Colleges’ Hero Moment
Higher Ed’s Chance to Rewrite Their Funding Story
August 20, 2025 | Written by Casey White & Avery
Welcome back to Kinetic Signals, a new content series from Kinetic West where we track the turning points reshaping opportunity, equity, and systems change.
As the federal landscape evolves across education, we’re spotlighting those best positioned to adapt and what it will take for them to meet the moment and deliver results. In earlier Kinetic Signals posts, we encouraged campus Career Services’ teams and Governors’ offices to thoughtfully plan for the opportunities at their doorstep.
Facing squeezed budgets, declining enrollment, and outcomes-based aid, colleges must chart a new path forward. Higher ed leaders who lean into these challenges can reclaim public confidence and deepen ties with communities, employers, and students.
What We See
H.R. 1’s “One Big Beautiful Bill Act” shift to outcomes-based aid echoes more than a decade of state-level Performance-Based Funding (PBF) experiments–models that tie a portion of public appropriations to metrics such as enrollment, retention, completion, and graduate outcomes. Early adopters hoped PBF would spur colleges to improve performance, but experience shows that design details make all the difference.
The terms of accountability in H.R.1 are wildly complex, and institutions will need to sort through a thick web of definitions, adjustments, and reporting requirements if they hope to thrive.
From the well of PBF research (sometimes referred to as Outcomes-Based Funding [OBF]), three lessons stand out:
Metric design makes or breaks incentives. At times, PBF has led to prioritization of near-term outcomes over longer-term outcomes. For example, there is evidence that PBF has led to certificate production at the expense of associate degree production. The incentive worked–more credentials were produced, but perhaps not as intended if many certificates have less labor-market value for students compared to associates degrees. The H.R. 1 lesson: get specific and consider (beware of) unintended consequences.
Equity can’t be an afterthought. Without safeguards, institutions serving high-need and rural populations lose out. States that have layered in equity premiums, for example incentivizing gap closing for the outcomes of low-income students, first-generation students, or other focus populations who require additional support–offer a roadmap for H.R. 1's implementation.
Some programs carry societal value beyond wages. An early childhood educator or home health aide may earn less but deliver outsized community impact. H.R. 1’s design should recognize these “vital but undervalued” careers rather than shut them out of funding eligibility.
What It Could Mean
A chance to rebuild trust
By transparently tracking and publishing student earnings and equity outcomes, institutions can show skeptics that a degree still pays off–especially for those most in need.
A risk of deepening divides
If revenue follows only the highest-earning programs and upper income students, regional comprehensive colleges and minority-serving institutions could see further cuts–widening the very gaps H.R.1 aims to close.
An opening for new partnerships
Colleges that embed work-based learning, stackable credentials, and third-party validation into program design will both meet H.R. 1’s tests and deepen ties with employers and communities.
Room To Act
Across our series we’ve focused on how individuals and their teams can turn compliance into opportunity. Higher-ed institutions, facing multiple crises, will nevertheless have the chance to impact outcomes for the better:
Ensure outcomes deliver for focus populations.
Pilot “adjusted earnings” metrics that account for student demographics and regional cost of living–ensuring programs serving vulnerable populations aren’t unfairly penalized.Elevate societal-value careers.
Propose “community impact credits” for essential fields (e.g., early childhood, special education, public health) so vital yet lower-paying credentials remain eligible under H.R. 1.Forge deep employer–education alliances.
Co-design curricula and work-based learning pathways with industry–locking in real-world outcomes and signaling to H.R. 1 reviewers that graduates meet genuine labor-market needs.Stack credentials into clear ladders.
Showcase how each short-term program feeds into longer credentials or degrees. A transparent “credential map” both aligns with Governors’ emerging guidance and empowers students to plot their journeys.Tell your data-driven story.
Publish an annual “Impact & Equity Report” that presents completion, placement, wage gains, and community-value outcomes. Use interactive dashboards and local storytelling to bring the numbers–and their human impact–to life.
Navigating H.R. 1’s detailed accountability provisions will be undoubtedly complex, but by leading with equity, societal value, and rigorous employer engagement, institutions won’t just survive the new funding tests–they’ll prove they’re indispensable to students, states, and the future workforce.