Financial aid

2 Democrats plan legislation to promote competency-based ed and rate colleges

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Two senators join the increasingly crowded Washington bandwagon for alternative forms of higher education to have access to federal funding. They also want college aid tied to institutional performance.

For-profit colleges step up criticism of gainful employment regulations as negotiations continue

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As a federal panel reconvenes to negotiate "gainful employment" regulations, representatives of for-profit colleges -- backed by a surprise visit from a key Congresswoman -- step up their criticism.

How to increase college access in 3 easy steps (essay)

Today the Senate is holding a hearing on student aid and college access with a focus on simplification, in advance of the upcoming reauthorization of the Higher Education Act. Focusing on streamlining federal student aid and making the various programs more flexible is a well-reasoned approach in a fiscal environment where increases in federal funding for the programs appear unlikely. Here are three recommendations policy makers can apply immediately to simplify programs and increase college access:

1. Better align financial aid applications with college admissions by using prior-prior year

Each year a student is enrolled in postsecondary education, he or she must submit a FAFSA to be considered for federal student aid (grants, loans, work-study). Under the current structure, the FAFSA becomes available Jan. 1 and requires tax information from the prior year (PY). However, most students and families haven’t even filed their taxes by then, making it difficult to complete the form in totality. This delay can cause an unfavorable chain reaction: a delay in submitting the FAFSA due to lack of tax information can result in a delayed financial aid award letter, which in some cases could lead to a reduced amount of financial aid, at least when it comes to aid that is awarded on a first-come, first-served basis.

The use of prior-prior year (PPY) income on the FAFSA would have multiple benefits for students and families. These benefits include the ability to: file the FAFSA earlier, often at the time they are applying to college; make better use of the current IRS data retrieval tool, which allows automatic population of a student’s tax return data; receive notification of a financial aid package earlier; and streamline the college-going process by applying for financial aid the same time they are applying for admissions.

This would be welcome news for students who need financial aid the most -- who also happen to be the most likely to miss current financial aid deadlines and overestimate college costs, according to a study by researchers at the University of Illinois at Chicago and an Illinois financial aid official.

The best part? The U.S. secretary of education was already given the authority to implement PPY over five years ago, so Congressional action is not needed to implement this idea.

While there are some concerns about using PPY as a proxy for current financial strength, it is important to remember that prior year information is also a proxy. The National Association of Student Financial Aid Administrators recently released a study on the impact of using PPY data and found that for most of the lowest-income students, using PPY versus PY did not greatly impact the amount of Pell that a student received.

2. Implement an early Pell notification, or “Pell Promise”

Low-income students often decide at an early age that college is too costly and therefore just “not for them.” Enrollment data underscore this pattern, with 52 percent of low-income high school graduates enrolling in postsecondary education compared to 82 percent of high-income graduates, according to the National Center for Education Statistics. Even for low-income students who do go on to college, many are self-selecting out of competitive or elite schools that would have been less expensive than where they ultimately attend. (This issue of "undermatching" has recently attracted significant attention from President Obama, as well as the first lady.)

One recent study of a sample of high school valedictorians found that only 50 percent of those from low-income backgrounds even applied to a selective university, compared to roughly 80 percent of the valedictorians from upper-middle and high-income families. Unfortunately, when a student decides early on that higher education is not an option, it impacts their high school coursework choices and college enrollment behaviors.

A “Pell Promise” -- a commitment of funds from the federal government as early as the ninth grade -- would make low-income students aware of their Pell grant eligibility in much the same way that the Social Security Administration disseminates information to citizens about the amount of social security they can expect in retirement.

While not technically a promised income, Social Security statements allow individuals to plan for an eventual retirement. A Pell promise would assure low-income students that a specific amount of funds would be available to them upon successful completion of high school and incentivize early college-going behaviors and patterns. Early studies from similar state-based programs, such as the 21st Century Scholars Program in Indiana, have shown that when students and parents know there are funds available to them for higher education, there are noticeable increases in college preparatory coursework and college going rates.

Identifying low-income students early would not be difficult given IRS data and other federal and state means-tested benefit programs. This change would also be easy to implement since the Higher Education Opportunity Act (HEOA) already authorized a similar demonstration program, although funds were never appropriated to fulfill the program.

3. Provide flexibility in the Pell Grant program through a “Pell Well” of funds.

The current system of Pell Grant delivery is based on the traditional spring/fall calendar and the traditional student.  A student may wish to move through their program at an accelerated pace by taking courses each summer, yet under the current Pell Grant rules, that student would run out of Pell eligibility and be forced into loans to cover academic costs or defer additional enrollment until the next year. This structure is outdated and confusing to families, particularly as nontraditional students and innovative programs with nonstandard academic calendars proliferate.

To increase flexibility and encourage students to complete at a quicker pace, lawmakers could implement a Pell Well system, whereby a student’s lifetime Pell Grant eligibility would be calculated when the student initially applies for aid.  The student would then be able to draw funds from their well of Pell Grant at their own pace, not to exceed a certain amount per payment period.

This is different than how Pell eligibility is currently calculated, which is based on telling students annually how much they qualify for in Pell funds and then trying to explain future Pell eligibility as a percentage of full time enrollment. Students and parents understand dollars, not percentages, and they increasingly require predictability and flexibility. Such a change would both simplify and streamline the program, and incentivize continuous enrollment and higher retention and graduation rates. 

As Congress considers various proposals through HEA hearings, and as grant makers and college access advocates continue to think of ways to reimagine student aid, we should remember that manageable and realistic changes like these could have a huge impact on college access and success.


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

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Consumer bureau issues initial findings on college debit card deals

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Arrangements between colleges and financial institutions that provide services to students may mirror problems with private student loans and predatory credit card marketing on campuses, U.S. consumer agency says. 

Essay on how President Obama's rating system should work

After a month of speculation, President Obama unveiled his plan to “shake up” higher education last week. As promised, the proposal contained some highly controversial elements, none greater than an announcement that the U.S. Department of Education will begin to rate colleges and universities in 2015 and tie financial aid to those results three years later. The announcement prompted typical clichéd Beltway commentary from the higher education industry of “the devil is in the details” and the need to avoid “unintended consequences,” which should rightfully be attributed as, “We are not going to outright object now when everyone’s watching but instead will nitpick to death later.”

But the ratings threat is more substantive than past announcements to put colleges “on notice,” if for no other reason than it is something the department can do without Congressional approval. Though it cannot actually tie aid received directly to these ratings without lawmakers (and the threat to do so would occur after Obama leaves office), the department can send a powerful message both to the higher education community and consumers nationwide by publishing these ratings.

Ratings systems, however, are no easy matter and require lots of choices in their methodologies. With that in mind, here are a few recommendations for how the ratings should work. 

Ratings aren’t rankings.

Colleges have actually rated themselves in various forms for well over a hundred years. The Association of American Universities is an exclusive club of the top research universities that formed in 1900. The more in-depth Carnegie classifications, which group institutions based upon their focus and types of credentials awarded, have been around since the early 1970s. Though they may not be identified as such by most people, they are forms of ratings — recognitions of the distinctions between universities by mission and other factors.

A federal rating system should be constructed similarly. There’s no reason to bother with ordinal rankings like the U.S. News and World Report because distinguishing among a few top colleges is less important than sorting out those that really are worse than others. Groupings that are narrow enough to recognize differences but sufficiently broad to represent a meaningful sample are the way to go. The Department could even consider letting colleges choose their initial groupings, as some already do for the data feedback reports the Department produces through the Integrated Postsecondary Education Data System (IPEDS).

It’s easier to find the bottom tail of the distribution than the middle or top.

There are around 7,000 colleges in this country. Some are fantastic world leaders. Others are unmitigated disasters that should probably be shut down. But the vast majority fall somewhere in between. Sorting out the middle part is probably the hardest element of a ratings system — how do you discern within averageness?

We probably shouldn’t. A ratings system should sort out the worst of the worst by setting minimum performance standards on a few clear measures. It would clearly demonstrate that there is some degree of results so bad thatit  merits being rated poorly. This standard could be excessively, laughably low, like a 10 percent graduation rate. Identifying the worst of the worst would be a huge step forward from what we do now. An ambitious ratings system could do the same thing on the top end using different indicators, setting very high bars that only a tiny handful of colleges would reach, but that’s much harder to get right.

Don’t let calls for the “right” data be an obstructionist tactic.

Hours after the President’s speech, representatives of the higher education lobby stated the administration’s ratings “have an obligation to perfect data.” It’s a reasonable requirement that a rating system not be based only on flawed measures, like holding colleges accountable just  for the completion of first-time, full-time students. But the call for perfect data is a smokescreen for intransigence by setting a nearly unobtainable bar. Even worse, the very people calling for this standard are the same ones representing the institutions that will be the biggest roadblock to obtaining information fulfilling this requirement. Having data demands come from those keeping it hostage creates a perfect opportunity for future vetoes in the name of making perfect be the enemy of the good. It’s also a tried and true tactic from One Dupont Circle. Look at graduation rates, where the higher education lobby is happy to put out reports critiquing their accuracy after getting Congress to enact provisions that banned the creation of better numbers during the last Higher Education Act reauthorization.

To be sure, the Obama administration has an obligation to engage in an open dialogue with willing partners to make a good faith effort at getting the best data possible for its ratings. Some of this will happen anyway thanks to improvements to the department’s IPEDS database. But if colleges are not serious about being partners in the ratings and refuse to contribute the data needed, they should not then turn around and complain about the results.

Stick with real numbers that reflect policy goals.

Input-adjusted metrics are a wonk’s dream. Controlling for factors and running regressions get us all excited. But they’re also useless from a policy implementation standpoint. Complex figures that account for every last difference in institutions will contextualize away all meaningful information until all that remains is a homogenous jumble where everyone looks the same. Controlling for socioeconomic conditions also runs the risk of just inculcating low expectations for students based upon their existing results. Not to mention any modeling choices in an input-adjusted system will add another dimension of criticism to the firestorm that will already surround the measures chosen.

That does not mean context should be ignored. There are just better ways to handle it. First and foremost is making ratings on measures based on performance relative to peers. Well-crafted peer comparisons can accomplish largely the same thing as input adjustment since institutions would be facing similar circumstances, but still rely on straightforward figures. Second, unintended consequences should be addressed by measuring them with additional metrics and clear goals. For example, afraid that focusing on a college's completion rate will discourage enrolling low-income students or unfairly penalize those that serve large numbers of this type of students? The ratings should give institutions credit for the socioeconomic diversity of their student body, require a minimum percentage of Pell students, and break out the completion rate by familial income. Doing so not only provides a backstop against gaming, it also lays out clearer expectations to guide colleges' behavior, something the U.S. News rankings experience has shown that colleges clearly know how to do with less useful measures like alumni giving (sorry, Brown, for holding you back on that one).

Mix factors a college can directly control with ones it cannot.

Institutions have an incentive to improve on measures included in a rating system. But some subset of colleges will also try to evade or “game” the measure. This is particularly true if it’s something under their control — look at the use of forbearances or deferments to avoid sanctions under the cohort default rate. No system will ever be able to fully root out gaming and loopholes, but one way to adjust for them is by complementing measures under a college’s control with ones that are not. For example, concerns about sacrificing academic quality to increase graduation rates could be partially offset by adding a focus on graduates’ earnings or some other post-completion behavior that is not under the college’s control. Institutions will certainly object to being held accountable for things they cannot directly influence. But basing the uncontrollable elements on relative instead of absolute performance should further ameliorate this concern.

Focus on outputs but don’t forget inputs.

Results matter. An institution that cannot graduate its students or avoid saddling them with large loan debts they cannot repay upon completion is not succeeding. But a sole focus on outputs could encourage an institution to avoid serving the neediest students as a way of improving its metrics and undermine the access goals that are an important part of federal education policy.

To account for this, a ratings system should include a few targeted input metrics that reflect larger policy goals like socioeconomic diversity or first-generation college students. Giving colleges “credit” in the ratings for serving the students we care most about will provide at least some check against potential gaming. Even better, some metrics should have a threshold a school has to reach to avoid automatic classification into the lowest rating.

Put it together.

A good ratings system is both consistent and iterative. It keeps the core pieces the same year to year but isn’t too arrogant to include new items and tweak ones that aren’t working. These recommendations present somewhere to start. Group the schools sensibly — maybe even rely on existing classifications like those done by Carnegie. The ratings should establish minimum performance thresholds on the metrics we think are most indicative of an unsuccessful institution — things like completion rates, success with student loans, time to degree, etc. They should consist of outcomes metrics that reflect their missions—such as transfer success for two-year schools, licensure and placement for vocational offerings, earnings, completion and employment for four-year colleges and universities. But they should also have separate metrics to acknowledge policy challenges we care about — success in serving Pell students, the ability to get remedial students college-ready, socioeconomic diversity, etc. — to discourage creaming. The result should be something that reflects values and policy challenges, acknowledges attempts to find workarounds, and refrains from dissolving into wonkiness and theoretical considerations that are divorced from reality.

Ben Miller
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Ben Miller is a senior policy analyst in the New America Foundation's education policy program, where he provides research and analysis on policies related to postsecondary education. Previously, Miller was a senior policy advisor in the Office of Planning, Evaluation, and Policy Development in the U.S. Department of Education.

Incoming student characteristics determine graduation rates, studies find

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Colleges that serve fewer disadvantaged students have higher graduation rates, new studies find, a fact policy makers should heed.

Let's talk to families about paying for college in language they understand (essay)

Parents: We can’t possibly afford $60,000 per year for our daughter to go to Medallion University.

College representative: But Medallion University provides financial aid based upon your family’s financial need.

Parents:  Oh, that is interesting. Someone told me that Medallion University was need-blind, so I just figured you didn’t care if we couldn’t pay that much.

College representative: If your daughter is admitted to Medallion University, we will calculate your expected family contribution.

Parents: Well, we contribute to our church but we have never made a contribution to Medallion University, but someone told me this is expected in order to get in.

Should we laugh or cry about this exchange?  While the conversation is written in English, the parents and college recruiter are not speaking the same language.  The college representative is speaking the “Language of Financial Aid” while the parents are speaking a language about paying for college. 

I call the former “Financial Aid Speak” and the latter “Payment Language.” To explain college pricing to the American public, higher education administrators must translate their rhetoric to Payment Language so families can make informed decisions about whether they can afford the price.

Actually, college administrators speak several languages in addition to Financial Aid Speak. Vice presidents for finance, for example, speak “Cost Language.” They engage in discussions about balance sheets and expenditures for producing a college education

Like Académie française for French, Cost Language has regulating boards that dictate the standards for word usage.  The Government Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB) regulate the meaning of words, phrases and concepts for finance administrators from the public and private sector, respectively.  But administrators correctly hold no expectation that the public would know or even care about the wording of, say, FASB Rules 516 or 517 as a generally accepted accounting principle.

To balance a budget these same vice presidents for finance also estimate the income side of the ledger. Here the language follows not only GASB and FASB rules, but also the more public vernacular of “Tuition, Fees, Room, Board, Transportation, Books, and Other Expenses.” Vice presidents for enrollment management may use additional phrases like the “Cost of Attendance” or a “Comprehensive Fee” to explain the full price of going to college at an institution. They are using Price Language to explain the price of college.

“Ay, there’s the rub,” as the Bard reminds us. Price Language and Cost Language do not explain how much most families, and certainly not low-income families, will actually pay for college. Families must also understand Financial Aid Speak or be left with the impression that everyone pays $60,000 per year. Perhaps many families narrow their choices of where to apply because they are not multilingual, or maybe they speak Price Language and don’t understand Financial Aid Speak.

And why should they? Financial Aid Speak evolved from internal administrative activities at Medallion University -- procedures that now exceed half a century in age. “Expected Family Contribution,” for example, became the shorthand jargon of financial aid officers to explain how much a family would pay after the financial aid distribution to a student. 

An “award,” (not to be confused some kind of “prize") has different components, i.e., the “package” is made up of “gift aid” and “self-help.”  Ironically, these birthday sounding words reduce the family’s financial obligation, not only by the amount of money available to the family but also according to the admissions priorities of Medallion.  

“Scholarships,” or “grants” – the so-called “gift aid” -- reduces the “net price” for a family, while a job or a loan – the so-called “self-help” -- requires labor and repayment.  Who is “giving” this gift that requires payment of an unaffordable bill?  And is the “help” really for the “self” or a down payment on the school’s operating budget? This language so familiar to the financial aid officers ignores the verbiage that an untrained family uses to consider college affordability.

Add the various proper nouns and one begins to think that Financial Aid Speak is a history exam. Pell, Stafford, Perkins, SEOG, Plus at the federal level, or Lindsay, Herter, Adams, Tsongas at the state level where I live in Massachusetts, are generous programs; but families often must find and recognize eligibility, and complete lengthy forms for these named programs, to receive the intended financial help.

“Net Price,” is the central concept for knowing how much a family pays for a college education. A consumer buying a car or a television or a computer would recognize the concept as the listed price minus any store discounts and rebates.  The “Net Price” for a year of college is the price of attendance minus grants and scholarships from any and all sources. 

Savings (past resources), wages (present resources), and loans (future resources) – both of student and parents -- describe the assets that a family will use to pay for all of these academic goods and services over time. This is the vocabulary of Payment Language; it is simple, direct, understandable and essential for general understanding of college prices. The public speaks Payment Language every day.

Recent research has shown that over half of the high-achieving students from low-income families never consider selective public and private colleges even though the price of attendance could actually be lower than the college they select. 

Entitled “Boston’s Faces of Excellence,” the Boston Globe published the photographs and future plans for the valedictorian from each of the city’s 44 public high schools. The student destinations included selective private universities (Harvard, Boston University, Boston College, Northeastern), flagship state universities (the University of Massachusetts, the University of New Hampshire), state public colleges and universities (Westfield State and Bridgewater State), local colleges (Simmons, Mount Ida), community colleges (Bunker Hill), and undecided. 

How many of these students made their choice of college knowing the financial options that were available from all sectors of higher education? Their preferred college could have depended on the best fit for each student, but one suspects that at least some of these students had a conversation that sounded like the one at the beginning of this essay. And for the valedictorians whose surnames are Lopez and Garcia, and who were born outside of the United States, one wonders how Financial Aid Speak translates into the parents’ native tongue.

Financial Aid Speak is a precise language; the verbiage describes what enrollment managers do when they decide about price discounts and eligibility for jobs and loans. Becoming articulate requires years of experience and training. When spoken well, it allows financial aid officers to compare pricing among a large number of college applicants from a variety of financial and academic backgrounds. It also produces an illusion of fairness by using standardized criteria applied equally and professionally to all applicants.

Financial Aid Speak, Cost Language, and Price Language, however, do not use words and phrases that provide adequate explanation to those that need pricing information the most – middle and high school students with low-income parents. Many education experiments indicate that simple, straightforward explanation about college pricing increases the college-going rate and available college options to low income families. Meaningful communication is a necessary condition for informed choice.

Payment Language uses words and concepts directed toward that objective. It can enlighten those who may have limited their college choice because they did not understand the available information about paying for college. Colleges must use words with universal meaning for financial transactions that explain the choices about what college to attend and how to pay the bill. We should adopt Payment Language, and follow these principles::

  1. Payment Language adopts only words that are used in common financial transactions that are familiar to the public.
  2. Payment Language produces comparable concepts about college pricing in all institutions from any sector of higher education, for all types of financial aid programs, and for all amounts of discounting and payment.
  3. Payment Language uses “net price” – the amount of money that the family pays for one year of college -- calculated as the price of attendance minus grants and scholarships from all sources.
  4. Payment Language separates financial obligation among the institution, student and parents.
  5. Payment Language identifies the federal, state, institutional, and other programs and their associated eligibility requirements as a source of funding.
  6. Payment Language identifies the expected timing for payment into past (savings), present (wages), and future (loan) financial obligations.
  7. Payment Language includes the responsibilities for education loan repayment, including the interest rate, effect of compound interest, the total interest, monthly repayment, the possibilities for reduction and forgiveness as well as the incidence and consequences of default and bankruptcy.
  8. Payment Language is as easily understood in Spanish as English and can be translated directly to other foreign languages.

These principles require testing.  Conjecture about how people talk, the words they use, and what they understand is not enough to evaluate the benefits and the costs of a college education. Years of good intentions notwithstanding, our communications with the public about paying for college are confusing and often misunderstood outside of the academy.

C. Anthony Broh is the founder and principal of Broh Consulting Services and co-author of Paying for College. He has been constructing a universal “Language of Financial Aid” with financial aid officers for more than a decade.

Education Department hears comments on PLUS loans, gainful employment and for-profit colleges

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Historically black colleges urge Education Department to reconsider changes to some student loan criteria, and for-profit colleges and student advocates gear up for rewrite of "gainful employment" regulation.

FAFSA changes recognized many kinds of parents

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Changes to the FAFSA will collect information on both parents in a same-sex marriage or who are unmarried but living together.

William & Mary adopts new financing model, embraces high tuition/high aid

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New financing policy at William & Mary embraces “high tuition/high aid” model, while emphasizing middle class affordability and investing in academic quality.


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