While there have always been education funding gaps that prevented institutions from meeting all of their goals, this landscape is shifting. In today’s environment, it’s not a subtle shift either. We’re seeing dramatic changes in higher ed funding that can have a long-term and lasting impact on the way academic institutions operate.
Educational funding is under increased scrutiny at the federal and state level. Shifts in government policies and priorities are forcing institutions to make difficult decisions. In many cases, it’s led to deep cuts in research, degree programs, and staffing.
Not every institution will survive. An analysis by the Federal Reserve Bank in Philadelphia predicts that 80 higher education institutions will be forced to shut down in the next five years. This comes on top of the 861 colleges and universities that have ceased operations since 2004.
As state and federal funding become less reliable, and enrollment figures shift with changing demographics and perceptions of value, academic institutions must explore innovative funding and resource-sharing models.
With increasing challenges in how to fund higher education, institutions are expanding their use of educational cooperatives to reduce costs and achieve greater efficiency in spending.
How Educational Cooperatives Work
At its core, an education cooperative is an organization owned and controlled by its member institutions, designed to pool resources to achieve common goals. Unlike traditional vendor relationships, cooperatives are member-driven and focused on creating collective value. A prime example is E&I Cooperative Services, the only member-owned nonprofit cooperative dedicated exclusively to the education sector.
When you become a member of E&I, you realize significant benefits including:
Let’s take a closer look at the most common reasons for educational funding shortfalls and how they impact institutions.
Federal, state, and enrollment challenges are all impacting higher ed funding.
On average, state educational funding rose 4.3% in FY 2025, but that only tells part of the story. Actually, 20 states reduced funding levels. At the same time, the State Higher Education Executive Officers Association (SHEEO) notes that these figures are not adjusted for inflation, which the most recent Higher Education Price Index puts at 3.4%, mitigating much if not all of any increased state funding.
There are serious concerns about federal funding. Cuts at the Department of Education (including the possibility of elimination), research grants from the National Institutes of Health (NIH), changes to endowment regulations, and other threats to funding put higher ed funding at significant risk.
Many academic institutions benefit greatly from research grants, which can generate revenue to fund programs. As these grants are eliminated or reduced, it can take a significant toll on finances. A proposal to dramatically increase the tax on endowments could force institutions to sell investments or assets to comply.
At the same time, higher ed funding is threatened by the demographic cliff. As birth rates decline and populations shift, many institutions are seeing a drop in enrollment numbers. This decline reduces tuition revenue and undermines the viability of educational programs. Alongside this, rising tuition costs and shifting perceptions about the value of higher education further exacerbate enrollment issues.
The number of high school graduates is projected to peak in 2025, followed by a 15-year decline. A study by the Western Interstate Commission for Higher Education forecasts that by 2041, the number of traditional incoming college students will decline by 13%.
Attitudes about the value of a college education are shifting as well. About half of Americans say it’s less important today for getting a well-paying job than it was in the past. And, with tuition costs rising, 47% of those surveyed by the Pew Research Center say college is only worth the cost if students don’t have to take out loans.
The funding challenges have severe consequences, forcing difficult decisions.
Unfortunately, budget constraints often result in layoffs, reduced staffing levels, and the elimination of degree programs, directly impacting the quality of education and support services available to students. Without sufficient funds, institutions may also struggle to invest in strategic initiatives or advancements that are critical for long-term success.
For example, concerns over higher ed funding have led many institutions to postpone critical infrastructure and maintenance projects. An analysis by Moody’s revealed more than $950 billion in capital needs over the next decade, much of which will require taking on new debt to finance investments.
Funding shortfalls can also make meeting strategic initiatives impossible. Most academic institutions have defined strategies for expanding the use of sustainable materials and contracting with certified diverse suppliers. When money is extremely tight, it can make it more challenging to meet all of an institution’s goals—especially when there may be staff reductions.
At the same time, many academic institutions find they need to align programs with evolving student needs, requiring investment in new technology. Amid enrollment challenges, there may also be a need for significantly increased marketing efforts to attract new students.
How Educational Cooperatives Address Funding Gaps
Educational cooperatives offer a practical response to many of these education funding challenges by providing cost-saving and strategic partnerships that enable you to do more with less.
By aggregating demand, cooperatives can benefit from bulk discounts that individual institutions could likely not achieve alone. This is true for both small and large institutions. This purchasing power directly translates into cost savings on a wide range of products.
E&I COOPERATIVE SERVICES—COMMON PROCUREMENT CATEGORIES | ||
Athletics | Food & Food Services | Office & Classroom, Interiors |
Facilities & MRO | Information Technology (IT) | Professional, Consulting & Administrative Services |
Financial Services | Logistics & Travel | Research & Scientific |
Utilizing cooperative contracts also reduces the administrative overhead associated with procurement, enabling staff to focus on more strategic activities rather than individual transactions.
When multiple institutions join forces, they command a larger share of the market. This enhanced bargaining power is critical when negotiating with vendors, ensuring that contracts are favorable and tailored to the unique needs of the education sector.
Cooperatives can also establish longer-term agreements, which help to insulate institutions from price volatility. By locking in lower prices over extended periods, schools and universities can better plan their budgets without the constant worry of rising costs.
While cost savings are a significant advantage, the benefits of educational cooperatives extend far beyond mere financial relief. These additional resources can help improve efficiencies and also solve challenges in how to fund education.
E&I Cooperative Services is made up of procurement professionals, many of whom have come from academic institution procurement teams. These experts can apply specific expertise in the education sector and share best practices to reduce spending.
There are also additional resources available. For example, E&I EdProHub is a digital platform designed to connect, support, and empower procurement professionals in higher education and K–12. This creates a network effect, helping you benefit from the collective expertise of the entire cooperative community.
Applying advanced analytics to education spending can result in significant efficiencies, and in turn, cost reductions. E&I offers members a no-cost Strategic Spend Analysis (SSA). Using historical spending data, E&I analysts can look for hidden savings opportunities, such as:
This data-driven approach can uncover immediate savings and help you to plan more effectively for the future.
The streamlined procurement provided by an educational cooperative results in improved operational efficiency. When procurement is handled by experts who understand the nuances of educational funding, institutions are better positioned to allocate resources strategically.
This strengthens long-term financial planning, enabling academic institutions to invest in growth and innovation without jeopardizing day-to-day operations.
An educational cooperative may also offer significant professional development opportunities. For example, the E&I EdPro NextGen Leadership Program for Future Educational Procurement Executives, developed in partnership with Cornell University, is designed to build leadership competencies and strategic procurement skills. This program enhances the capabilities of procurement teams and ensures that the education sector is continuously evolving to meet modern challenges.
In today’s increasingly competitive and resource-constrained educational environment, the need for innovative solutions is more urgent than ever. Partnering with E&I Cooperative Services can help bridge education funding gaps and foster collaboration, efficiency, and professional growth to meet evolving challenges. For experienced procurement and finance teams in education, the cooperative model offers a robust framework for managing costs, mitigating financial risks, and positioning your institution for future success.
However, it’s key to partner with a cooperative that aligns with your goals. While there are many for-profit cooperatives that serve multiple industries, a nonprofit like E&I Cooperative Services focuses only on the education sector. This provides deep insight into the unique needs of colleges, universities, and school districts to help you achieve your goals and optimize education funding.
The future of education depends on adaptive, forward-thinking financial strategies. Educational cooperatives are poised to play a central role in that evolution. As the only cooperative exclusively serving the education sector, E&I offers cost savings and tools to empower you to navigate funding challenges
How is higher education funded?
Higher education funding typically comes from a mix of state and federal appropriations, tuition and fees, private donations, grants, and research funding. The proportions vary widely depending on the institution, with public universities often relying more heavily on government support and private institutions depending more on tuition and endowments.
How is K–12 education funded?
K–12 education funding primarily comes from state and local sources, with federal contributions playing a smaller but significant role. Funding mechanisms vary from state to state, with property taxes, state budgets, and federal aid programs all contributing to the overall financial structure.
What are the biggest challenges facing educational funding today?
Unfortunately, the list is long. Education funding is facing challenges from declines in public funding, rising costs, enrollment shifts, and government policy changes.
How can an education cooperative help you save money?
An education cooperative helps save money by pooling the purchasing power of multiple institutions to secure bulk discounts and favorable contract terms. Cooperatives streamline procurement, reduce administrative overhead, and use data-driven analysis to uncover additional savings.
How much does it cost to become a member of an education cooperative?
While some cooperatives charge fees, there is no cost to become a member of E&I Cooperative Services and no minimum purchasing requirement. As a nonprofit, E&I reinvests proceeds into member services and also provides patronage refunds based on participation levels. These refunds can return millions of dollars to member institutions.
E&I Cooperative Services has hundreds of competitively solicited and ready-to-use cooperative contracts with top-tier suppliers. You can view the available contracts across a wide range of categories designed for the education sector or contact E&I to learn more about opportunities to maximize your education funding.
