N.Y.'s Tuition-Free Dream Meets Details

Clawback provisions and residency requirements worry critics, but New York's governor is pushing the big picture.

April 17, 2017
 
SUNY Plaza

Details of New York’s free public college tuition program stoked a stream of strong reactions in the days since Governor Andrew Cuomo and state lawmakers reached a deal that will have it starting this fall.

Perhaps the most controversial element of the program, which is called the Excelsior Scholarship, is a work and residency obligation that kicks in after students graduate. Scholarship recipients will have to live and work in New York State after graduation for the same number of years they received Excelsior Scholarships, or their grants will turn into loans.

The program has also generated discussion around a requirement that students complete 30 credits per year to remain eligible. And the 30-credit requirement comes with another caveat that has been previously overlooked: students who don’t complete 30 credits in a year could have some of their Excelsior Scholarship clawed back. They’ll still be eligible for the first semester of free tuition in the year in which they failed to complete 30 credits. But after that year is over, they could receive a bill from their college or university asking them to pay for their second semester, unless a hardship is declared.

The 30-credit requirement has further inflamed a long-ranging debate over how to best ensure students, particularly first-generation and low-income students, earn their degrees after enrolling in college. It has also expanded to include discussion over the best way to encourage colleges and universities to help such students graduate on time.

Those arguments join the disagreement over the program’s work and residency restrictions, which has turned into a battle over the merits of brain-drain protectionism on a state-by-state basis in a country where college graduates often move to pursue jobs and opportunity. It also joins existing arguments on whether the program should provide more money for low-income students and whether enough money has been set aside to cover costs.

Together, the discussions reflect the fact that the Excelsior Scholarship is a groundbreaking program that’s captured attention across the country. Now the question is whether it will prove to be an effective policy, making it easier and cheaper for New York students to attend college, or an elaborate tangle of red tape that overpromises, restricts students and will ultimately underperform.

Study in New York, Live in New York, Work in New York

The Excelsior Scholarship is a “last-dollar” program that bridges the gap between tuition costs and previously available state and federal aid. It’s available to students who are New York residents and attend public four-year colleges and universities and community colleges.

In its first year, the program will be available to students from families with annual incomes of up to $100,000 per year. The income limit will go up to $110,000 in 2018 before rising to its ultimate cap of $125,000 the next year.

Those details are essentially the same as what Cuomo proposed when he first unveiled a free-tuition plan in January. But New York Republicans added a major change during the legislative process, adding the residency requirement. The governor has since come out in support of that requirement, however.

“Why should New Yorkers pay for your college education and then you pick up and you move to California?” he said, according to The New York Post.

Not everyone agrees with that sentiment. It’s at odds with the historic relationship between public higher education and taxpayers, according to Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.

Traditionally, state colleges and universities have posted lower tuition for in-state students than for other students, under the idea that taxpayers had been helping to fund those institutions for years before their children enrolled, Nassirian said.

“This notion of creating a prospective [postcollege] residency requirement kind of breaks that historical arrangement,” he said. “It’s really dangerous to turn it on its head.”

Yet this is far from the first time student aid has been tied to some kind of residency requirement. Such requirements have cropped up at the state level in free community college plans, like a newly enacted plan in Arkansas that would require its grant recipients to work full time in the state for at least three years after graduation. Many states, including New York, also have loan forgiveness programs helping graduates pay off their student debt if they work in certain professions and in certain geographic areas.

Maine a decade ago started offering a tax credit reimbursing student loan payments to residents who earned their degrees in the state and decided to work there. The program has since been modified several times to establish different qualifications and benefits.

No other program seems similar enough to the Excelsior Scholarship to serve as a proxy for how New York's program will affect graduates, however -- in specifics or in size. In Maine, for example, 5,642 people filed returns for the tax credits in 2015 at a cost to the state of $9.3 million. In contrast, New York has appropriated $87 million for the Excelsior Scholarship’s first year alone. That money is enough to cover an estimated 22,000 students.

Many believe more students will apply for Excelsior Scholarships, however. Cuomo’s office has estimated that 940,000 families with college-aged students will be eligible for the program by the time it is fully in place in 2019.

“We don’t have many programs that are like this,” said Robert Kelchen, an assistant professor of higher education at Seton Hall University who has written about challenges the Excelsior Scholarship program faces. It will be hard to look at other programs as a way to predict how many New York students will be affected by the residency requirement, he said.

“The closest thing we have is probably a federal TEACH Grant,” Kelchen said. “To some extent, that encourages staying in a particular state, because it can take time to get a teaching license in another state.”

The U.S. Department of Education runs the federal TEACH Grant, which offers up to $4,000 per year to students who commit to teaching in low-income school districts for at least four out of eight years after they graduate. Those who don’t fulfill their TEACH Grant commitments have their grants converted into loans, similar to the mechanism in the Excelsior Scholarship.

In 2015, a Government Accountability Office report found that about a third of the TEACH Grant’s 112,000 recipients had their grants converted into loans. That rate won’t necessarily be reflected in New York’s program, however. The report said some conversions were the result of government or contractor errors.

Cuomo’s office says 84 percent of graduates from the state’s higher education systems -- the State University of New York and City University of New York -- stay in the state after graduation. That roughly aligns with SUNY data on students who earned associate and bachelor's degrees, provided the portion of students who live in New York after graduation roughly aligns with the portion who work in the state.

SUNY data show 83 percent of students employed in New York State in the first year after graduation. The portion drops to 78 percent in the second year after graduation and to 73 percent in the fourth year.

In many other states, especially those with struggling economies, top students routinely leave the state after graduation. But that's not the case in New York, as reflected in the relatively high number who remain. Some of the reasons graduates leave the state, such as to enroll in graduate or professional school, would entitle them to defer the requirement that they remain in state or have their scholarships converted to loans.

Meanwhile, another analysis shows about a fourth or a fifth of New York’s college graduates leave the state within four years. Douglas Webber, an assistant professor of economics at Temple University, analyzed U.S. Census Bureau Data and estimated that between 20 percent and 25 percent of New York college graduates leave the state within four years of receiving their degrees.

Data limitations mean that’s a rough estimate of past conditions, though. It doesn't distinguish between private and public institutions, so it doesn't align perfectly with the Excelsior Scholarship, particularly if graduates from public colleges are more likely to remain in the state. And even if the estimate is accurate, it isn’t necessarily predictive of the future -- many students could very well decide to stay in New York in order to keep their Excelsior Scholarships from converting into loans.

Webber argued such a decision is also a significant impact, however.

“You don’t necessarily need to know how many people are going to leave the state in order to know how many people it’s going to affect,” Webber said. “In some sense, if you decide to stay in the state because of this requirement, I would also count that as someone who is affected.”

The residency requirement can have numerous economic implications, Webber said. Research shows that the first job a graduate lands can have a major impact on their earnings in the future, he said. Economists liken the labor market to a ladder -- if you start on a lower rung, it’s harder to climb as high as you would have if you started on a higher rung.

So taking a slightly lower-paying job in state instead of a higher-paying one out of state can matter over time.

“One of the big reasons that a college degree gives you so much earning power is because it allows you to compete in a national labor market,” Webber said. “Just from the perspective of taking that away, or at least putting up a barrier to that, it absolutely will affect earnings in some people.”

It should be noted that New York has the job center of New York City, given graduates a fertile ground for in-state jobs at typically higher wages than those paid elsewhere. Still, some graduates could find it difficult to pay for New York's high cost of living right after graduating. They will not have the option of living across the river in New Jersey if they want to keep their scholarships from converting into loans.

Others questioned whether New York's government is prepared to verify that thousands of Excelsior Scholarship recipients continue to live and work in the state for years after graduation. The scholarship covers two-, four and five-year programs, meaning that in some cases officials would need to verify a student’s workplace and residency for half a decade.

“In my estimation, any state aid program that requires students to live and work in a certain state will be administratively burdensome and confusing for students to navigate,” said Sarah Pingel, a senior policy analyst with the Education Commission of the States. “We can look to states that currently offer loan forgiveness for working in certain occupations as an example. State-run loan forgiveness programs are generally very small in size but have eligibility requirements that can be difficult for states to monitor and enforce.”

New York officials have argued that they will be building upon an existing verification infrastructure, however. Graduates will have to verify their residency by providing some type of documentation like a pay stub, tax return or phone bill. The State’s Higher Education Services Corporation will notify students of requirements. That agency already oversees several existing state loan forgiveness and scholarship programs with residency requirements.

It's worth emphasizing, however, that those programs are smaller than the Excelsior Scholarship is expected to be. New York had seven programs in 2015 that were classified as conditional grants, conditional loans, loan assumption programs or loan forgiveness programs, according to the latest data available from the National Association of State Student Grant and Aid Programs. Those programs covered a total of 1,371 recipients. Their expenditures totaled $7.7 million.

30-Credit Requirement

The governor’s office has cast the Excelsior Scholarship’s 30-credit-per-year requirement as a component that will ensure students complete college on time. It has strong support from Complete College America, a nonprofit group backing the 15 to Finish campaign that encourages students to take at least 15 credits a semester.

The group’s president, Tom Sugar, compared New York’s program to the tuition-free community college Promise programs that several states have put in place and other aid programs that require students to take 12 credits per semester. The Promise programs are built for access, he said. But he went on to argue that access without completion lets students down and can lead to a loss of public funding in higher education as policy makers and taxpayers see money as being spent without results.

“Access is critically important,” Sugar said. “If success doesn’t follow, it will all be over with.”

The Excelsior Scholarship attempts to balance its 30-credit requirement with some flexibility for students. Students can use a January or summer term to get to their 30-credit requirement. The minimum number of credits they need to take per semester is 12. The scholarship can also be paused for certain interruptions, like a family death, medical leave or military service.

Still, many wonder how the 30-credit requirement will affect low-income students who may need to work summers to pay for rent or college fees -- expenses that the Excelsior Scholarship program does not cover. They say the benefits of free tuition need to be available to part-time students. And they wonder if students will drift toward easier programs in order to ensure that they will meet the academic standards necessary to keep their free tuition.

Sugar sees it another way: he believes the strict requirement will force public colleges and universities to change. They might find new ways to support students and start scheduling classes at more convenient times so those students can work while they attend class, Sugar said.

“The 30-credit requirement in Governor Cuomo’s plan will inspire innovation,” he said. “It will inspire colleges to adopt strategies that are proven to work, to help students accumulate more credits and therefore graduate closer to on time.”

It’s not entirely clear how many students at public colleges would have to change their behavior to meet the 30-credit requirement. Currently, about 80,000 SUNY students from households with incomes of $125,000 per year or less take 15 credits per semester in the fall and the spring. Roughly half already attend tuition-free under existing forms of student aid.

What is becoming clear is what will happen to Excelsior Scholarship students who fail to complete 30 credits in a year. The legislation that authorized the Excelsior Scholarship says that such a student is only eligible to receive their award for the first semester of that year.

So the student becomes ineligible for the second semester of the year. Colleges and universities will be responsible for charging such students.

That makes the Excelsior Scholarship a high-risk proposition for students and families, said Tom Hilliard, senior researcher at the Center for an Urban Future, a New York City-based nonprofit organization.

“You’ve really moved far away from free college as a benefit to the student,” he said.

Sugar, of Complete College America, declined to comment on the possibility of a student receiving a bill for their second semester after missing the 30-credit cutoff, saying he had only recently learned that detail about the New York program and that the state still has to go through an administrative rule-making process that could impact the specifics of such a situation. Instead, he addressed the general concept of a strong set of incentives and disincentives.

“Is it a good thing or a bad thing that the incentives are strong?” he said. “Certainly, the notion that you might get a bill because you didn’t complete -- I understand how folks might react to that negatively. But these incentives need to be strong, because the reward is so great.”

It should also be pointed out that New York offers several programs and benefits for part-time students. Tuition at its community colleges is low. The state makes part-time Tuition Assistance Program grants available to students who have previously completed a year of classes at a load of 12 credits per semester.

Other Requirements

Meanwhile, the debate will likely continue about numerous other parts of the Excelsior Scholarship. Since Cuomo first unveiled his plan in January, some experts have pointed out that New York already has a generous Tuition Assistance Program that helps students pay the cost of tuition. They wonder if the money allocated to free tuition would be better spent on assisting low-income students with support services or helping them pay other costs that can keep them from finishing college, like room, board and fees. Public institutions have often turned to increasing such costs when they are unable to raise tuition.

Additionally, critics have argued that New York has not set aside enough funding to cover costs. They say New York's allocation, $163 million over three years, isn’t enough to cover a potential 940,000 families.

Administrators at some of New York’s private colleges and universities -- many of which have been critical of the free public tuition program or think it threatens their institutions' futures -- have pointed to language in the authorization bill that allows the state’s Higher Education Services Corporation to set up a lottery for awarding scholarships in the event that funding does not match demand. They’ve taken to derisively calling the program the “SUNY Powerball.”

Cuomo’s administration has expressed confidence that the state will provide enough funding to meet demand. And it is true that, in states with tuition programs benefiting the politically influential middle class, legislators tend to come through to provide necessary money.

The governor in public appearances has focused on a larger argument, saying that the idea of free college is powerful. It will inspire students, he said last week in an interview with talk radio host John Catsimatidis.

“It says, every child who puts his head on the pillow or her head on the pillow -- you can be a success,” he said, according to a transcript of the appearance circulated by his office. “It doesn’t matter if Mom and Dad can’t pay for college. It says to parents, ‘Don’t worry about paying for college. Don’t worry about choosing between paying rent and paying for college education. The state will invest in your child because that’s an investment in the state.’”

That argument appeals to many of Cuomo's critics, who believe there is something to be said for highlighting the importance of higher education and putting new money into public colleges and universities after years of disinvestment across the country. But the argument also highlights their biggest problem with the governor's signature program: that students and parents attracted by the glamorous promise of free tuition might be let down by a tangle of fine print that runs from residency requirements to scholarship clawbacks.

“What is the likelihood that parents and students will get past the message of free?” said Nassirian, of AASCU. “It’s absorbing the very powerful and, frankly, important message of ‘free’ in huge letters and then footnoting it in fine print with all kinds of contingencies.”

Paul Fain contributed to this article.

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