Exacerbating Inequality

The last year has brought a cacophony of proposals for "fixing" the federal student financial aid system, with debates about the sequester and the size of the federal budget raging, the renewal of the Higher Education Act looming, and a well-financed effort by the Bill & Melinda Gates Foundation priming the pump.

While the recommendations have been all over the map, many of them embrace, to varying degrees, the ideas that any changes made to federal aid programs should assume that there will be no new funds (given budget constraints) and that the programs should be increasingly aimed at students likely to remain in college and earn their degrees.

A new report from the federal committee that advises Congress on student financial aid warns that embracing those principles would serve to exacerbate a system that already disadvantages the postsecondary outcomes of black and Latino students from low-income backgrounds.

The report, "Inequality Matters," from the Advisory Committee on Student Financial Assistance, lays out data showing that a combination of enrollment shifts to two-year colleges and declining persistence rates have contributed to loss of 1.4 million bachelor's degrees of low-income black and Hispanic students who took at least Algebra II in high school.

And it asserts that adopting some of the aid reforms championed by think tanks and others -- such as demanding budget neutral funding of federal aid programs and channeling assistance based on students' likelihood of completing college -- "are likely to further undermine the 4-year college enrollment, persistence, and completion of qualified low-income high school graduates, particularly minority students, and worsen inequality in national educational attainment by income, race, and ethnicity."

Not Naming Names

In criticizing several of the ideas floating around financial aid policy circles right now, the advisory committee's report does not single out any particular groups. But it is clearly targeting some of the proposals developed by associations, advocacy groups and research organizations as part of the Gates Foundation's Reimagining Aid Design and Delivery project, which allocated $3.3 million to more than a dozen entities. Those behind the Gates effort strongly rejected the critique that the foundation's effort was designed in any way to push college completion at the expense of access for low-income students, and Inside Higher Ed's analysis of the 15 Gates-funded reports revealed significant variation in their recommendations.

But some of the papers did embrace the ideas that "Inequality Matters" warns would hurt students from low-income backgrounds. The Committee for Economic Development urged Congress to turn the Pell Grant and other need-based aid programs into a block grant to states, for example, and several of the papers took as a starting assumption that funds for federal student aid should not (or at least will not) increase. Numerous others, including those from the National Association of Student Financial Aid Administrators and the National College Access Network, also called for linking aid funds to college completion. Critics of such approaches note that colleges with the highest completion rates tend to be those that serve the best-prepared students, a cohort that is wealthier and whiter than the student body nationally.

William H. Goggin, the advisory committee's director, has criticized some of those recommendations in the past, and made the case in an Inside Higher Ed essay last year that proposals to reconsider how the federal government awards financial aid to students should be subjected to careful analysis about which students and institutions they would help and hurt.

The advisory committee's new report clearly takes as its starting point that the needs of low-income students should be foremost in policy makers' minds as they review possible changes to aid programs. Building on a 2010 report showing the worsening status of low-income students in higher education, the panel's new paper focuses particularly on low-income black and Latino students who graduated high school and taken Algebra II, traits presumed to position them solidly for postsecondary education.

The vast majority of those young people -- 86 percent of black and 83 percent of Hispanic students -- expected to earn a bachelor's degree, but the likelihood of such students actually enrolling in a four-year institution has declined sharply over time. In 1992, more than half (53 percent) of black high school graduates who had taken Algebra II enrolled in four-year colleges, and 17 percent enrolled in two-year institutions; by 2004, those percentages had shifted to 41 percent and 23 percent. Nearly half of the 1992 Hispanic graduates with an Algebra II background (48 percent) enrolled in four-year colleges and 26 percent in two-year colleges; by 2004, the proportions had changed to 31 percent in four-year institutions and 34 percent in two-year colleges.

"Driven by the rising net price of 4-year public college -- approaching 50 percent of family income -- financial concerns are undermining the 4-year college enrollment of low-income high school graduates, particularly minority students," the report states.

Citing those declining enrollments, the report estimates that the proportion of low-income, black and Latino high school graduates in 2004 who will go on to earn bachelor's degrees will be "decidedly lower" than was true for their peers in 1992, falling to 26 percent from 32 percent for black students and to 21 percent from 28 percent for Hispanics.

Extrapolating further, the report calculates that 1.4 million fewer qualified black and Latino high school graduates will have earned bachelor's degrees in the 2000s because of rising net prices, and that the losses this decade will be even greater, exacerbating "existing disparities in educational attainment, by race, ethnicity, and family income, for the foreseeable future."

The advisory committee's report urges policy makers to take that worsening context for low-income minority students into account when assessing the potential impact of the various proposals being bandied about right now. Denying grants or loans "based on risk of non-completion," as some policies might, "will discourage enrollment, drive students toward higher cost private loans, and undermine persistence and completion," the report asserts.

Transferring Pell Grant aid to block grants to states, the report says, would put decisions about allocation of crucial college funds in the hands of state policy makers who have increasingly allocated their own student aid funds on merit-based rather than need-based grounds, and could result in diversion to other state purposes.

And accepting the idea that overall spending on federal need-based student aid programs must remain level, as many policy makers have suggested given today's government budget constraints, "is tantamount to assuming there are no additional funds for national investment in human capital," the advisory committee paper states. "This austerity-inspired assumption ... will trigger zero-sum redistributions of existing student aid funds, arbitrarily lowering awards to some students while increasing awards to others. Since adequately precise empirical estimates of student response to loss of student aid do not exist, it is virtually impossible to ensure that budget neutral funding will improve completion among those gaining funds more than it will undermine both access and completion among those losing funds."