Financial aid

Study looks at effects of guaranteeing Pell Grant for low-income eighth-grade students

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A study suggests that guaranteeing a Pell Grant for low-income students as early as the eighth grade could increase college access and completion.

Study finds little impact of student grants based on performance

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Grants tied to enrollment, persistence and grades bolstered full-time study but did little to increase credits earned by low-income students, study finds.

We need to fix federal student aid -- for students (essay)

Only days away from the 2012 election, one thing is abundantly clear -- Americans are deeply worried about our system of higher education. In fact, almost 90 percent of Americans believe that higher education is in crisis. The success of this generation, and of the U.S. economy, depends on whether we can rise to meet our challenges in higher education over the next four years.

The higher ed crisis is a product of both longer-term disinvestment and a failure to structure our current programs around key goals like access, completion, and job placement.  Between 2000 and 2010, state and local funding per student for higher education fell by 21 percent. This follows decades of declining investment and fuels massive tuition hikes, which have hit students hard. 

Higher education policy wonks and economists generally agree that a degree is still worth it, but that choice is not always so clear to the individual student.  In our surveys and conversations with students across the country, they voice concerns over rising costs, complicated financial aid systems, little guidance, and the uncertain job prospects after school. Despite the problems, about four in five young adults believe that getting an education is even more important to their success than it was to their parents'.

From a national perspective, our biggest lever to improve higher education and help students is federal financial aid. Reforming our financial aid system changes incentives for students, families and schools, and can, if done right, put us on a path to a more successful higher education system.  If reform is done wrong -- without student input, for example -- it could hurt the very students we are trying to help. But we owe it to ourselves to try for real change.  Higher education is too important to settle for the status quo.

Successfully reforming federal financial aid requires a student-centered approach to drive real impact and minimize adverse consequences. Having surveyed and talked to thousands of students from across the country, we have laid out four key principles that should guide reform efforts:

1. Financial aid must provide meaningful access to all students and families.

About 84 percent of young adults believe that making college more affordable should be a priority for Congress. Our government currently provides critical Pell grants to lower and middle-income students because they need it the most, but we know that college is not yet affordable for all Americans. We can do more. Reforms to grant and loan programs must ensure that higher education is accessible for all students, particularly low-income students and those from communities with historically low enrollment and completion rates. For example, we must fill the impending Pell Grant shortfall. 

2. Promote a transparent system that allows students and their families to act as well-informed consumers. 

Access to grant aid increases enrollment, yet too few individuals fully understand the aid available to them. Complicated applications, meager advice, low information and an opaque marketplace frequently prevent students from enrolling or finishing school. Those that do graduate too often make choices along the way that raise costs and student debt. Change can start by proving better consumer information for students and families. By making it easier for students and families to compare college prices and outcomes, we can drive competition to help bring down tuition in the long run. For example, we should streamline and simplify federal student loans so borrowers automatically default into income-based repayment.

3. Hold all stakeholders accountable for the goal of graduating students with jobs, not debt.

We know that our college graduation rates are far too low. Federal financial aid does help. In a recent study, about 4 in 5 Pell grant recipients said that their grants increased the likelihood of completing school.  Aid should be even more targeted to help students complete, and all stakeholders benefiting from aid, including schools, must be accountable for that goal.

Accountability does not end, however, with graduation -- students must be connected to jobs and careers that provide an opportunity to succeed and, at the very least, to pay off student debt. This generation believes in the value of hard work, and we know it is ultimately our responsibility to work hard and succeed. However, stakeholders should be judged on whether they take every opportunity to connect hard-working students to jobs during school, and encourage graduation with a meaningful degree and manageable debt.  For example, we should restructure federal work-study to better connect students to jobs, and we should reward colleges that have more low-income graduates successfully paying back the principal on their loans.

4. Make smart, innovative investments to prepare this generation for tomorrow’s economy.

The federal deficit and the Budget Control Act have increased pressure on Congress for across-the-board cuts, including further cuts to education.  But we cannot simply cut our way to prosperity. When we asked young adults whether Congress should cut Pell Grants in order to address the deficit, three-quarters were opposed. Indeed, young people understand that investing in higher education is crucial for the economy: 88 percent of young people agree that increasing financial aid and making loans more affordable for post-secondary education and training helps make the economy stronger.  Policymakers looking to address deficits in the name of our future should listen to the generation affected by those choices. With limited resources, policymakers must 1) invest adequate dollars in aid, and 2) efficiently distribute limited dollars.  Importantly, student-oriented innovations in our federal aid system could help to increase the efficiency of those investments. For example, we should re-examine the ways in which our tax structure helps build campus gyms or attempts to incentivize college savings among families who save anyway, and spend that money instead on shoring up Pell Grants.

The political landscape in 2013 won’t be easy to navigate, regardless of what happens next week. As policymakers head back to Washington post-election and step into the next Congress, we will have to deal with a looming fiscal cliff and budget battle, expiring tax cuts, the approaching reauthorization of the Higher Education Act and No Child Left Behind. But the next year does offer a real opportunity for major reforms to our higher education status quo: it is clear that some level of change to the federal aid system is inevitable. And with the cost of college rising at scary rates, our graduation rates lagging, and student debt mounting, a comprehensive look at our federal aid system should be a top priority.  Young Invincibles will be laying out a detailed policy proposal for comprehensive change to the federal financial aid system in November, only a couple weeks after the election, to help guide Congress and the president.

Change is both necessary and challenging.  Students must lead the way to ensure that no one claims the mantle of “reform” or “finding efficiencies” but really means “cut.”  Instead, with evidence-based, student-led, and student-centered reforms and investment, we can attain greater enrollment, higher graduation rates, better job placement, and a generation prepared for tomorrow’s economy. The time for financial aid reform is now.

Aaron Smith is co-founder and executive director of Young Invincibles.

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New report on debt and class of 2011

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Annual report from the Institute for College Access and Success finds students borrow an average of $26,600.

Standards tightening for federal PLUS loans

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Over the past year, the Education Department has made it harder for parents to borrow on behalf of their children in college. Historically black colleges say they are disproportionately affected.

Two-year default rates for student loans increase again

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The two-year default rate for federal student loans increased again this year, but defaults at for-profit colleges fell. 

SUNY planning systemwide fight against student loan defaults

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A large university system begins statewide effort to help students manage debt and avoid defaults.

Saint Benedict sees revenue grow while shrinking enrollment

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Saint Benedict decreased enrollment to shore up its finances, an unusual move at a time when many small colleges are considering growth.

Researchers argue over school vouchers' impact on college-going

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A high-profile study asserting that New York program increased college enrollment of low-income black students comes under attack from a leading scholar of financial aid policy.

Financial aid directors support better information for students

Let’s get one thing straight: Financial aid award letters can and should be improved to better help students understand the costs of higher education and the aid available to them.

Although Rachel Fishman’s Views article in Monday's Inside Higher Ed would have readers believe otherwise, the National Association of Student Financial Aid Administrators (NASFAA) and the 18,000 financial aid professionals we represent are committed to ensuring that students and families have the information they need to make good decisions about planning and paying for college.

Fishman’s opinion article not only oversimplifies and misrepresents NASFAA’s position, it wastes precious time drawing battle lines over a fight that doesn’t exist, instead of moving the policy discussion forward.

Here’s the reality:

  • All key stakeholders agree that improvement is needed in consumer disclosures about the cost of college. That’s why NASFAA convened a Consumer Information and Award Letter Task Force on this subject almost a year ago. In May, that task force released recommendations on how to improve award letters and consumer notification -- recommendations that align with the Department of Education’s recently released Shopping Sheet in several key areas.
  • NASFAA has never opposed or discouraged use of the Shopping Sheet. Rather, we have urged schools to carefully examine the Shopping Sheet to ensure it will effectively communicate important information.  We’ve also encouraged members to – at a minimum – adopt the recommendations NASFAA issued in the spring.  In a recent letter to members, I wrote, “Regardless of whether your institution adopts the Shopping Sheet, I urge you to strongly consider standardizing specific elements of the Shopping Sheet that are in correlation with NASFAA’s recommendations, as set forth by the Task Force and adopted by the NASFAA Board of Directors.”
  • NASFAA has been at the forefront of discussions about how to lead improvement of consumer disclosures. Rather than putting “entrenched institutional interests above students’ financial welfare” (as Fishman asserts) we’ve actually partnered with the Department of Education throughout this process, urging our members to offer feedback on preliminary versions of the Shopping Sheet as well as the final version. We were pleased to partner with key members of the Department of Education and White House to see aspects of our recommendations adopted in the final version.

Ignoring the existence of NASFAA’s detailed recommendations show at best a lack of research (or even cursory glance) on Fishman’s part, and at worst an intentional omission of facts in order to bolster her misguided assertions that do little to move this policy discussion forward.

The truth is that our recommendations align in many places with the goals of the Shopping Sheet. For instance, we concur with mandating the standardization of common terminology to avoid confusion and enhance comparability. We also recommend that self-help aid and student loans be clearly delineated from grants and scholarships. In fact, NASFAA’s recommendations go further than the shopping sheet, advocating for a one-stop online location where students can be shown all of their student loan indebtedness, both federal and private.

However, we do remain cautious about fully endorsing the Shopping Sheet because it hasn’t been consumer-tested against other models, including online and electronic models currently utilized successfully by leading institutions of higher education.  Schools are already required to provide an overwhelming number of disclosures to students and parents. Without consumer testing, no one can assert that the Shopping Sheet is the best way to convey financial aid award information to all types of students. To ensure the Shopping Sheet is based on rigorous research rather than anecdote, NASFAA is planning a consumer test, to be conducted through an independent third-party evaluator.

In the absence of such empirical data, NASFAA encourages financial aid offices to “to carefully review the Shopping Sheet before adopting it to ensure it will effectively communicate this critical information to the students and families they serve.”

This statement of caution should not be misrepresented as opposition. NASFAA does not oppose the Shopping Sheet, but we do wish to circumvent unintended negative consequences, avoid additional confusion, and preserve the ability of schools to deliver information in ways that they have found best serve their particular populations.

Fishman states that “the Shopping Sheet may need to be altered in some circumstances.” We agree. Unfortunately, once a school agrees to use the Shopping Sheet in its current form, it cannot be altered to meet the unique needs of diverse higher education institutions -- and this inflexibility is one of NASFAA’s primary concerns.

For instance, some campuses send a different award letter to returning students than to incoming students. While the Shopping Sheet is designed to inform first-time or prospective students, the vast majority of college students are returning students.

Appropriate consumer disclosures that actually help students and families cannot be developed in a vacuum. Financial aid administrators are a key part of the ongoing dialogue. We agree that change is needed and some level of standardization is warranted, but this process must be deliberative and based on quantifiable data about what works for students and families. Anything less is a disservice to those we are trying to help.

Justin Draeger is president of the National Association of Student Financial Aid Administrators.

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