher education.

FIderdi Programs; bypassing the States p*

StateS_served,as intermediaries under federal legis- lation for higher education in the nineteenth century. Proceeds from the sale of public lands pr6villed eridoviments that helped the states estab- lish and finance'the eafly land-grant institutions, agricultural – extension programs, and other fore- runners of toddy's comprehensive colleges' and universities. 'File federal grants to the states were broad and carried few restrictions.

Toward, the beginning of the twentieth century the pattern began to change:. Federal support be- Came piecemeal and started going directly to the institutions themselves, not by way of the states. In recent decades, nearly all federal monies have ., been channeled to institutions (or to departments, schools, and faculty members within institutions) or to individual students.

Speechmakers sometimes refer to a federal- -state "partnership" in supporting higher education, a phrase with meaning only in the general sense of the historical roles and governmental division of labor we have described. There is, in fact, little conscious meshing of funding purposes and patterns between the two levels of government. By and large the federal ac_ tivity proceeds independently. As one observer has noted:

With a few modest exceptions, federal poscsecondary spending arrangements make no-attempt to stimulate state spending, to. compensate for differences in state wealth or effort, or to give state governments money to allot as they see fit.5

Nor, it might be added, would it be easy or even feasible to design a program or funding formula that would effectively achieve any combinationcof such objectives. —

Some provisions of current higher edueati-On law recognize the states, but primarily in incidental ways. Several of the categorical programs authorized in the 1960s, such as college construction assistance and continuing education grants, called for a state commission or other responsible body to review institutional applications for funds. But states vary widely in the ways they have handled the federal program authorities, and, in many cases, the com- missions have existed outside the purview of proper state legislative or executive authority. Moreover, some state commissions ?Were established to ad- minister federal programs that now either no longer funded pr arer§urviving on margina