Universities Funding Students: Who, What, And Why?

Universities are often thought of as money-making institutions, but are they always taking from their students and not giving back? Universities have numerous ways of generating revenue, including tuition fees, endowments, college sports, and fundraising. However, they also provide funding to students in the form of loans, financial aid, grants, and scholarships. In 2018, federal money made up 14% of all college revenue, with the US government directing 65% of its investments to federal student aid. Outside of financial aid, universities also fund research and development through university laboratories and special departments. With the recent COVID-19 pandemic, universities have also been providing emergency grants and support to students. So, while universities may be known for their high tuition fees, they also give back to their students in a number of ways.

COVID-19 emergency grants

The COVID-19 pandemic has had a significant impact on universities and students, with many students facing unexpected financial challenges. In response, universities have provided various forms of emergency financial assistance, including grants, to support their students. These grants aim to prevent significant interruptions in students' academic progress and help them cover essential expenses.

The Higher Education Emergency Relief Fund (HEERF) is a federal program that provides grants to students facing financial difficulties due to the COVID-19 pandemic. The grants are intended to cover expenses directly related to the disruption of their education, such as course materials, technology, housing, and living expenses. The HEERF program has undergone several phases, including HEERF I, HEERF II, and HEERF III, with funding allocated by the US Department of Education to eligible institutions of higher education.

The University of Missouri-Kansas City (UMKC) offers COVID-19 emergency grants through the HEERF program. UMKC received $3,531,361 in funding through the Federal CARES Act Emergency Funds, providing grants to 2,442 students. Additionally, UMKC received $11,423,023 through the HEERF III program, assisting 6,882 students with exceptional needs related to educational costs, food, housing, healthcare, and childcare.

The University of Maryland, Baltimore County (UMBC) has also provided COVID-19 emergency grants to its students through the HEERF program. UMBC was approved for $13,436,173 in emergency grants under the American Rescue Plan (ARP) or HEERF III. These grants prioritized students with exceptional financial need and were used to cover costs such as tuition, housing, healthcare, and childcare. Previously, UMBC had also received funding through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) or HEERF II, providing $4,657,829 in emergency grants to 4,738 students.

The COVID-19 pandemic has disrupted the lives of many students, and universities have responded by providing emergency financial assistance. The HEERF program, through its various phases, has played a crucial role in allocating funds to support students in need. Universities like UMKC and UMBC have utilized these funds to offer emergency grants, ensuring that their students can continue their education and manage essential expenses during these challenging times. These grants have provided a lifeline to students facing unexpected financial obstacles due to the pandemic.

Federal student aid

The Free Application for Federal Student Aid (FAFSA) is the key to accessing this financial support. The FAFSA is a free application that students can use to determine their eligibility for federal student aid. It is essential to submit the FAFSA on time to be considered for this aid, and the information provided is also used by states and colleges to award their own financial aid packages. For the school year 2024-25, the federal deadline to submit the FAFSA is June 30, 2025.

To complete the FAFSA, students need to create an account and obtain a Federal Student Aid (FSA) ID. This FSA ID can be used immediately to sign and submit the FAFSA form. However, for any other use, there is a waiting period of up to three days for the Social Security Administration (SSA) to confirm the applicant's information. Students can check the status of their FAFSA application online or by contacting the Federal Student Aid Information Center.

Scholarships and grants

In 2018, the US federal government directed 65% of its $149 billion investments in higher education to federal student aid, which includes scholarships, work-study, and loans. Federal grants received 27% of the total investment, or $41 billion, from the federal government in 2018. These grants are awarded to individuals or organisations to fund research and projects that contribute to the public good.

There are various types of grants available for students, such as the Pell Grant, which is one of the largest grant programs in the country. For the 2023-24 school year, the Pell Grant ranged from $750 to $7,395, with the maximum amount adjusted periodically. To be eligible for the Pell Grant, students must demonstrate financial need and maintain satisfactory academic progress. Another example is the Federal Supplemental Educational Opportunity Grant (FSEOG), which is also need-based and ranges from $100 to $4,000 annually.

In addition to federal grants, many states offer grants for students attending college within their state. For instance, the New York State Tuition Assistance Program (TAP) provides up to $5,665 annually for New York state residents studying in New York. State grants may or may not have a need-based component and may have specific GPA or test score requirements.

Scholarships are also widely available from universities and private organisations. For example, Harvard University offers generous scholarships to offset its high tuition costs. Additionally, private scholarships, such as the Zeta Tau Alpha Scholarships, are awarded based on merit and financial need.

Overall, scholarships and grants provide significant financial support for students pursuing higher education. By recognising merit and addressing financial need, these funding opportunities help make college more accessible and reduce the burden of student debt.

Sports funding

On the one hand, sports are undoubtedly important for the holistic development of students. The ancient saying, "a sound mind in a sound body," underscores the idea that physical health is essential for mental well-being and academic success. Sports teach valuable lessons in discipline, competitiveness, and teamwork, which can benefit students in other areas of their lives. Additionally, successful athletes can bring prestige to their universities and attract more applicants.

However, the financial reality of university sports programs is complex. While sports like football and basketball can generate significant revenue for universities, they rarely produce a positive net profit. The cost of running these programs often exceeds the revenue they bring in, and only a handful of schools turn a profit through college athletics. The situation is even more challenging for smaller schools or those without top-division sports teams.

The COVID-19 pandemic highlighted the financial vulnerability of university sports programs. The cancellation of the NCAA's March Madness basketball tournament in 2020, its biggest moneymaker, resulted in significant losses for the organisation and the schools. Consequently, colleges had to reduce scholarships, cut coaching positions, and even eliminate some sports programs.

To address the financial challenges, universities should prioritise transparency in their athletic department financial reporting. By providing clear and understandable financial reports, universities can facilitate informed discussions with stakeholders, including students, faculty, and the general public. This transparency can help identify areas of wasteful spending and guide decisions about rightsizing or transitioning certain sports teams to a lower division to reduce costs.

In conclusion, while sports funding in universities is important for student development and can bring prestige, it is also a significant financial burden for many institutions. To ensure the sustainability of sports programs and mitigate the cost impact on students, universities should embrace transparency and engage in thoughtful financial strategies.

Student loans

Universities do not give out money directly to students, but they do receive funding from the government and other sources, which can help students in the form of loans, grants, scholarships, and other financial aid.

Student loan debt has been increasing, with a total of $1.73 trillion in student loan debt in July 2021. The average undergraduate student loan balance upon graduation was about $30,000 in 2019. Graduate school loans are typically in much higher amounts, and loan amounts vary based on race, social class, age, institution type, and degree sought.

There are two main types of student loans: federal loans and private student loans. Federal loans are offered by the government and are either subsidized (the government pays the interest) or unsubsidized. Private loans are offered by banks or finance companies and are more expensive and have less favourable terms than federal loans.

The amount of student loans that can be borrowed is limited by the government, and there are different loan limits for dependent and independent undergraduates, as well as graduate students. Students must start repaying their loans once they drop below half-time enrolment or graduate, with a six-month deferment period.

Income-based repayment plans are available, which limit monthly payments to a percentage of discretionary income and forgive unpaid balances after a certain number of years. There are also loan forgiveness programmes for certain professions, such as teachers and public service workers.

Frequently asked questions