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New effort to gear federal financial aid programs to college completion

Completion-Focused Financial Aid
August 7, 2012

Even those who most strongly support the concept of government financial assistance for college students concede that the system by which governments and colleges now provide it to American students isn't working optimally. Although the amount of financial aid flowing to students has risen sharply in the last decade, with state and federal governments and individual institutions alike ratcheting up their spending, low-income students remain significantly less likely than wealthier students to enroll in and graduate from college, and overall completion rates for American students have flattened.

But if relative consensus exists that the financial aid system might be improved, exactly what the problems are and how they might be fixed remain intensely in dispute -- at a critical time when the country's political leaders are intent on cutting the federal deficit.

So it's hardly surprising that a new effort aimed at "reimagining aid design and delivery" is stoking suspicions even before it is formally announced. Among the reasons are its patron -- the Bill & Melinda Gates Foundation, which plans more than a dozen other grants related to financial aid; its short timeframe (developing its recommendations within several months); and its stated goal: “using student aid to provide the right incentives to help all students attain a high-value credential.”

The initiative, which is being led by HCM Strategists, a public policy consulting firm based in Washington, has brought together a series of financial aid analysts, former government officials and other technical experts to develop and assess the potential effects of a wide range of possible changes to federal aid programs. A yet-to-be-chosen "select committee" of high-profile college presidents, politicians and civic leaders will then hone and select among the options to create a smaller menu of recommendations for which its members -- through polling and other advocacy -- will try to build public support.

Kristin Conklin, the effort's organizer and a partner in HCM Strategists, says the panel's goal is to "change the [policy] conversation about financial aid from 'How can we find savings?' to 'Can we do better? and Can we help more low-income students be successful?' "

Conklin says that the committee's work will focus not only on the bedrock Pell Grant Program, but on the full panoply of federal investments in students (including the widely disparaged but politically popular tax credits) and on the interplay of federal grants and loans with state and institutional aid. "To me it will not be a complete slate of options of at least one doesn't address the question of how we get states and institutions to invest more in low-income students," she says.

While many financial aid experts and campus leaders might share those goals, the panel's orientation makes some of them very nervous.

Some of them worry that the panel -- which is described in planning documents as convening "a set of credible experts willing to publicly call for using financial aid as a lever to improve student outcomes" and focused on "the need for a higher financial aid return on investment" -- has a preordained outcome that could clear the way for short-sighted action by budget-cutting lawmakers.

Others are concerned that the committee has begun its work with a set of assumptions -- that the federal government must cut back (or at least redirect) its spending on financial aid, and that funds to students can and should be spent in ways that encourage college completion -- that will inevitably help some students at the expense of others. Many fear that applying such an approach to programs like Pell Grants, which were created to be awarded based on the financial need alone of students, would effectively deny aid to some needy students who have been admitted to college, but not performed as well (or ramped up as quickly) as do well-prepared students.

The panel's goal is to "change the [policy] conversation about financial aid from 'How can we find savings?' to 'Can we do better? and Can we help more low-income students be successful?' "
--Kristin Conklin, HCM Strategists

"I'm not against redirecting student aid money, but you have to be aware that if you're assuming this is a zero-sum game, as they seem to be, there are tradeoffs that have to be understood," says William J. Goggin, executive director of the Advisory Committee on Student Financial Assistance, which counsels Congress and the executive branch on financial aid issues. "The burden of proof should be on those who say you can redistribute and come out ahead [on college completion], because some students and institutions will inevitably lose. Are they going to do enough analysis to ensure that they know who will be hurt?"

Gates and the C Word

There can be little doubt that much of the early consternation about the panel stems from its lineage. The Gates Foundation has put a significant imprint on higher education in the nearly five years since it homed in on college completion and other postsecondary education issues -- and that work has won it both many champions (including high up in the Obama administration) and more than a few critics, who question its aggressive advocacy role and its push to influence public policy toward data-focused accountability and college completion.

Financial aid policy is an area that Gates has, until this point, left largely untouched, at least compared to the other modern-day philanthropic behemoth in higher education policy, the Lumina Foundation. But that appears to be changing with a round of about 15 grants that Gates will roll out over the next few weeks. A spokeswoman, Debbie Robinson, says that the grants will go to "people who have different perspectives" on the "very important issue of financial aid and affordability," to generate a "robust set of thoughts on the best way to move forward." Two other grants have been made so far, Robinson says -- to the Center for Law and Social Policy and to the Institute for Higher Education Policy. Details on those grants were not available at press time.

Reimagining Aid Design and
Delivery: Technical Experts

  • Steven Brooks, North Carolina State Education Assistance Authority
  • Kevin Carey, director, Education Policy Program, New America Foundation
  • Jason Delisle, director, Education Budget Project, New America Foundation
  • Thomas Kane, faculty director, Center for Education Policy Research, Harvard University
  • Andrew Kelly, research fellow, American Enterprise Institute
  • Daniel Madzelan, former chief of policy analysis, U.S. Department of Education
  • Kim Rueben, Senior Fellow, Urban Institute

Conklin and others involved with the HCM grant were not quite ready to talk about their plans, either, but Inside Higher Ed obtained a confidential internal memo that described the committee's goals and the nature of its work.

Some of those details hit the hot buttons for those who are suspicious of Gates and the completion agenda. The memo describes the effort as trying to "assess the empirical and political feasibility of using financial aid to significantly improve student outcomes" -- suggesting at least some doubts about whether financial aid can be used to improve student outcomes. But in the next breath, the memo describes as one of its goals convening experts "willing to publicly call for using financial aid as a lever to improve student outcomes."

That, combined with the panel's tight timeframe (a few phone calls among the panel's technical experts, one full-day meeting of the members of the Select Committee to review recommendations and cost assumptions, and the development of a set of recommendations by late fall) and the memo's discussion of public opinion polling and Gates grants to "credible national organizations to challenge predicted opposition," raise red flags for some observers about the committee's work.

Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, says that it's impossible to quibble with the notion that the federal student aid system needs to be revisited and possibly remade, given the explosion of spending on it and how it confuses many students. Such a review "is necessary and it's certainly going to happen -- but it ought to be based on rigorous policy analysis, not driven by pollsters and recommendations developed in a couple of phone calls and a single meeting in Washington," Hartle says.

"Even the Spellings Commission had more meetings than that," he says of the 2006 Bush administration panel that laid the groundwork for much of the current accountability movement in higher education (and it is rare when a higher ed lobbyist offers praise -- even faint praise -- to the Spellings Commission).

Goggin, of the Advisory Committee on Student Financial Assistance, is most concerned about the context into which the new panel's work will emerge. He notes that with Congress facing a "funding cliff" early next year if they cannot agree on a plan to curtail the budget deficit, lawmakers will be on the lookout for ideas -- particularly the simplistic ones that many politicians tend to favor -- that will save the government money.

As spending on Pell Grants has ballooned in the last several years, it has become an article of faith -- even among some supporters of the program -- that it has grown too big and must be cut or at least constrained, and that if its need-based aid dollars are to be most effective, they should be allocated increasingly to students who achieve their educational goals (or to institutions where low-income students are more likely to succeed).

"The burden of proof should be on those who say you can redistribute and come out ahead [on college completion]."
--William J. Goggin, Advisory Committee on Student Financial Assistance

Goggin argues that the question of whether Pell should be cut is a political one, and that the available data suggest that "failure to increase need-based grant aid will make achieving 2020 [college completion] goals impossible." And research undertaken by the advisory committee also shows, he says, that reshuffling Pell funds to reward students who advance academically (or institutions where students are likelier to complete) would have "catastrophic effects on access and likely lower degree/certificate completion," by wasting money on students who would complete anyway and hurting "students most at risk and the institutions that serve them."

Many questions should be answered before anyone decides to "put financial aid in service of completion," he says. "What non-need-based factors will be injected into the calculation of the Pell award? Where is the research that supports using those factors without adverse effects? Who will win and lose under such proposals -- which students and institutions? How can policy makers be sure that gains in completion will more than offset losses?

Performance Matters

Conklin bristles a bit at the suggestion that the panel in any way has it in for Pell or for low-income students; as the first in her family to go to college 20 years ago, Conklin says, she depended on Pell and Cal Grants (California's need-based equivalent to Pell), and she has focused her career on having the financial aid system "open doors for others the way it did for me." But right now the system is producing "too many students with debt and no degree," she argues, based in part on its complexity and in part on the programs' limitations in providing the right incentives to students and institutions alike.

She concedes that the Gates-funded panel will not conduct research -- "that's not the role you'd want a public policy firm to engage in" -- but says that the group's technical experts will lean heavily on existing research (including the Advisory Committee's) in developing the list of ideas it will explore and present to the Select Committee. The technical panel will also run projections of how different proposals might affect different sets of students, types of institutions, and the like. "We will produce evidence," she says, challenging the suggestion that the panel's work will be an analysis-free zone.

To the extent that financial aid advocates fear that the panel is gunning for Pell, she makes several points. First, while Pell (as the country's biggest financial aid program) would inevitably draw the attention of any group looking at the student aid system, the select committee will frame its vision widely, examining the efficacy of the federal government's numerous grant programs, its multiple loan programs and its tax credits, as well as whether state and institutional aid funds are aimed at the right students.

Second, while critics seem concerned that the new panel will give politicians bad ideas, it's not as if higher education policy decisions in Washington are making the best and most forward-looking decisions now, absent the new committee's analysis. Over the last several years, Congress and the Obama administration have made changes to Pell and other programs to trim the budget, and some of those actions now seem unwise, like the elimination of the year-round Pell Grant.

"We're seeing Congress cut summer Pell here, nibble there," Conklin says. "A lot of people are very worried that cutting summer Pell is hurting the accelerated pathways they've set up. Lots of things that might be done to these programs can have unintended consequences, and we need to have a more robust debate about the best ways to ensure access and student success, for the long term.

"That's what we want this conversation to be about."

 

 

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