Tertiary expansion and financial aid system evolution: Comparative evidence from U.S. and China

• In Event: Adult education: practice, theory, and debate

Proposal

1. Objectives or purposes

Higher education expansion becomes a global phenomenon in the past fifty years (Marginson, 2016a; Vincent-Lancrin, 2017). Higher education expansion leads to a proliferation of high participation system (Marginson, 2016b, 2016c). It generates substantial changes in tertiary governance, horizontal diversity, vertical stratification, equity, and finance. How tertiary expansion is funded and who bears the costs is paramount to the long-term financial sustainability of higher education (Callender, 2017). In addition to budget allocation for higher education institutions, governments often also pay for a substantial amount of student aid. In U.S., federal government shoulders 65% of total undergraduate aid in 2015 (College Board, 2017). Similarly, Chinese central government offers 51% of total college aid in 2015 (National Student Aid Report, 2016). Obviously, the world-wide tertiary expansion has brought about unprecedented fiscal pressure on national and regional government.

Prior research has addressed funding implications of high participation in higher education (Callender, 2017; Dougherty, 2018; Jongbloed, 2018), yet less attention has been paid to transformation of student aid system during the expansion. A significant change has occurred in structure of student aid system in high participation countries: a trend of replacing unconditional high-subsidy aid (such as grant) with conditional low-subsidy aid (e.g. loan). Current analysis has not sufficiently addressed these structure changes. With few exceptions (Jongbloed and Vossensteyn, 2016; Callender, 2014, 2017), scholars overlook sources of variation in student aid system across countries. To address this knowledge gap, this study intends to addresses how tertiary expansion shapes the configuration of current student aid systems and how this expansion is enlarging rather than mitigating stratification.

2. Perspective(s) or theoretical framework

To understand the nature of tertiary expansion and its influences on higher education system, this study refers to Martin Trow’s definition of broad pattern of higher education development (Marginson, 2017). This study argues that countries response differently to fiscal pressure brought about by tertiary expansion, depending on higher education governance pattern. Under different regimes, central and regional governments assume different roles. In competitive federalism model like U.S., federal government subsidizes students but not institution. States refer to market mechanism to solve the excess demand for student aid, including introducing performance funding for institution, cost-sharing, and low-subsidized aid or deferred tuition payment for students (Zhou and Mendoza, 2017). In cooperative model such as Germany, federal government shares research costs and student aid with states. Government introduces cost-sharing and formula funding with performance indicators. In Commanding-Heights-type countries such as China, the state decentralizes non-selective institutions to regional governments and the latter uses cost-sharing and revenue-diversification to release fiscal pressure. Government’s reaction to fiscal pressure brought about by tertiary expansion determines the structure, scale, and distribution of student aid across student groups and across institutions.

3. Method and data

From methodological perspective, this study combines theoretical exploration with statistical analysis. First, it conducts an extensive literature review of political economic analysis of tertiary education expansion and federalism in higher education. Second, the study takes a historical institutionalism approach to investigate the evolution of U.S. and Chinese financial aid system since 1950s to date. This paper traces the critical historical junctures in both countries in terms of establishment and improvement of college financial aid systems, based on review of related legislations, federal and state policies, academic literature, and historical statistics data. Finally, this paper summarizes empirical evidence and shows how recent financial aid policies changes lead to further stratification among student groups. The paper utilizes comparable statistics of financial aid system in U.S. and China since 1950s, including statistics yearbooks, NCES databases, and publications by College Board and other related organizations.

4. Results and point of view

This study reaches three main conclusions. First, global tertiary education expansion has shaped the configuration of current student aid system. (1) Tertiary expansion brings huge fiscal pressure for national and regional government. (2) Countries under various types of federalism response differently to such fiscal pressure. Two common policy instruments are decentralization or cooperation between governments and use of cost-sharing policies. As a result, there is a general trend towards revenue diversification and cost-sharing; towards performance-based funding; towards high-fee and high-aid system; towards outcome-oriented and decentralized system.

Second, the evolution of national student aid systems in both countries implies tacit government action to reduce fiscal pressure related to tertiary expansion. As tertiary system moves towards mass or universal phase, (1) use of tuition fees increases over time; (2) use of merit standards in need-based aid programs increases, the actual coverage of grants and scholarships decreases; (3) use of student loan and market loan is prevalent and increasing in both countries.
Consequently, this study observes that the degree of subsidization in student aid decreases; more conditions are put on need-based aid programs; and the low-subsidy aid programs grow at the expense of high-subsidy aid programs. Implicitly, recent changes of student aid policies reduce fiscal pressure on government, but adding attendance costs for students.

Lastly, response of student aid system to tertiary expansion is enlarging rather than mitigating stratification. There is strong evidences that: (1) student aid system opens college access for disadvantaged students, but the distribution of aid favors high-ability students in selective institutions; (2) many needy students are not covered by need-based aid; (3) even among aided students, need-based aid is insufficient to reduce student poverty.

5. Scientific or scholarly significance of the study or work

This study represents one of the first attempts to analyze the effect of global tertiary expansion on student aid systems from the political economic perspective. It combines recent literature on high participation system, federalism in higher education, and public finance for tertiary education. By using a historical institutionalism approach, it is able to identify critical historical events/policies which shaped the current configuration of student aid systems.

Author

• Po Yang, Peking University