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Powered by federal stimulus funds and increases in state and local appropriations, total funding for higher education reached $113.2 billion in fiscal year 2021 – an increase of three percent, according to the State Higher Education Finance (SHEF) report produced annually by the State Higher Education Executive Officers Association (SHEEO).

Total funding increased in FY21 despite the onset of the COVID-19 pandemic and a brief but sharp economic recession that occurred during the year. Support for higher education initially was buoyed by federal stimulus aid received under the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, among other programs. In total, federal aid to colleges and universities jumped 186 percent during the FY20 to FY21 timespan.

However, federal stimulus funds still accounted for only three percent of institutions’ total state and local funding received in FY21, with state and local tax appropriations making up 81 percent of the total. State and local appropriations for colleges and universities increased from $107.8 billion to $109.5 billion in FY21. On a per-full-time-equivalent (FTE) student basis, state spending on higher education by 4.5 percent, while total funding from net tuition revenue fell 3.2 percent.

Student aid programs appear to be large beneficiaries of the increased funding. Total student aid from state and local funding rose 7.5 percent between FY20 and FY21. Since 2006, funding for aid programs has nearly doubled from 6.9 billion to $12.2 billion. Aid programs now account for more than 11 percent of total state funding.  

In spite of these student aid and other funding increases, the SHEEO report highlights a number of challenges facing higher education that may affect funding in the future. The most substantive of these declines is enrollment. From 2020 to 2021, FTE enrollment at colleges and universities fell from 10.9 million to 10.6 million. The drops in enrollment cannot be blamed entirely on the pandemic, as FY21 marks the 10th straight year of enrollment declines. While all sectors have seen drops in their numbers of students, the declines have been particularly acute at public two-year institutions, which saw their numbers of students fall 6.1 percent. In 11 states, public two-year student enrollments fell by more than 10 percent.

Additional information about the SHEF project, including individual profiles of higher education funding in each state, is available on the SHEEO website.


Ken Redd

Senior Director, Research and Policy Analysis


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