A Federal Idea ... Well-Received?!

At Education Department's farewell summit, U.S. plan to restructure financial aid system earns cautious (and rare) praise from college leaders.
July 18, 2008

In the days leading up to Education Secretary Margaret Spellings's final higher education summit, which began Thursday in Chicago, the big question was: Would they or wouldn't they? Would the Education Department's leaders use the occasion to do something big -- undertake a major new policy initiative, take another whack on a contentious issue like accreditation, or pick a new fight?

Or would they seek simply to wrap a bow around their higher education efforts, satisfying themselves with having generated an important conversation and raising the public profile of key issues in higher education?

A somewhat similar conversation was taking place within the department itself in recent weeks, it turns out. Spellings and her aides, Under Secretary of Education Sara Martinez Tucker said in an interview, "knew we were going to do something" at the meeting about the issue of simplying the federal financial aid system, which is widely seen as overly complex and generally viewed as flawed.

Tucker's own pragmatic side, she said before Thursday's summit began, made her inclined to suggest "something that's doable in the next six months" before the Bush administration leaves office, like reworking the (10-page, 100-question) Free Application for Federal Student Aid to make it less daunting for students and parents. But her "idealistic" side, Tucker said, suggested that that wouldn't be enough, that she'd be shortchanging students and taxpayers to aim low. The summit probably presented the administration with its last chance to share a "big idea," she added.

So Thursday, Tucker opened the two-day summit of 150 college leaders, state officials, policy experts and others not with a low-key tinker but with a sweeping proposal to restructure the system for awarding federal financial aid, with the chief goals of greatly simplifying the financial application process and administrative structure; informing students much earlier exactly how much financial aid they would receive; and, ultimately, greatly increasing the number of Americans who enter and complete college, an underlying goal of Thursday's summit and most of the Bush administration's work on higher education.

"I don't know that there's anyone who disagrees that the student aid system is too complex, duplicative, maybe inefficient," Tucker said, a theme that has been gaining currency in higher education. Fixing federal aid was a chief recommendation of Spellings's Commission on the Future of Higher Education, and though it has been at the top of Tucker's personal list of projects from her very first days in office in 2006, it has constantly been deferred by more-pressing matters, usually various student loan crises.

Under Tucker's plan, students would find out almost immediately after submitting their much shorter federal student aid application -- truncated to just 9 questions from the current 102 -- exactly how much federal grant, subsidized and unsubsidized loan and tax break funds they would qualify for, based on their adjusted gross income and number of family members. (Right now students find out at that stage, usually in January or February, only how much their family is expected to contribute, which may discourage rather than encourage students to go to college, Tucker said.) The awards would be indexed based on an as-yet-undetermined formula -- something like the average cost of attendance at a four-year public institution, for instance -- that would essentially set a maximum amount of federal aid for which a student could qualify.

The sources of federal aid would be greatly streamlined. Federal grant aid, which now flows through about a dozen programs (and rising), would be consolidated into just the Pell Grant Program, providing an additional $1.7 billion that would increase the maximum grant by $370, Tucker said. (No Perkins Loans, no Supplemental Educational Opportunity Grants, no SMART Grants.) What the student loan program would look like is unclear, Tucker said, given the recent turmoil in that sphere. Work study and education tax breaks would continue to be part of aid packages, the latter particularly for upper-income students.

Students, armed far earlier than they are now with information on exactly how much federal aid they will receive, would then be in a position to choose among competing colleges based on how much state, institutional and other aid they can package for the student, and once a student makes that choice, the federal aid would follow the student to that institution.

Much would remain to be figured out, Tucker acknowledges; the department, for instance, has a complex simulation tool designed to assess what overall mix of grants, loans and tax benefits would do the most to increase the college-going and completion rates, and how the funds should be allocated to students from different income levels, backgrounds, etc. But the hope, Tucker told the higher education leaders at Thursday's session, is that her proposal would be a starting point for a discussion that would involve financial aid experts, advocates for students and others, ultimately resulting in legislative and other proposals aimed at simplifying the aid form, consolidating the grant programs, and revamping the financial aid formulas.

Given the many details that were left unsketched in Tucker's 20-minute presentation, many of the college leaders and financial aid experts in the audience said they could not fully assess the wisdom or practicality of the department's proposal. But by and large -- reflecting the overall tone of the first day of this week's summit, which was much more collegial and warmer than most previous encounters between department officials and college leaders -- the financial aid plan was well received.

"I was very taken by the description that Sara presented today," said William E. (Brit) Kirwan, chancellor of the University System of Maryland. "I would obviously love to know more about it, but in general it seems like something we need to get some energy behind. I think there is strong support for what I heard her speak about today."

A similar reaction came from Sandy Baum, a Skidmore College economist who as a consultant to the College Board is leading its own effort called "Rethinking Student Aid." Baum was not at Thursday's meeting, and the best information she could get was a second-hand briefing from a reporter. But based on that sketchy information, she praised the department's proposal as an "attempt to simplify both the application process and to get information to students in a timely manner.... Whether they're going about it in exactly the right way is hard to say," but that will be clearer with more details, Baum said.

The department's proposal is largely an amalgam of numerous ideas that have been discussed before, and based on past reactions to some of the concepts, it is likely to run into trouble on several fronts. Among them:

  • Calculating financial aid based on gross income, rather than on a combination of income and family assets, would almost certainly make it easier for families with low incomes but significant wealth to qualify for aid, and might increase the amount of gaming of the system by families to hide wealth.
  • Simplifying the federal financial aid form might result, ironically, in students having to fill out more forms. Nearly a third of the current questions on the FAFSA were placed there to provide information for states that want information about aid applicants, and a simpler form might lead more states and individual colleges to require students to fill out forms for them.
  • Consolidating aid programs would inevitably anger supporters of programs, like Perkins Loans and Supplemental Educational Opportunity Grants, that financial aid officers say give them added flexibility to help students with different financial situations. The Bush Education Department has sought in every recent budget to wipe out funds for Perkins and SEOG and shift them to Pell, prompting screams from college officials and rebuffs from Congress. In recent years, Congress has been adding, not eliminating, grant programs.

Still, Tucker's proposal, in combination with the ideas that emerge from the College Board review, is likely to serve as a starting point for a discussion that, as Terry W. Hartle of the American Council on Education said at Thursday's summit, is likely to begin in earnest when Congress finally completes its work on renewing the Higher Education Act some time this year.

"Simplifying the student aid system is like untangling a large plate of spaghetti," said Hartle, senior vice president for government and public affairs at higher education's main presidential association. "There is widespread agreement that it is mind-numbingly complex, and there's an important discussion to be had about ways that it might be simplified. The more ideas the better."

Tucker and Hartle rarely seem to agree, but in the spirit of Thursday's event, they did. "I'm sure some people will oppose this, but what would they suggest?" Tucker said in the interview Thursday. "Is this the best idea? Give me something comparable, and let's have a conversation."

The summit, and the conversation, continues today, featuring a speech by Spellings herself.


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