Outcomes Over Optics: Why College Funding Must Support Student Success

Rachel enrolled in her local community college full of hope. A first-generation college student, she balanced two part-time jobs while attending night classes. Her college proudly touted record-high enrollment numbers that year, and Rachel was one of the many new faces that filled the campus. But two years later, she quietly left without a degree. The support she needed - targeted advising, clear course pathways, and flexible scheduling - never materialized. Her story echoes a broader reality: increasing attendance doesn't always translate to student success.

A few years ago, during a strategic planning meeting at a local community college, the focus centered on enrollment goals, recruitment campaigns, and ambitious projections. One administrator proudly announced a 12 percent increase in first-year enrollment, which was met with applause. However, when a question was raised about the same cohort's graduation rate, the room fell silent. The rate had remained unchanged for five years. More students were entering the institution, but just as many were leaving without earning a degree, credential, or securing employment.

This situation reflects a core paradox in the current funding model: institutions receive rewards for enrolling students, not necessarily for helping them succeed. Traditional state funding formulas often rely on metrics such as headcount, contact hours, and faculty ratios. While these inputs are easy to track, they do not ensure that students are learning, completing programs, or achieving meaningful employment. According to a 2020 report from the State Higher Education Executive Officers Association (SHEEO), more than 30 states have implemented some version of performance-based funding, yet many still allocate most of their resources based on enrollment rather than on student success outcomes like graduation rates or job placements1.

Outcomes That Matter: Graduation, Jobs, and Equity

A college degree holds value only when it leads to tangible outcomes. For many students, especially those from low-income or first-generation backgrounds, the goal of higher education extends beyond intellectual growth. It includes obtaining a job, supporting a family, or breaking cycles of poverty. Despite this, institutional success is often measured by prestige, research funding, or incoming freshman numbers. While such metrics may be appropriate for elite universities, community colleges and regional public institutions serve a different and more pragmatic purpose: they are vital engines of workforce mobility.

Only 42 percent of community college students complete a degree or certificate within six years of enrollment2. This statistic serves as a critical warning. The challenges are even more pronounced for students of color. Black and Hispanic students are significantly less likely to complete degrees compared to their White peers, even when controlling for factors like income and academic preparation3. Continuing to fund colleges based solely on enrollment, rather than completion rates and post-graduation outcomes, perpetuates inefficiencies and deepens inequities in the system.

Performance-Based Funding: The Good, The Bad, and the Promising

Several states have piloted performance-based funding models to address these disparities. Tennessee, for instance, has been recognized for its comprehensive approach. Since 2010, the state has tied 100 percent of its higher education funding to outcomes such as degree completion, employment rates, and student progress benchmarks4. Preliminary evaluations indicate that institutions have responded by enhancing academic advising, simplifying degree pathways, and collaborating more closely with employers to align curricula with labor market demands.

However, performance-based funding is not without drawbacks. Critics contend that these models may incentivize institutions to become more selective or reduce support for high-risk students in an effort to protect performance metrics. A study by the American Educational Research Association found that while some institutions experienced short-term improvements, others showed limited long-term gains, particularly when performance-based funding represented only a small portion of the overall budget5. If incentives are too weak or metrics lack nuance, the result can be performative compliance rather than meaningful change.

What Leaders Can Do Differently

While state-level policies set the framework, municipal leaders and local stakeholders have significant influence over educational outcomes. City governments can bring together education and workforce partners to ensure that local postsecondary institutions are aligned with regional labor market needs. For example, San Antonio’s Alamo Colleges District collaborated with local chambers of commerce to develop industry-aligned “career clusters” that guide students toward high-demand occupations. This initiative was supported by city-funded wraparound services such as transportation and childcare, which contributed to increased completion rates among adult learners6.

In addition, municipal governments can play a critical role in building data infrastructure. Often, student outcomes post-graduation remain unclear due to a lack of tracking. Partnerships with workforce development boards or state labor departments can close this information gap. Sharing data on employment rates, wage growth, and credentials can help institutions refine their programs and enable funders to make more targeted, effective investments. To fund what works, it is essential to know what is working.

Rethinking Possibilities for Higher Education

Higher education need not be a four-year detour that leads to decades of debt. It can and should be flexible, career-focused, and grounded in measurable outcomes. However, this requires a shift away from viewing education as a numbers game. Filling classrooms does not equate to preparing graduates for success. If education is truly a pathway to opportunity, funding models must prioritize those paths that deliver real, long-term value.

A challenge is presented: when enrollment growth is celebrated, ask about graduation rates. Ask how many graduates secured employment in their field of study. Ask how many are still burdened by student debt five years later. Institutions should be rewarded not for how many students they attract, but for how many they help succeed. Education must be about outcomes, not optics.

Bibliography

State Higher Education Executive Officers Association. “State Higher Education Finance: FY 2020.” SHEEO, 2021. https://sheeo.org/project/state-higher-education-finance/.

Complete College America. “Time is the Enemy.” 2011. https://completecollege.org/wp-content/uploads/2017/11/Time_Is_the_Enemy.pdf.

Bailey, Thomas R., Shanna Smith Jaggars, and Davis Jenkins. “Redesigning America’s Community Colleges: A Clearer Path to Student Success.” Harvard University Press, 2015.

Hillman, Nicholas, and Alisa Hicklin Fryar. “Evaluating the Impacts of ‘New Era’ Performance Funding Policies in Higher Education.” American Educational Research Journal, 52(4): 2015, 636-673.

Kelchen, Robert. “Performance-Based Funding in Higher Education: What Has Been the Impact?” Lumina Foundation, 2018. https://www.luminafoundation.org/resource/performance-based-funding-in-higher-education/.

Alamo Colleges District. “Career Clusters and Program Offerings.” Accessed May 2024. https://www.alamo.edu/career-pathways.