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The Elephant in the Student Aid Office

The Elephant in the Student Aid Office

September 25, 2006

Secretary of Education Margaret Spelling’s Commission on the Future of Higher Education recently released its report titled “A Test of Leadership: Charting the Future of U.S. Higher Education.”  The report contains a series of recommendations built on a year of deliberation by its 19 members. First and foremost is the recommendation that “the U.S. commit to an unprecedented effort to expand higher education access and success by improving student preparation and persistence, addressing non-academic barriers and providing significant increases in aid to low-income students.”

Last week, in an effort to get out ahead of the momentum that is already building for the report and its recommendations, the American Council on Education and the other organizations that make up the “big six” higher education lobbying groups in Washington issued an eight-page letter to their members. 

This document, “Addressing the Challenges Facing American Undergraduate Education,” describes seven “issues and actions” that the organizations expect will result from the issuance of the Spellings commission's report. The first of these actions, echoing the commission’s first recommendation, is “Expanding college access to low-income and minority students.”

According to the six organizations, “The single most effective step to boost college participation of low-income and minority students is to increase substantially the value of Pell grants.”  Pell grants, the centerpiece of the federal government’s efforts to reduce college cost barriers for low- and moderate-income students, is indeed a critical part of the nation’s financial aid system. 

The letter supports the commission’s recommendation to increase the value of the average Pell award from 48 percent of the average in-state tuition at a public 4-year institution to 70 percent within five years.  This is a noble goal, and having the support of the six lobbying groups is critical in helping to persuade Congress and the Bush administration to support it also. ACE’s own calculations demonstrate that such an effort could require almost doubling the current $13 billion budget of the Pell grant program.

The letter also encourages colleges and universities to find ways to control the growth of costs, again echoing a major theme of the Spellings commission. And it encourages the institutions to do a better job providing to students and parents clearer and more accurate information about the true “net price” of college, after taking into account financial aid.

But in all the discussion in the letter about making college more affordable, these organizations ignore the elephant in the room: how colleges and universities spend their own institutional financial aid funds. While an increase in the value of Pell grants will certainly help achieve the objective of expanding postsecondary opportunity for low-income students, the goal could be promoted much more quickly and effectively through the reform of institutional financial aid policies.

In a study I conducted earlier this year for the Wisconsin Center for the Advancement of Postsecondary Education, I examined the distribution of grant awards to undergraduate students.  Using data from the National Postsecondary Student Aid Study, a nationally representative sample of students from the 2003-4 academic year, I looked at what many label “traditional college students” -- those who are still dependents of their parents and attended a single college full-time that year. 

What I found was while colleges and universities provided just over $4 billion in federal grants and $3 billion in state grants to these students, they provided more than $10 billion in grants from their own resources.  The nation’s colleges and universities should be applauded for the effort they make in helping to lower the cost of college by partnering with the federal and state governments to award grants from institutional resources.  

But not all grants are alike. My study found that while 97 percent of all federal grant dollars and 75 percent of all state grant dollars awarded to these students went to those whose parents’ income was below the national median, only 47 percent of all institutional grants were targeted to this same population of students. Over half of the grants awarded by institutions, or $5.5 billion, was awarded to students without any consideration of their or their parents’ financial need. 

This is in contrast to Pell Grants, which are very highly targeted at needy students, and three-quarters of state grants, which also use financial need as the primary criterion for determining eligibility. The lack of means-testing in the awarding of over half the institutional grants, along with broader definitions of “need,” results in a very different distribution of awards as compared to means-tested federal and state grant programs.

There has been much written in the nation about the necessity of helping middle-income students find ways to help pay for college, especially since many of them come from families that are above the eligibility cutoff for federal or state need-based grants. Many institutions have indicated that they are filling that objective through their own institutional grant programs. And while many of these grants do go to students of modest means, the truth is that many go to students who come from families with incomes well above a level that most of us would describe as “modest.”

For example, in 2003-4, institutions awarded more than $2 billion in grant aid to dependent students from families with incomes in excess of $108,000, or approximately twice the median family income of all dependent students in the nation that year. While some may believe that these families deserve help in paying for college, it is difficult to make the argument that this should be a priority in light of the Spellings commission's declaration that its members “are especially troubled by gaps in college access for low-income Americans.” One is hard-pressed to argue that giving $2 billion in grants to students from these upper-income families helps to address the commission’s concerns.

What is particularly troubling is that the letter from ACE and its partner organizations never once lays even a portion of the responsibility for helping lower-income students afford college at the doorstep of the financial aid policies of their member institutions. There is language in the letter, of course, about expanding Pell Grants, and about other “efforts” and “goals” of institutions to improve access for poor students. There is also the announcement of another public service campaign called “Know How To Go” targeted at low-income students (raise your hand if you remember ACE’s “College is Possible” campaign, which was launched in 1997 and sounds awfully similar to “Know How To Go”).

But never does the letter recommend that these institutions conduct an evaluation of their own financial aid programs to determine whether they are working in consort with the goal of expanding access for underserved populations, or whether they are simply rewarding wealthier students who have had many social, financial, and academic advantages in the years before they went to college. 

Rather than focusing solely on public service campaigns, cost-cutting efforts, and new ways of explaining the difference between “sticker price” and “net price,” colleges and universities would be much better off by simply taking this $2 billion and putting it in the hands of low- and moderate-income students. This decision could be made tomorrow, requires no action on the part of the federal government, and would have an immediate impact on the college participation of these students.

The American Council on Education and the other higher education organizations in Washington should be lauded for their attempts to be proactive in supporting the recommendation of the Spellings commission to improve college access for low-income students. But before the organizations and their member institutions ramp up their external public relations and lobbying efforts, they should look inward at their own practices.

Reforming institutional policies so that all financial aid resources are focused on students who truly need them to be able to afford college -- rather than being awarded to students who would attend college anyway -- is an important first step.

Bio

Donald E. Heller is associate professor of education and senior research associate in the Center for the Study of Higher Education at Pennsylvania State University in University Park.

 

 

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