In Sooner, Simpler, Smarter, the National College Access Network calls for simplifying federal financial aid, reports Clare McCann, a New America Foundation policy analyst, on Ed Central. Ideas include notifying families with young children about college aid eligibility and using tax returns, instead of FAFSA, to calculate Pell Grant eligibility.
“There is near unanimity on the fact that the financial aid ‘system’ is layered with inconsistencies, redundancies, and overlapping federal programs,” writes McCann. “Students find it confusing and un-navigable, so despite all the taxpayer investments in student aid, students often don’t know how to access them or which benefits to use.”
A Congressional Budget Office reports analyzes ideas for revamping Pell Grants. Replacing FAFSA with federal tax returns would raise costs by about $10 billion over 10 years, the CBO estimates.
. . . the Department of Education would issue about 2 percent more grants averaging $1,500 – some to newly eligible students who wouldn’t have to report that income now, and some to new would-be students who otherwise wouldn’t have applied because the application was too complex. Additionally, about 20 percent of the grants that are already awarded would be larger under the new formula, by about $350 on average.
Another option is to tie Pell Grant eligibility to the federal poverty level replacing the complicated formula now used. That would make it easy for families to predict college costs and aid. students know early where they stand.
Taxpayers would save $1.4 billion over 10 years if the maximum Pell Grant was reserved for families at or below 150 percent of the federal poverty level (about $35,000 for a family of 4), with smaller grants for families between 150 and 250 percent (almost $59,000 for a family of 4).
Without federal student aid — loans, Pell Grants, tax credits — higher education would cost less and be less elitist, said economist Richard Vedder in a Nov. 15 speech in San Diego. While fewer people would enroll in college, those who do would be more likely to earn a degree and less likely to end up as sales clerks and bartenders. Colleges would hire fewer administrators.
Vedder recommends seven steps he thinks are “politically feasible.”
First, return the program to its roots: helping poor persons attend college. Right now, over 17 percent of students from families with incomes from $60,000 to $80,000 a year get Pell Grants—these individuals have above median incomes. Over a few years we should tighten eligibility significantly, reducing the number of Pell recipients by perhaps 50 percent. Similarly, PLUS loans to parents of high income kids should end. Tuition tax credits benefit families whose kids would go to college in the absence of the credit, mostly from above average incomes. Go to a single grant program and a single loan program.
Second, impose academic performance standards to continue receiving grants. Reward students who graduate in less than four years, and cut off aid for, say, students who are in their sixth year of full-time attendance.
Third, he’d get the federal government out of student loans and let private lenders “strengthen the tie between interest rates charged students and market rates.”
Fourth, make participating colleges have some skin in the game. If colleges accept students and promise them Pell grants or guaranteed loans, make them share in the burden of high levels of defaults on loans, or the failure associated with Pell recipients not graduating. This would lead to a needed reduction in lending to persons who lack the aptitude, background, or discipline for college level learning.
Fifth, he’d gear federal aid to the cost of a basic college education from a relatively low cost state university. Increases would be linked to the inflation rate to discourage colleges from raising tuition to capture increased aid.
In step six, Pell Grants would become a voucher for very low-income students tied to academic progress. “Top students could be paid extra for superior academic performance,” Vedder suggests.
Finally, he’d “encourage private investors to begin human capital equity funds.” Investors would pay college costs in return for a portion of the graduate’s future earnings for a set time period, Vedder writes. “A graduate from M.I.T. majoring in electrical engineering might have to pay 8 percent of his income for 12 years, while a graduate in anthropology from Central Michigan University might have to pay 15 percent for 20 years.” These market signals would be useful for students.
Directing aid to low-income students — and away from the middle class — doesn’t sound all that politically feasible to me. Setting performance standards also would generate a lot of resistance.
Ohio’s community college students are “second-class citizens” when it comes to Ohio College Opportunity Grants, editorializes the Toledo Blade.
Community college tuitions average $3,800 a year — about one-third that of those at four-year schools — in Ohio.
In 2009, the General Assembly cut the OCOG budget from roughly $395 million to $171 million. Making matters worse, it also forced low-income students to use federal Pell grants to cover tuition expenses at community colleges before tapping state grants. Those changes made nearly all community college students ineligible for OCOG.
Unlike Pell grants, state grants cover tuition only. And because tuition is low at community colleges, Pell grants typically cover students’ tuition.
Before the changes, 20,000 community college students in Ohio received state grants.
Ohio needs legislation that would permit community college students to, first, use OCOG to cover tuition costs, thereby enabling them to tap federal Pell grants for other college-related expenses. That change also would call for setting aside another $20 million a year to cover the more than 20,000 newly eligible community college students.
Last year, as Ohio began to refund OCOG, money was set aside to fund for-profit college students but not community college students, reports Inside Higher Ed.
Aid Like a Paycheck – low-income students get financial in two-week increments — promotes academic success and good money management, concludes an MDRC study. The Institute for College Access and Success came up with the idea in 2009.
Students are encouraged to think of school as a job that requires regular attendance and effort, notes Ed Week‘s CollegeBound. If they stop going to classes, their aid stops too.
Typically, a college applies a student’s financial aid award toward tuition and fees, and then gives the remaining money to the student as a financial aid refund in one or two installments a semester. MDRC research shows that money often runs out, leaving students short on living and school-related expenses. If students get all of their refund, but then drop out, they may be required to return a part of the money to school.
Colleges aren’t very good at collecting that money.
Aid Like A Paycheck was tested first at Mt. San Antonio College, a large community college in southern California. Tuition is only $780, while Pell Grants are worth up to $5,500, so students had large refunds to manage. In the pilot, 200 students received biweekly payments of $125 to $350 instead of getting all the money upfront.
Soon after Mt. San Antonio College, another pilot began at Triton College outside of Chicago.
At the colleges, as students signed up for more credits or dropped classes, the disbursements would be adjusted to reflect their new eligibility status. Exceptions were made in the event of a demonstrated hardship, but few students made these requests. Students in the pilot program were regularly emailed information about online tools to help with budgeting, borrowing, and money management.
Students told MDRC the new system helps them “spend their money wisely, reduce their work hours, and put more energy into their school work,” reports Ed Week.
Redesign Pell Grants, stretch out income-based loan repayment and simplify college cost estimates urged outside experts at a Hamilton Project forum today.
Pell Grants should provide guidance and support services tailored to recipients’ needs, write Sandy Baum of George Washington University and Judith Scott-Clayton of the Community College Research Center at Teachers’ College, Columbia.
They also propose dramatically simplifying eligibility and the application process and strengthening incentives for students to move quickly to a degree.
Income-based repayment should extend beyond the first 10 years after college, propose Susan Dynarski and Daniel Kreisman of the University of Michigan. Payments would rise and fall with a borrower’s income.
This model could prove less costly for taxpayers than the current system and it could even be less expensive; the proposal would reduce defaults and cut the cost of loan servicing, as well as eliminate what would become redundant policies, such as the student-loan interest deduction and the in-school interest subsidy. For the very small percentage of borrowers who take on significant student debt, the authors propose improving bankruptcy protection as well as tightening regulation of the private lenders who own most of these very large loans.
A better college cost calculator would help students from lower- and middle-income families to make informed college choices, writes Wellesley’s Phillip Levine. His Quick College Cost Estimator uses six basic financial inputs.
Federal student aid should reward success, said Richard Vedder at a Brookings Institution event last week. An Ohio University economist, Vedder directs the Center for College Affordability and Productivity.
Despite rapid growth in federal student aid since 1971, lower-income students make up a smaller share of college graduates, Vedder pointed out. As federal aid expands, state governments spend less and universities charge more.
He believes financial aid has “contributed to high dropout rates, mediocre levels of student work effort and academic performance” and underemployment for college graduates.
I think we are probably over-invested, not under-invested, in higher education in the United States, creating a credential inflation arising from using degrees as an obscenely expensive screening device, one involving massive wastes of potentially highly productive human resources.
Phasing out federal aid isn’t politically viable, at least in the short run, so we need to “correct two perverse incentives,” Vedder argues.
First, there needs to be rewards for good academic performance and negative financial consequences for poor performance. . . . Second, colleges should have skin in the game. Their inappropriate admissions decisions or inattention to floundering students massively contributes to loan defaults, yet they face no adverse consequences. That needs to change.
Beyond that, simplify the system, restricting aid to more affluent families, doing away with PLUS loans and tuition tax credits, in line with RADD (Reimagining Aid Design and Delivery) recommendations. We also should convert Pell Grants into progressive performance vouchers. . . . No full-time student should get money for more than five years. “A” students graduating in less than four years should get a small bonus for saving the government money and as a reward for high academic achievement.
Federal policy should encourage private approaches to financing, such as letting students “contract to forfeit part of post-graduate earnings in return for financial support of college,” Vedder argues.
Changing financial aid to promote college completion could limit access, warns Do No Harm, a report by the U.S. Advisory Committee on Student Financial Assistance. Several proposals under discussion could make it harder for low-income students to attend college, the panel advises.
The report lists 10 financial aid “fallacies.”
For example, redirecting need-based grants to higher achievers and colleges with higher graduation rates would not improve completion, the report argues. The loss in access and completion for unfunded students will offset completion gains, it predicts.
To increase completion, financial aid proposals must address barriers for low-income students, the panel recommends. These include: high net prices for low-income students; excessive borrowing; decoupling of federal, state and institutional aid; complex forms and eligibility determination; inadequate early information and intervention, and insufficient in-college support services.
To increase access and completion, the panel proposes: Using federal aid to spur state and institutional aid; doubling the maximum Pell Grant; converting higher education tax credits to Pell Grants, and redesigning income-based loan repayment.
Give low-income college students a free or reduced-price breakfast and lunch, proposes Sara Goldrick-Rab. Ending “food insecurity” would boost student success, argues the University of Wisconsin professor. It’s one of her “three radical ideas” for improving higher education on Education Optimists.
Her second idea is to make teaching — not research — a priority in public higher education. All new hires should have teaching experience and earn professional development credits every two years, she proposes.
Idea #3 is to “focus funding where it can do the most good.”
The fewest dollars flow to the neediest students. Per student spending of about $6,000 in community colleges is a travesty.
. . . Require that all states receiving any Title IV financial aid maintain adequate per-student spending at their community colleges. Base this on appropriate adequacy funding studies done by state.
Technological strategies to help disadvantaged students succeed are “tinkering towards utopia,” concludes Goldrick-Rab, a professor of education policy and sociology.
The cost of Pell Grants has “risen dramatically” in recent years, reports the Congressional Budget Office. From 2006–2007 to 2010–2011, inflation-adjusted spending on Pell grants increased by 158 percent. The number of recipients increased by 80 percent and the average grant amount increased by 43 percent in inflation-adjusted dollars. The maximum grant for 2013–2014 is $5,645.
The CBO report analyzes proposed money-saving options, such as shrinking the size of grants or reducing the number of recipients by tightening eligibility criteria.
However, some believe grants should be increased to cover a higher percentage of college costs, the report notes. Legislators “could increase the size of grants for all low-income students . . . or offer greater amounts to students who make particular educational choices.”
A set of options that would tighten means-testing, impose more rigorous academic requirements, and reduce the grant amounts could cut the program’s costs in half, saving an average of about $20 billion per year, but would reduce the number of recipients by 40 percent.
Options for simplifying Pell including asking for less financial information on the Free Application for Federal Student Aid (FAFSA) or linking eligibility to federal poverty guidelines.
There are other ways to broaden access postsecondary education, the report points out. Possibilities include forgivable loans, grant commitments to young teenagers, federal support of state grant programs and funding job training.
In calling for innovation in higher education, President Obama praised awarding college credit based on learning rather than “seat time.” Competency-based education lets students “learn material faster, pay less and save money.”
That’s true, writes Deb Bushway, chief academic officer of Capella University, in an Inside Higher Ed essay. However, federal financial aid — built around credit hours — will need to change.
. . . requirements around weeks of instructional time simply do not work with a direct assessment model that focuses on what the student is learning, not the number of weeks it takes them to do so. Additionally, an examination of artificial, time-based barriers to completion highlights the need to reinstate year-round Pell Grant funding and explore the elimination of annual loan limits. The current funding rules around both the Pell Grant program and the Stafford Loan program prevent ambitious students from moving more quickly through their programs and increase the likelihood that students will have to pause their education for a term or more in order to gain additional aid eligibility.
Capella was the first university to receive U.S. Department of Education approval to offer competency-based bachelor’s- and master’s-degree programs, Bushway notes.