Federal funds for higher education

Higher education in US is primarily the responsibility of state governments. The federal government nonetheless plays an important role as well, through direct support for research or facilities or through grants and loans made to students.

• Land-Grant Colleges and Universities
  

Through the Morrill Land-Grant Acts, first established before the Civil War (1862) and then extended in 1890 and on, federal government created 106 Land-Grant colleges (mostly public) who received federal lands which, or the proceeds from which, was to be used toward establishing and funding public services, which originally include "agriculture and the mechanic arts" and was later extended to other outreach services.

• Federal support for students
  

During the Great Depression, federal aid to students reached its peak in 1937 when 11% of all students nationwide received an average of $12 per month for undergraduates and $20 per month for graduate students as part of the National Youth Administration's work-study program.

After WWII, the Serviceman's Readjustment Act of 1944 covered tuition as well as subsistence for returning veterans (commonly referred to as GIs or G.I.s) to have postsecondary education, which provided a new revenue stream for colleges and universities.

The first general available student loan through federal government was created in the late 1950s, through the National Defense Education Act. The legislation was sought to promote access to higher education to increase the technological capacities of the US, in response to the launching of the first satellite by the Soviet Union. Now called Perkins Loans, these loans were funded by providing capital directly to colleges, which in turn lent the money to students at highly subsided rates.

In 1965, the passage of the Higher Education Act created the student grant and loan programs targeted at the nation's neediest students, and provided direct funding for college libraries, historically black colleges and universities, and a number of smaller, specialized program. The legislation still functions today, although many changes have been made through its reauthorizations every five years. Initially, Pell Grant, the foundation grant program, was established only for poor students, and it provided more than 80 percent of the cost of attendance at a typical public, four-year program. The grant opened up to all students in 1978 but reiterate its income limits in 1992.

Another important milestone in federal funding for higher education students was the passage of the Taxpayer Relief Act of 1997. The legislation created the Hope and Lifetime Learning tax credits for college tuition. Shifted from spending programs to tax subsidies, the new incentives move major beneficiaries away from the neediest college students and toward middle-and upper-income students.

• Federal support for research

Federal support for research was generally tightly coupled with national priorities. In WWII, federal expanded funding for higher education, mostly for research in support of the war effort, which slowed down with the close of war.

In 1965 the Department of Defense represented 24 percent of all federally sponsored research at higher institutions. It dropped to approximately 1o percent of the total in the 1970s, when more research funding was shifted to energy-related research when the nation faced an energy crisis due primarily to the OPEC oil embargo. The percentage recovered in the 1980s to 15 percent, when the focus turned back toward military research as the Reagan administration created new defense initiatives. In 2000, the military research dropped again to less than 8 percent of the total, when research spending for the Department of Health, Education, and Welfare raised to 44 percent from just 26 percent in 1965.

Federal research dollars also bring with them support for indirect costs, which may include library operations, plant maintenance, repair and operations, administrator salaries, and the costs of managing sponsored research on the campus. In recent years, universities (especially research-oriented ones) are increasingly active in competing for federal grants. Not only do they want the money to support research, they have increasingly relied on the indirect cost to partially support daily operations when they get much less money from states.