@EdWorkingPaper{ai26-1544,
title = "“More STEM Credentials at What Cost? Unpacking 2-Year Colleges’ Response to the STEM Incentive in Performance-Based Funding",
author = "Tasneem Sultana",
institution = "Annenberg Institute at Brown University",
number = "1544",
year = "2026",
month = "August",
URL = "http://www.edworkingpapers.com/ai26-1544",
abstract = {Objective: Performance-based funding (PBF) has gained significant traction in US higher education over the past few decades. It aims to improve student outcomes by tying a portion of state funding to outcomes (e.g., graduation, retention). In recent years, an increasing number of states have added workforce metrics to their PBF policies to promote STEM and health credentials aimed at strengthening the local labor pipeline. This study evaluates whether and how the STEM incentive for 2-year institutions changes total STEM credentials awarded, awards by duration (short, medium, and long-term STEM awards), STEM-to-total awards, and awards by duration among racial and socioeconomically minoritized students. Methods: I leverage InformEd States and IPEDS data to create a national panel of 691 institutions and employ difference-in-differences and event study strategies with institutional controls and state-year fixed effects to evaluate changes in awards in response to the state incentive. Results: The results suggest that overall STEM awards do not change in response to the incentive. However, colleges shift focus from long-term to medium-term STEM degrees and track minorities into such programs. Contributions: The findings underscore that community colleges might pursue a lower-cost path to larger bonuses by awarding more short-term degrees that may be less valued in the labor market. Additionally, minority students might be disproportionately tracked into shorter-term credentials. This analysis highlights the perverse incentives the current reward system generates and recommends a redesign that aligns college and student interests.},
}