The Education Department is increasingly relying on collection agencies to obtain funds from those who have defaulted on student loans, but the department is failing to monitor complaints about these agencies, says a new report from the National Consumer Law Center. The center "found that contractors do not maintain accessible complaint systems and some agencies ignore the department’s minimum requirements for handling borrower grievances," the report says. "Overall, the complaint systems used by some collectors display a haphazard approach to resolving borrower disputes. The department also has failed to inform borrowers of the resources available through the agency to address complaints."
Federal financial aid for college students is frequently in the headlines, but the student grants provided by state governments receive less attention. In recent years, the grants have grown in importance as tuitions have increased and state appropriations for public colleges and universities, which allow these institutions to subsidize the tuition of all in-state students, have declined. Policies vary widely across states, but state grant aid – which provides subsidies to selected students -- has increased to about $9.2 billion in 2010-11.
In our new report, “Beyond Need and Merit: Strengthening State Grant Programs” (co-authored with the other members of a Brookings Institution study group), we urge states to re-examine their state grant programs to more effectively support the goal of increasing educational attainment.
We propose moving away from the dichotomy between “need-based” and “merit-based” aid and instead designing programs that direct aid to students with financial need with appropriate expectations and support for college success. Too many existing grant programs exclude the students who need them most by rewarding past academic accomplishments. Our goal is to improve the performance of students facing financial and academic challenges.
Some states ignore financial circumstances in allocating all or most of their grant funds, providing expensive subsidies to many students who would enroll and succeed in college without this assistance.
Other states do target low-income students, but frequently have complex allocation formulas that increase administrative costs and reduce student understanding of the system. The incentives embodied in aid programs for low- and moderate-income students are rarely carefully designed to support academic progress. Too many state grant programs exclude students without stellar high school records. Not enough provide simple, attainable guidelines for accumulating the credits necessary to graduate.
The recommendations in our report, which was funded by the Lumina Foundation, fall into three categories: targeting, simplification, and incentivizing success.
First, states should do a better job of targeting aid dollars at students whose potential to succeed is most constrained by limited resources. These students are most likely to be affected by state grant awards -- in terms of both their ability to attend college and the likelihood that they will graduate.
Second, states should consolidate programs to make the system simpler and easier for prospective students and their families to understand and navigate. Programs can be better targeted but still relatively simple. Look-up tables like those that would base grant eligibility only on income and family size might serve as a model. In the same spirit, net price calculators that students can use to estimate the cost of attendance at every public institution in the state would be a valuable supplement to the calculators each individual institution is now required by federal law to post on its website. There is strong evidence that complexity reduces the effectiveness of grant programs. The federal government has begun to simplify the financial aid application process and efforts are under way to move further in that direction, possibly reducing the amount of information collected to determine student and family ability to pay. States should welcome federal simplification efforts and should resist any temptation to ask for additional data -- restoring complication even as the federal government reduces it.
Third, state grant programs should encourage on-time degree attainment by rewarding concrete accomplishments such as the completion of credit hours. Academic requirements embodied in state grant programs should provide meaningful incentives for success in college; they should not be focused exclusively on past achievement or be so high as to exclude students on the margin of college access and success. States should provide second chances for students who lose funding because they do not meet targets the first time around.
Many states have been forced to ration funds to balance their budgets. There may be no good options under these circumstances, but some choices are worse than others. An increasing number of states are adopting “first-come, first-served” models, providing assistance to those who apply early and denying aid to eligible students who apply after the money has run out. Instead, states under pressure to cut spending quickly could lower income limits; cut grants for all recipients, with the neediest students losing the least; or build more incentives for college completion into their programs.
Financial aid alone cannot bring educational attainment to its desired level or close the troubling disparities in outcomes between disadvantaged students and their more affluent peers. And encouraging students to complete more credit hours will not solve the time-to-degree problems at institutions that face capacity problems and do not provide access to the courses students require.
But state grant programs are among a limited set of policy levers available to lawmakers. These programs should be designed to use taxpayer dollars as effectively as possible to increase the educational opportunities and attainment levels of state residents. They should be viewed as part of an integrated system of higher education funding including appropriations for operating expenditures, tuition setting, and student aid.
States should use this time of financial exigency to carefully evaluate the effectiveness of existing grant programs and to put in place systems for periodic review of these programs. Last-minute budget slashing efforts have the potential to do serious damage to the states’ students, colleges and universities, and long-run economic health. Careful planning, program design, and monitoring can increase the effectiveness of vital state grant programs and maximize the impact of taxpayer dollars.
Sandy Baum is senior fellow at the George Washington University Graduate School of Education and Human Development and chair of the Brookings Institution State Grant Aid Study Group. Matt Chingos is fellow in governance studies and research director of Brookings's Brown Center on Education Policy and a member of the study group.
The University of Texas of the Permian Basin has introduced five bachelor's degrees in science fields for which the price tag for students will total $10,000 for a four-year degree, The Midland Reporter-Telegram reported. The degrees fulfill a challenge by Texas Governor Rick Perry, a Republican, to create $10,000 programs. Students in other programs at Permian Basin are charged about $25,000 for a four-year degree.
A study released today questions the extent to which Pell Grants and other need-based financial aid improved the retention and success of academically underprepared community college students in Louisiana. The study, conducted by researchers at Noel-Levitz and the American Institutes for Research and funded by the Bill & Melinda Gates Foundation, found that increasing the amount of financial aid awarded to Louisiana community college students who needed remedial coursework did not improve their academic performance.
WASHINGTON – The House of Representatives passed a bill Friday to keep the interest rate on federally subsidized student loans at 3.4 percent for another year, but President Obama threatened to veto the measure because it would cover the $6 billion cost of the extension by cutting money in the health care reform law for preventive care and public health. Obama has seized the student loan issue as the campaign for the general election begins in earnest, touring college campuses and calling on Congress to act to stop the interest rate from doubling to 6.8 percent in July.
Democrats in the House and Senate proposed paying for the extension through either changing tax laws that allow owners of some corporations to avoid payroll taxes, or through cuts to oil subsidies. Republicans previously said they wanted a long-term solution rather than a short-term extension, and passed a budget for fiscal year 2013 that allowed the interest rate to increase.
Simplifying the Free Application for Federal Student Aid would have little effect on eligibility for need-based state grants, according to a College Board study that could allay the concerns about relying only on Internal Revenue Service data -- not a more detailed listing of a student or parent's income and assets -- when awarding financial aid. The authors of the report, "Simplifying Student Aid: What It Would Mean For States," examined the possible consequences of relying only on data transferred from the IRS, which would make filling out the complex form much less difficult for students. (Some fear that the application process itself discourages students who would qualify for need-based financial aid.)
In a sample of five states that award need-based grants, the simpler form would have little effect: the number of eligible students decreased by less than 1 percent in Kentucky and Ohio and would increase slightly in Minnesota, Texas and Vermont, the study's authors found.
The Education Department just finished two rounds of negotiated rule making on financial aid issues -- one on student loan regulations and one on the rules that govern financial aid for teacher preparation programs -- but is already planning a third. The department will focus on creating new regulations to prevent fraud in financial aid programs, as well as possibly changing financial aid delivery to electronic funds transfers. The department may also "update and streamline" the rules for campus-based financial aid programs, such as Perkins Loans and Federal Work-Study, wrote David Bergeron, deputy assistant secretary for policy, planning, and innovation in the department's Office of Postsecondary Education.
Public hearings on the rule making process are scheduled for May 23 in Phoenix and May 31 in Washington, D.C.
The Student Veterans of America this month announced that it has suspended 40 chapters at for-profit institutions, saying that they were "using the SVA brand to legitimize their programs." At the time, the group did not name the chapters. Today it released a list of 26 chapters at for-profit institutions that continue to have their charters revoked. "In addition to being a peer support group, SVA chapters exist as campus and community based advocacy organizations. It appears that some for-profit schools do not understand our model, or worse, they understand our model and they choose to exploit it for personal gain," said a statement from Michael Dakduk, executive director of the association.
As President Obama continued his barnstorming tour to campuses in key election swing states calling for Congress to stop the interest rate on federally subsidized student loans from doubling, several bills were introduced to do just that, including one from House Republicans. The key difference among the bills is how they would pay for an extension of the 3.4 percent interest rate, estimated to cost about $6 billion in the first year. A bill from Senator Tom Harkin, an Iowa Democrat, would pay for the extension by changing a tax loophole for so-called S corporations. A House version announced by Representative George Miller, a California Democrat, would cut oil subsidies, and a version from House Republicans, introduced by Illinois Republican Judy Biggert, would cut money from a portion of the health care law used for disease prevention and public health.
The bill represents a reversal for House Republicans, who had previously said they weren't interested in a short-term extension. Future debate is likely to center around what will be cut to pay for the extension, without which student loan rates will increase July 1.