Re-Tooling Student Aid

By Watson Scott Swail, President and CEO, Educational Policy Institute

Yesterday, the College Board released a new report entitled Fulfilling the Commitment: Recommendations for Reforming Federal Student Aid. This project, a partnership of the College Board, The Spencer Foundation, Lumina Foundation for Education, and The Mellon Foundation, is, in part, a reaction to the Spellings Commission of the last year. No one is satisfied with the way our system of financial aid works in the US, and the Board has at least tried to move the conversation forward.

The study group gathered for this work is a listing of usual suspects. Interesting, of note, with the exception of College Board reps, there are no financial aid practitioners on the committee. That raised both of my eyebrows in a study about financial aid systems. However, my purpose is not to blow holes in what they have done. The report provides an important service to policymakers and practitioners to push our discussion forward. Instead, I offer my few perspectives on this issue.

Specifically, the report outlines seven principles to “undergird” the federal aid system, which can be reviewed in the report or in the InsideHigherEd.com or Chronicle articles. Among them is the principle of ensuring that the system focuses on those who are “unlikely to meet their educational goals without financial help.” And rightly so, it is the first principle listed. This is important in several respects. First, because much of state aid over the last 10 years has shifted away from need-based to merit-based aid, we need to see it shift back, or at least conform to a hybrid approach of need with merit. No one argues against merit, but I, for one, am not a fan of using taxpayer money to reward those who don’t need it as much as other, less-affluent individuals for whom higher education can provide a change in life direction and opportunity. Second, the appropriate federal role in financial aid is to focus mainly on those with financial need. In the financial aid world, money provides access, but it also provides choice. For those who are more affluent (not to be defined as “rich”), more federal and private funding provides choices that less affluent students do not have. Thus, if the federal government can help level, or at least reduce the levels in the playing field, that would be appropriate.

The hope of federal financial aid historically has resided in this area of postsecondary access. The report cites former Senator Claiborne Pell, during the HEA reauthorization in 1972, who said that it “establishes by law the right to a postsecondary education for all of our Nation’s citizens…no longer will higher education be the province of some of us—it will be a birthright of all.”

Pell’s dream was to make higher education affordable for ALL and to, if not eliminate, then significantly reduce the financial burden on lower-income families. The Pell Grant has helped expand higher education in a manner akin to the GI Bill in the 1940s and 1950s. But Pell and his Congressional allies surely did not imagine or conceive that the expansion would be so dramatic or that the price of college would expand so greatly over time. In a nation the size of the US, we must come to grips with the issue of college access and affordability. Specifically, we need to question whether we can provide full-out access to all students (please define “all”) at an affordable rate. The answer, quite obviously and unfortunately, is no. If anyone has argument with that, well, look at where we are currently in this debate: colleges and universities are far more costly than ever before, and finances are a greater barrier than ever. And it will get markedly less affordable over time. If we can’t do it now, how can we do it tomorrow?

Many people tell me that they do not think this college cost talk is all doom and gloom, and that college costs/prices are not as big an issue as people like me say they are. These people are wrong. This is a massive policy and societal issue that, like our mutual funds (bad week to use this example), compound over time. Financial aid, in any present form, cannot withstand the compounding increases of tuition, fees, room and board, books, lab fees, transportation, and other requirements to attend college. There simply isn’t enough money to make it happen.

So, where does this leave us? The College Board and its funding partners have taken an earnest step into moving the conversation forward. But even their proposals and “principles” don’t go far enough. Until we get a grasp on the “cost” side of the equation, we are playing around the margins. The US system of financing higher education is uniquely and undesirably complex. Other countries less so, but over time, they are morphing into US-style models, complete with government and private loan programs.

Many of the principles outlined by the College Board are impacted by the cost discussion. For instance, should we simplify financial aid? Yes. But unless we know what the cost of higher education is from year-to-year, at over 12,000 Title IV institutions, how can we without moving to the old Aussie HECS-style income-continent system of repayment. HECS is politically unviable, I believe, in the US. Many economists in the US feel income-contingent loans (ICL) are regressive and inequitable, but it is simple and people understand it. The volatile costs of higher education make the development of a predictable and transparent system, as encouraged in the report, also difficult. HECS would solve this, but…

So, we have a lot of work to do. My comments are only snippets of much more to discuss, but we’ll leave that for another day. Thanks to the Board and its partners for getting this important dialogue moving.

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