Higher Education Finance

The financing of higher (or tertiary) education deals with issues of resourcing (i.e., funding) higher education institutions, their students, and their (academic and nonacademic) staff. The study of higher education finance covers the sources of funding for higher education (including the balance between public and private funds) as well as the uses of those funds (for education, research, student support, infrastructure, staffing, campus development, etc.). The management of funds is essentially a study of choice—about using scarce resources to achieve often-conflicting goals—which implies that it also extends to issues of priority setting, effectiveness, and efficiency. In many ways, these are questions of a political-economic nature. With higher education being such a large part of the public sector, the study of higher education finance, on the one hand, may be seen as part of public finance, while on the other hand, as a subfield of the economics of education. In times of shrinking public budgets, there is increasing scrutiny on how public resources for higher education are allocated and used. At the national (country, state) level, reforms in educational financing are frequently debated in policy circles, with the goal of identifying the funding mechanism that produces the best outcomes in terms of guaranteeing access for students, high-quality education, and high-quality research, as well as connecting this education and research to the needs of society. At the level of the higher education institution (i.e., university, college, or specialized institution), debates will often focus on the internal budgeting system and how the institution can make sure it runs its operations in a financially sound way in the short term, with sufficient incentives for efficiency and revenue generation, as well as incentives for innovation on the mid- to long term. All of this illustrates the many trade-offs and dilemmas that appear in the study of higher education finance. It also shows that the topic of higher education finance touches on many other research fields in higher education, including, for example, governance, privatization, and student financial aid. And given the political-economic nature of these issues, many conceptual approaches used for the study of higher education finance are imported from economics, political science, public administration, public policy, or organizational studies. Because the field of higher education finance is constantly evolving, the topics that are at the forefront of scholarly research are to be found primarily in academic journals. The themes covered in the study of higher education finance deal with some of the above-mentioned major trade-offs and dilemmas. After first presenting some of the general-overview works in higher education finance, this article will cover some of these themes touching on the most-important policy debates in higher education finance.