Let us make sense how will decreasing of federal student loans impact the public universities and colleges.  In the optimization or mathematical programming world, putting one more constraint will reduce the objective function optimal solutions, assuming that this additional condition, i.e., reduction on student loans is bounded.  Having said that, there are two possibilities:

1. If the impacted institutions find other resources to off-set the holes left out by declining loans from other sources, rather than from the tuition hikes, then the effects will be minimal.
2. Otherwise, each institution will increase the tuition, especially for the out-of state enrollees.  However, there is a limit before the consumers are totally back off from enrolling at one institution and choose to go somewhere else.  Have your institution calculated where is your “tuition shadow price or stoppage” yet?  Click here for help.  This is another reason why you need to be a member of AAEA.  The old ways where you cannot get the optimal benefits or to increase your professional skill sets or only just to attend ceremonial annual meetings have passed many years ago.  You need to boost your professionalism by joining this Association for free.

It does not matter which scenarios will be taken, competition will surely increase for getting the state funding.  Therefore, each state will adopt some sort or undisputable and fair ways to slice the pie.  Some states have adopted the Performance Base Funding Model (PBFM) as we have discussed a couple of weeks ago.  For sure, more States in the country will start looking at PBFM.  Even if the size of the pie is the same over the years PBFM will be applied.  However, the pie size may not be constant from time to time.

Right at this moment, the following measurable elements are available and therefore, they will be used as the yardstick.  These elements are:

1. Core elements–Student learning outcomes: Retention and graduation rate.
2. Supplemental elements:
   1. Gainful employment.
   2. Student loans: Default and Average.
   3. Charged tuition: Average and percent of annual increase.
   4. Local contents unique to the state.

If one looks at these components, they are nothing but the CAR (College Affordable Rating) which has been introduced by the past administration.  There are cons and pros on the ways how the college ratings should be done and what elements needs to be used.  This debate will not bring anyone to anywhere.  However, the limited funding is still there.  Rather than to worry on it, better yet for colleges to prepare themselves to embrace the new reality.  Making continuous improvements on each of those mentioned elements are in deed a strategic move.

There is another alternative how a state can distribute the education budget among the State Colleges and Universities.  This concept never been applied before, and it has been written in the CAR book about four years ago.  This concept is an original work from the author and first introduced to the public on June 17, 2016.  Please cite appropriately.