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Brookings State Grant Aid Study

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Released last week by the Brown Center on Education Policy at Brookings, Beyond Need and Merit: Strengthening State Grant Programs describes the scope and type of state grant programs across the US, and provides recommendations for improvement. Such programs currently provide over $9 billion in aid to students each year and comprise, on average, approximately 12 percent of total state funding for higher education. However, they vary widely in number, complexity, eligibility criteria, grant amounts, and efficacy.

Average annual tuition at a public four-year institution in the US is just over $7,000, and the average state grant disbursed to students ranges from $44 in Alaska to over $1,700 in Sourth Carolina (averaging $627 across all states). While 73 percent of all such aid is disbursed based primarily on financial circumstances, many states have adopted large, merit-based programs in recent years that direct grants to non-needy students. For example, the report notes that in Louisiana, where the average annual household income is $45,000, 45 percent of total state grant funds went to students from households with income above $80,000.

Ultimately, the report focuses on ways to potentially streamline state grant programs and better target their resources to those students who need them most in order to increase the impact on both college access and completion. Major recommendations include:

  • Focus grants on students with financial need, who have been shown by research to be most postively affected by grant aid.
  • Simplify grant programs to the extent possible while still being able to target resources to needy students. Straightforward applications, early knowledge of awards, and effective net-price calculators all have a positive impact on application and enrollment rates for students with financial need.
  • Consolidate multiple programs where possible, including converting state required tuition set-asides to state grants to avoid the appearance that the students are subsidizing needy students instead of the state.
  • Create financial incentives for students while they are enrolled by requiring minimum but attainable grades and steady progress toward completion.
  • Consider targeting resources to non-traditional students, including those who are older, part-time, and placebound.
  • When resources are constrained, ration grant aid in a way that is clear and predictable for students.
  • Consider state grant aid incentives in concert with federal and institutional aid to ensure that programs are not operating at cross purposes.
  • Evaluate existing programs as well as test and evaluate new approaches.

Although not discussed much in the report, Washington State has one of the most generous state grant programs in the nation, even though it currently does not have enough funds to accomodate all qualified students. 98 percent of Washington grant funds are awarded based on student financial need and the average grant per student is nearly $900, compared to the national average of $627. Washington State Need Grant funding and policy has and will continue to be key to maintaining college affordability as scarce resources have necessitated rising tuition while household incomes are stagnant. This report provides some useful guidelines for ensuring that taxpayers receive the best return for each dollar invested in student success.

Another Report on the Effect of Public Investment on Attainment

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Demos, a research and advocacy organization, recently published a report entitled “The Great Cost Shift” discussing the effects of higher tuition and lower state investment on a growing and diverse college population. The report focuses on the Millennial generation, the group of students born in the 1980s and 90s and beginning to enter college in the 2000s.

 There were 26.7 million young people (ages 18-24) in the US in 1990, and 30.7 million in 2010. This population growth combined with increased participation in higher education created a 37.9 percent undergraduate enrollment increase in public universities over 20 years. Additionally, the Millennial generation is characterized by much greater racial ethnic and racial diversity than previous generations (12.3 percent are African American, 57.2 percent are white, and 20.1 percent are Hispanic). Both the growth and diversity of the young adult population has altered the needs of students, and institutions have had to adjust both services and support as a result.

These changes in the number, type and needs of students over the last 20 years has been accompanied by a steady disinvestment of state governments in higher education, which resulted in significant  tuition increases. The very institutions, public, that have absorbed the majority (65.5%) of enrollment increases have also endured the largest decline in funding per student (26.1% decline in real terms from 1990-2010). As a result, public four-year institutions raised tuition by 112.5 percent, adjusted for inflation, over the same time period while the real median household income rose just 2.1 percent.

While states and institutions have often offset these tuition increases with larger financial aid packages for student with need, it is increasingly not enough to cover students’ educational expenses, and students borrowed 4.5 times more in 2010 than in 2000.

The report concluded with a number of recommendations:

  • Recognizing that lower investment in higher education results in higher tuition and lower access for low and middle-income students, states should appropriate more money to higher ed, especially investing more in large institutions that produce a significant number of degrees.
  • Reform the tax system to relieve the tax burden on low and middle-income families.
  • States should move away from merit-based aid and focus on need-based financial assistance. They should also increase awareness about the benefits of federal student loan programs to decrease the volume of private debt students take on.

To read the entire report, please click here.

Majority of Americans Think College Is Beneficial, Though Disagreements Over its Primary Purpose Remain

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According to the latest survey by the Pew Center for the People and the Press, conducted in late February, the majority of all Americans think higher education contributes positively to the country, while those identifying themselves as conservative were more likely to doubt its benefits. While 67 percent of Democrats believe college affects the country positively, only 51 percent of Republicans and 46 percent of conservative Republicans agree. For those who self-identify as agreeing with the Tea Party, only 38 percent think colleges have a positive effect and 47 percent think they have a negative effect.

That said, both Democrats and Republicans who have experienced higher education think it was a worthwhile personal investment (81 percent and 85 percent, respectively). Furthermore, parents of all political backgrounds fully expect their children to go to college: 99 percent of Republican parents, 96 percent of parents who are Democrats and 93 percent of Independents hope their children will receive higher education.

Finally, the primary purpose of college is debated across the political spectrum. While liberal Democrats tend to say college should focus most on enhancing the student personally and intellectually (47 percent), 52 percent of conservative Republicans think college should focus primarily on teaching skills and knowledge needed in the work world. In general, 47 percent of survey respondents thought skills were the most important, while 39 percent believed personal growth was the crucial component of a college education.

To read more about the survey, please follow the link to the report on the Pew Research Center website.

Obama’s Blueprint for Higher Education Affordablity

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As reported on the UW Office of Federal Relations blog, President Obama made a splash in the higher education community last week when he outlined new proposals for higher education reform in his State of The Union Address and in a speech at the University of Michigan. Many are praising the President’s focus on the value of higher education in today’s economy, and in particular, the importance of high quality, affordable higher education. However, a proposal to more closely tie federal financial aid funding  to some kind of institutional performance measures has proved more controversial.

In what the Administration is calling a Blueprint for College Affordability, Obama has proposed that Congress significantly increase available federal campus-based aid (primarily Perkins loans) and distribute the funds based on three institutional performance measures, including relatively low net tuition levels or low tuition growth, providing a good value to students, and serving low-income students. Until a detailed policy proposal is unveiled (likely after the election), it is difficult to know how substantial a shift this may be for institutions, but it is clearly an attempt to send a message to institutions about cost control. Obama stated, “If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.”

Other proposals included in Obama’s blueprint, include:

  • Creating a $1 billion Race to the Top program to reward states for making systemic changes in education policy and funding to increase efficiency and effectiveness.
  • Creating a $55 million First in the World competition to provide seed funding for institutions or other nonprofits to innovate.
  • Publishing a ‘College Scorecard’ for each institution, which will provide clear, comparable information on college costs, financial aid, graduation rates and, if these data become available, potential earnings.
  • Asking Congress to make the American Opportunity Tax Credit permanent, extend the lowered federal student loan interest rate (3.4%), and double the number of federal work study jobs.

Without policy details it is hard to know how these reforms might affect specific institutions, but because it marks a shift from previous federal efforts to facilitate attainment by increasing federal aid and easing federal loan repayment pressure, it is an important development and one that we will keep a close eye on.

New OPB Brief

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This week, UPenn’s Institute for Research on Higher Education (IRHE) released a report assessing the state of higher education policy in Washington State. While satisfactorily describing the key facts and long-term trends and potential future problems for higher education in Washington State, the report is somewhat unrealistic in its recommendations. It seems to assume that, absent any change in state funding trends, policymakers can dramatically alter educational attainment via structural changes in governance.

Read the latest OPB brief for more information.

Online Learning Still Plagued by Uncertainty

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The Thomas B. Fordham Institute published an interesting paper recently called Creating Sound Policy for Digital Learning. While primarily focused on the role of technology in K-12 education, the paper provides perspective for higher education as well. This topic is especially important as the economic crisis continues to push universities to produce more with less and, as a result, demands to scale up online learning intensify.

The paper recognizes the hope and possibility that technology will produce productivity gains in education over the long-term, but addresses major questions about quality and cost and emphasizes the need for systematic testing and analysis prior to radically changing today’s teaching model. Among the important points brought up in the paper:

  • We must question not only whether online learning can be less expensive than traditional learning, but, more importantly, whether it can be both less expensive and at least as good (or better) in quality and outcomes. We do not yet have enough data to answer this question.
  • The world of online learning is not monolithic. There are many ways to integrate technology with learning , and each model has very different costs and benefits and downsides.
  • Like with any new model, the start-up costs are very high and require a large up-front  investment.
  • Many assume that online learning will minimize labor costs by reducing a reliance on in-person instruction, but labor costs associated with developing, running, and maintaining sophisticated technology-based programs are themselves very high.
  • Similarly, online learning requires a dependence on expensive equipment (not only individual learning devices for teachers and students, but also servers, storage, and all the needs that accompany the maintenance and management of a large, technology-based enterprise).
  • Because technology changes so frequently, many of these costs are confronted anew on a much more regular basis than in a traditional educational model (e.g. Universities spending millions to wire entire campuses and then very quickly having to switch everything over to WiFi).

Technology has revolutionized how we live and do business in the modern world. This has been true in education as well, but the effect has not yet been as transformative as was hoped for. As education becomes more important in developing the human capital required for the economy of the future, its rising costs have become a bigger target for reform. And while it is clear that technology can and should play a larger role in changing how we educate the students of tomorrow, it is important that neither the tools of education nor the cost of education take precedence over the quality of the education.

Tax Benefits Increasingly Key to College Affordability

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Note that the report summarized in this post reflects data through 2007-08. We know from more recent data that 2009’s expansion of the American Opportunity Tax Credit (formerly the Hope tax credit) has more than doubled both benefit and participation rates, so we anticipate future reports to reflect similar but magnified findings.

In its latest Stats in Brief report, the US Department of Education analyzed the impact of federal education tax benefits on college costs for families in 2007-08. The report analyzes three different types of education tax benefits that applied in that year: the Hope tax credit, the Lifetime Learning credit, and the tuition and fees tax deduction.

Eligibility for the credits and deductions was based on student enrollment status, family income level, and citizenship status, and benefits could only be claimed based on the net tuition paid, after grant aid and veterans’ benefits had been taken into account. During the time period analyzed, the Hope credit could be deducted multiple times for multiple children, with a maximum of $1,650 per dependent student. The Lifetime Learning credit and the tuition and fees deduction could only be claimed once per return, with maximums of $2000 and $4000, respectively. The report showed that higher education tax benefits have become an increasing source of student aid: total benefits reached $6.85 billion in 2007-08, and comprised 6 percent of the federal government’s aid dollars that year.

Other interesting findings include:

  • 47 percent of all students in 2007-08 were estimated to have received a federal education tax benefit, reducing college expenses for the year by an average of $700. By contrast, only 27 percent of students received a Pell Grant the same year.
  • Tax credits were most beneficial for low-middle and high-middle income families: low-income families generally do not have enough after-grant net tuition expenses to qualify for benefits, and most high-income families exceed income limits. Of low-middle income families, 56 percent received tax benefits in 2007-08, compared to 63 percent of high-middle income, 48 percent of high income and 29 percent of low income families.
  • While the average benefit for families  in 2007-08 was $700, high-middle income families received an average of $1000 and low-middle income families received $900 in tax benefits.
  • On average, tax benefits decreased the cost of college attendance by about 5 percent.

For more information, check out the full report. To learn more about available tax credits, visit UW’s Office of Student Financial Aid or the IRS’ website.

Californians Concerned About the Future of Higher Ed

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A new telephone survey, conducted by the Public Policy Institute of California, suggests that although Californians appreciate the quality of their higher education system, they are concerned about the direction in which it is headed. In fact, only 28 percent of Californians think that the system is headed in the right direction, while 62 percent claim it is headed in the wrong direction. While respondents still believe higher education is integral to future success in the workplace, they are worried that affording higher education is becoming increasingly difficult.

Californians’ main concern for the future of higher education is affordability. 61 percent believe affordability is a big problem. Among parents of college students in California, 77 percent are very concerned about the increasing tuition. Fully 69 percent of Californians do not believe we should increase fees to fund higher education. Furthermore, only half of respondents agree that financial help is available for those who need it, and 75 percent believe that students must borrow too much for college.

Respondents mainly blame California’s government for the declining affordability of higher education. Only 29 percent think Governor Jerry Brown is handling higher education well, and only 14 percent think the legislature is doing a good job. 74 percent say the state does not fund higher education adequately. This assertion breaches the ideological divide, with 58 percent of Republicans agreeing that more funding is needed. However, respondents are split on their willingness to pay higher taxes to support higher education (52 percent unwilling, 45 percent willing).

More about the survey is available in the full report in this PDF document.

Is Higher Education the Next Bubble?

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As we continue to experience a very slow recovery from a deep recession, the ideas of long-time critics of modern, inclusive American higher education who question the value of college for many have gained traction and blossomed into widespread public speculation about whether undergraduate education might be the next economic bubble to threaten the US economy. We explore this topic in the latest OPB brief and hold that, in the context of data, the ‘bubble’ metaphor, though effective at capturing public attention in an economic climate characterized by fear and uncertainty, is ultimately inaccurate, misleading, and harmful.

We would love to hear your feedback on this topic!