Federal Policy Uncertainty Impacting College Budgeting – Inside Higher Ed

Report on Federal Policy Uncertainty and its Impact on Higher Education’s Contribution to Sustainable Development Goals

Executive Summary

A 2025 survey of college and university Chief Business Officers (CBOs) reveals that significant uncertainty surrounding federal policy is severely impeding the financial planning capabilities of higher education institutions. This instability poses a direct threat to the sector’s ability to contribute to key United Nations Sustainable Development Goals (SDGs), particularly SDG 4 (Quality Education), SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation, and Infrastructure), SDG 10 (Reduced Inequalities), and SDG 16 (Peace, Justice, and Strong Institutions).

Key Findings: Financial Instability and SDG Setbacks

Widespread Disruption to Institutional Planning

Data from a survey of 169 CBOs indicates that federal policy uncertainty is a primary driver of financial distress, undermining the stability required to advance the SDGs. The findings show:

• Nearly two-thirds of CBOs report that federal policy uncertainty is hindering their ability to conduct basic financial planning.
• 49% of institutions are moderately impacted, forcing adaptations to planning processes.
• 14% of institutions are severely impacted, leading to major disruptions that compromise their core mission and challenge their role as strong and effective institutions (SDG 16).

Primary Concerns and Their Impact on Sustainable Development

CBOs identified specific federal policy areas that represent major risks to their operations. These concerns directly correlate with setbacks for several SDGs.

1. Federal Student Aid Policy (68% of CBOs): Uncertainty surrounding student aid, compounded by the previous year’s FAFSA rollout disruptions, directly threatens SDG 4 (Quality Education) and SDG 10 (Reduced Inequalities). Instability in financial aid jeopardizes equitable access to tertiary education for all, particularly for vulnerable and low-income students.
2. Research Funding Levels (24% of CBOs): Anticipated cuts to federal research funding undermine progress toward SDG 9 (Industry, Innovation, and Infrastructure). As key drivers of scientific research and technological development, universities’ diminished capacity in this area can stifle national innovation and economic competitiveness.
3. International Student Policies: Changes impacting international student enrollment weaken global partnerships, a core tenet of SDG 17 (Partnerships for the Goals). These restrictions limit cultural and intellectual exchange, hindering the global collaboration necessary to solve complex challenges.

Institutional Responses and Threats to SDG Progress

Austerity Measures and Their Consequences

In response to the uncertain financial climate, institutions are implementing measures that have immediate negative consequences for sustainable development.

• Budget and Staff Cuts: Institutions like Michigan State University are planning spending cuts, including faculty and staff positions. This directly contravenes SDG 8 (Decent Work and Economic Growth) by threatening stable employment and weakening the role of universities as major local employers.
• Interim Budgets: The adoption of short-term, interim budgets, as seen at Swarthmore College, highlights a critical level of instability. This approach prevents long-term strategic planning necessary to maintain and enhance educational quality (SDG 4) and institutional strength (SDG 16).

Strategic Recommendations for Institutional Resilience

Strengthening Financial Governance to Safeguard SDG Contributions

Experts advise that institutions must adopt more dynamic and forward-looking financial management practices to navigate the current environment and protect their long-term mission. Key strategies include:

1. Multi-Scenario Budgeting: Institutions should prepare multiple budget scenarios, from “business-as-usual” to worst-case models involving significant funding loss. This proactive planning is essential to protect core functions that support quality education and research (SDG 4, SDG 9).
2. Real-Time Financial Forecasting: Unlike static annual budgeting, continuous forecasting allows leaders to proactively manage outcomes based on the most current data. This enhances transparency and accountability, aligning with the principles of SDG 16 (Strong Institutions).
3. Five-Year Projections: Analyzing the multi-year impact of current financial changes (e.g., lower enrollment, higher discount rates) is critical for sustainable planning. This foresight helps prevent sudden institutional crises and ensures long-term viability.
4. Enhanced Internal Collaboration: Frequent communication between CBOs and other cabinet-level leaders is crucial for a cohesive and informed response, fostering the internal partnerships needed to navigate external pressures effectively.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 4: Quality Education

  The article is centered on the financial stability and operational capacity of higher education institutions in the U.S. It discusses how federal policy uncertainty, changes to student aid (FAFSA), and budget cuts directly impact the ability of colleges and universities to provide quality tertiary education.

• SDG 8: Decent Work and Economic Growth

  The financial pressures on universities are shown to have direct consequences for employment. The article explicitly mentions that Michigan State University announced a plan to “cut spending, including faculty and staff positions,” which relates to job security and decent work within the higher education sector.

• SDG 9: Industry, Innovation, and Infrastructure

  The article highlights concerns over “cuts to federal research funding.” Universities are critical infrastructure for research and innovation. Reduced funding directly hampers scientific research and development, which is a key component of this goal.

• SDG 10: Reduced Inequalities

  The discussion around the “FAFSA fiasco” and changes to “federal student aid policy” connects to this goal. These systems are crucial for ensuring students from various socioeconomic backgrounds have equal access to higher education. Disruptions can disproportionately affect lower-income students, thereby increasing inequality of opportunity.

• SDG 16: Peace, Justice and Strong Institutions

  The core theme of the article is the impact of “federal policy uncertainty” on the ability of higher education institutions to function. It points to a lack of stability and predictability from government institutions, which in turn weakens the planning and operational capacity of universities. The article states that the federal government “is causing the uncertainty,” which undermines the effectiveness of these institutions.

• SDG 17: Partnerships for the Goals

  The article describes a strained relationship between the federal government (a public partner) and higher education institutions. Instead of a supportive partnership, the government’s actions are creating an environment where “basic financial planning has been extremely difficult.” This undermines the collaborative approach needed to achieve educational goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 4.3: Ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.

   The article’s focus on the “FAFSA fiasco” and CBOs citing “federal student aid policy changes as a major risk” directly relates to ensuring affordable and equal access to university. The financial instability of institutions, leading some like Swarthmore College to adopt an “interim operating budget,” threatens their ability to provide quality education.

2. Target 4.b: Substantially expand globally the number of scholarships available to developing countries… for enrolment in higher education…

   While the article is U.S.-centric, it mentions that “big changes for international students” and “restrictions on international enrollments” are contributing to budget uncertainty at universities like Michigan State. This directly relates to the global flow of students and access to higher education for international populations.

3. Target 8.5: Achieve full and productive employment and decent work for all women and men…

   The financial difficulties described in the article lead directly to employment issues. The example of Michigan State University planning to “cut spending, including faculty and staff positions” is a clear connection to this target, highlighting a threat to decent work and employment in the education sector.

4. Target 9.5: Enhance scientific research, upgrade the technological capabilities… including… encouraging innovation and substantially increasing… public and private research and development spending.

   This target is directly addressed by the article’s mention of “cuts to federal research funding.” The survey finding that research funding levels are a top concern for 24% of CBOs (and 36% at public institutions) shows a direct threat to public R&D spending, which is crucial for enhancing scientific research.

5. Target 16.6: Develop effective, accountable and transparent institutions at all levels.

   The article’s central theme of “uncertainty surrounding federal policy” points to a failure in the effectiveness and predictability of government institutions. The statement that “nearly two in three college and university chief business officers say that uncertainty… is hindering their ability to conduct even basic financial planning” demonstrates how the actions of one institution (the federal government) are negatively impacting the effectiveness of others (universities).

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicators for Target 4.3 (Access to Quality Education):

  The article provides quantifiable data on institutional disruption. The fact that “nearly four in 10 surveyed CBOs (38 percent) report having already experienced significant to severe disruptions related to that FAFSA rollout” serves as an indicator of failures in providing access to financial aid, which is a proxy for access to education.

• Indicators for Target 4.b (International Students):

  An implied indicator is the number of international student enrollments. The article notes that “restrictions on international enrollments” are a cause for financial concern and budget cuts, implying that this is a measurable metric being tracked by universities.

• Indicators for Target 8.5 (Decent Work):

  A direct indicator is the number of job cuts. The article points to Michigan State University’s plan to cut “faculty and staff positions” as a specific action, which can be measured to track progress (or regression) on this target within the sector.

• Indicators for Target 9.5 (Research and Development):

  The article provides a direct indicator related to R&D funding. It states that some institutions have had their federal funding “reduced by 5 to 10 percent,” while a “handful” have seen reductions of “more than 10 percent.” This percentage change in federal research funding is a direct indicator for this target.

• Indicators for Target 16.6 (Effective Institutions):

  The survey results serve as a direct indicator of institutional disruption caused by policy uncertainty. The statistics that “49 percent of institutions” are moderately impacted and “14 percent of institutions are severely impacted” by federal policy uncertainty provide a clear metric for the lack of effectiveness and predictability of government policy.

4. Table of SDGs, Targets, and Indicators

Source: insidehighered.com