Financial Aid Reform Called Key to Access
Advocates of increasing access of higher education, such as incoming Undersecretary of Education Martha J. Kanter, believe one of the keys to achieving their goal is to reform the college financial aid system.
Students attending community colleges — despite their reputation as a low-cost educational option — often have a harder time covering their college expenses than do their peers at four-year schools, according to the Institute for College Access & Success.
The California-based institute found that 81 percent of community college students still have unmet financial needs after all aid is awarded compared to 58 percent at public four-year schools.
The Obama administration, which has announced a goal for the United States to have the world’s highest proportion of college graduates by 2020, has proposed a reform agenda. Among other things, it would eliminate one of the federal government’s two student loan programs, eliminating subsidies for private lenders and using the multi-billion dollar savings to ensure a reliable, robust source of money for the Pell Grants — the primary financial aid program for needy students.
President Obama said ending the private subsidies would help 8.5 million students go to college.
“We have a student loan system where we are giving lenders billions of dollars in wasteful subsidies.” He called the system “a paradox of American life” that threatens to widen the gap between the haves and have-nots.
A recent proposal by the National Association of Student Financial Aid Administrators would go well beyond what the president is proposing.
The group announced a sweeping plan that would more than double spending on Pell Grants, eliminate tax breaks for many college expenses; consolidate campus-based aid programs into a single fund; base aid awards on a family’s income and size instead of the current , complicated needs analysis; and create $500 savings accounts for every American child to be used for future college expenses.
“We have a unique opportunity to significantly increase the percentage of Americans who graduate from college,” said NASFAA President Philip Day in a statement accompanying the release of the report. “Adopting NASFAA’s recommendations would create a more effective financial aid system that will enable more Americans to pursue and accomplish their higher education goals.”
Secretary of Education Arne Duncan welcomed the report, saying in a letter to Day that, “I appreciate NASFAA’s efforts to reach out ... and to bring together new ideas through a thoughtful and deliberative process.”
The report notes a gap between the promise of financial aid and its reality, saying that “the fastest-growing portions of the American population are the least likely to attend and successfully complete a higher education program.These students also face greater financial barriers to higher education. Financial aid plays a crucial role in helping these students to earn a college degree, but the current aid system does not offer sufficient aid, and is so complex that it is hard for families to understand and successfully navigate, sometimes even presenting a barrier to those that most need help.”
The recommendations are the result of a year-long effort to gather input from thousands of financial aid professionals, the advice of public policy experts, and data from more than 40 related research studies.
Significantly, left out of the report was a projected price tag, though NASFAA acknowledges that the cost will be large.
“NASFAA shares the Obama administration’s goal of dramatically increasing our number of college graduates, and we agree that bold changes are needed to realize this goal,” Day said. “If we continue business as usual, we risk falling behind in the future global economy and widening gaps between the haves and the have-nots. While the cost of enacting these changes may appear significant, the cost of not implementing them will be devastating to our national economy, our citizens, and for the millions of families who are desperately trying to escape the bonds of poverty.”
What follows is a summary of the recommendations contained in the NASFAA report:
Significantly simplify the federal student aid application process by eliminating unnecessary application questions, allowing families to initiate the financial aid application process through the federal income tax system, and allowing the neediest students to automatically qualify for maximum aid.
Expand and simplify grants by setting and indexing the maximum Pell Grant award to 70 percent of the average costs of in-state tuition, fees, room, and board at public colleges and universities, eliminating less effective programs like the ACG and National SMART Grant programs and rolling those expenditures into the Pell Grant.
Improve financial aid predictability and portability by making it possible for families to understand what aid is available to them well in advance, regardless of chosen school.
Create a single, new student loan program that combines the best aspects of the Direct Loan, Federal Family Education Loan and Perkins Loan programs.
Subsidize student loan borrowers during repayment — instead of while they are in school — and decrease student loan burden by strengthening the Income-Based Repayment program so students never pay more than 10 percent of their discretionary income and loans are forgiven after 20 years of repayment.
Eliminate certain tax benefits that have little impact on increasing college access, repeal taxes on all forms of student aid like scholarships and loan forgiveness and encourage employers to help students pay off their debt through a Human Capital Tax Credit.
Encourage families to plan and save for college by providing every child with $500 to start a college savings account, giving tax breaks to anyone who contributes to a child’s college savings account and provide college aid eligibility estimates for children as young as 10 years old.
Engage public and private entities to increase public outreach to raise awareness about the benefits of a college education and available financial aid, using technology to reach students about their eligibility.
— Paul Bradley