Oct. 2, 2006

A New Way for Need-Based Aid

After years of talk, the notion that American higher education needs to do much more to help students from low-income backgrounds get into and through college finally seems to be getting up a head of steam. A slew of research reports, books and impassioned pleas making the case that needy students are significantly underrepresented have in recent months resulted in a clear-throated call by a federal panel studying higher education for more need-based aid, prompted more colleges to expand the financial aid they make available to needy students, and contributed, at least in part, to the decisions by Harvard and Princeton Universities to abandon early admissions.

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And yet, just as the push for low-income students verges on becoming a full-fledged movement, it is becoming clear as well that the campaign risks alienating the middle class. College presidents like Amy Gutmann of the University of Pennsylvania and political leaders like the former North Carolina governor James B. Hunt Jr., even as they have advocated for more financial aid for needy students, have argued that the middle class is getting squeezed on paying for college, and that the potential for resentment is high.

Perhaps nowhere are these trends playing out as clearly as in the State of Oregon. In recent weeks, state leaders have put forward a proposal aimed at dragging Oregon out of the bottom of the pack of states in the amount of need-based financial aid awarded.

But to satisfy both worries from legislators that throwing more money at the problem won’t suffice, and public skepticism about turning college-going into an entitlement, the proposal emphasizes students’ own responsibility to help pay for their educations. Some national experts believe that the “shared responsibility” approach Oregon is embracing may be a model for a new kind of need-based aid that is also politically palatable to the middle class.

Oregon has not exactly been a model for need-based financial aid previously, lagging badly behind most other states in its awarding of such support. That fact concerned Oregon’s governor, Ted Kulongoski, a Democrat, who in 2004, relatively soon after being elected, appointed a committee, the Access and Affordability Working Group, to examine the state’s college “affordability gap” and figure out what to do about it.

The state took one step in that direction in the Legislature’s 2005 biennial session, when lawmakers backed a 77 percent increase, to $78 million from $44 million, in the amount of need-based financial aid awarded through Oregon’s Opportunity Grant Program, which gave funds to students with family incomes below a strictly set level (about $33,000). Much of that increase came from making the aid available to part-time students, who had been excluded before. The shift was seen as a significant help to those at Oregon’s community colleges.

As helpful as that increase was, says Timothy J. Nesbitt, a member of the Oregon State Board of Higher Education and co-chair of the affordability working group, academic and state officials knew that there was no bottomless pit of money available to pour into need-based aid. The panel’s analysis showed that the state would need to spend nearly $200 million each biennium to get into the middle of the pack in the United States, and that was not seen as practical, Nesbitt says.

“One legislator asked me, ‘When will we be done? When will we have put in enough money?’ I knew we couldn’t come back the next session and say, ‘Let’s double it again, because we’re trying to get to $200 million because we think that’s where all the other states are.’ We had to ask the question, when can we say we have a truly affordable higher education system?”

The fiscal restraint of legislators was not the only factor that made the state’s higher education leaders believe that just expanding aid to needy students was not the answer to the state’s affordability gap. The state access panel held a series of focus groups with citizens to discuss the panel’s ideas, including a proposal by Kulongoski to create and build an endowment to support aid for needy students. That idea was received coolly because it “started to sound like an entitlement,” says Nesbitt, a former president of the state AFL-CIO.

“People aren’t sympathetic to giving away a higher education,” he says. “They want students to earn it, which makes them more receptive to what the public’s contribution ought to be.”

David Longanecker, director of the Western Interstate Commission on Higher Education, who was a consultant to the Oregon panel, says that what started out as a quest for a “new story line” to explain why the state needed to expand funds for low-income students gave way to the realization “that they needed a new philosophy.”

That philosophy, as laid out in a proposal the governor made this month, aims to “build public support for higher education around student responsibility,” says Nesbitt.

Under Kulongoski’s “shared responsibility” plan, which was based in large part on a similar approach in Minnesota, every student and his or her family would be expected to pay for a reasonable portion of the cost of college, either through work or a combination of work and loans. Students attending a public community college would be expected to contribute an amount equal to what he or she would earn by working full time in the summer and up to 12 hours a week during the academic year (that number is made more significant than in other states because of Oregon’s high minimum wage of $7.50 an hour).

Students at a public four-year institution would have the same “earnings expectation” as community college students, but would also be expected to borrow money to pay for college — but not more than an amount that upon graduating would leave them with a debt burden could be managed on the sort of modest initial salary a teacher would earn. A report prepared by Longanecker pegged the borrowing expectation at about $2,750 a year, which would amount to a debt burden of $11,000 for four years or $13,750 for five years, which has become the average time to degree in Oregon.

A student’s parents or spouse would be expected to contribute the amount expected for the family’s contribution under the federal financial aid methodology. For students who qualify for Pell Grants and/or federal tuition tax benefits, those funds are also counted into the mix, as would any institutional aid or outside scholarships.

After those sources are all considered, Oregon would meet the leftover amount through its Earned Opportunity Grant program. The state’s projections show that doing so would cost it about $150 million to $160 million each biennium, up significantly from the current amount, and help more than twice as many students, says Nesbitt, the board member. While the family income cutoff for Oregon’s current need-based aid program is $33,000 – no one who earns over that qualifies – projections show that the new system would help families earning up to $60,000, he says.

The idea that state financial aid funds would increase and that more students would qualify for such aid appeals to financial aid officers at Oregon universities, says Tracey Lehman, who directs the financial aid office at Oregon Institute of Technology. Some of them are concerned, though, that the amount students would be expected to contribute through work is steep, she says, given that many working students use that income to help out their families or meet other living costs, not just to pay for college.

Financial aid officers are also concerned that the proposed process for awarding aid is just complicated enough that it may be hard to explain to those low- and lower-middle income students who need it most, says Kate Peterson, director of Oregon State University’s office of financial aid and scholarships.

But on balance, Peterson says, financial aid directors are “very excited” about the fact that the state seems to have found a way to invest more heavily in grant aid to students that seems destined to get support from across the political spectrum. “It’s definitely going in the right direction,” she says.

Nesbitt and other Oregon officials seem confident that by both expanding the state’s commitment to expanding access to college for needy students and providing more help to the middle class, and doing so by emphasizing students’ own responsibility to pay for their education, the plan will gain support from across the political spectrum.

“We think we can make the argument that that’s what higher ed is about,” says Nesbitt. “It’s not about giving free rides to people. It’s about people earning it, and if we match their effort, that’s only fair.”

— Doug Lederman

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