Colleges' Aid Eligibility Should Be Tied to Students' Backgrounds, Report Says

January 30, 2013

The latest in a series of proposals for restructuring the federal financial-aid system recommends evaluating institutional performance based on the backgrounds of students enrolled and redefining institutional eligibility for some federal aid programs.

The Association of Public and Land-Grant Universities released a report, "Federal Student Aid: Access and Completion," on Wednesday, and presented its ideas as ways to balance admissions selectivity, increase access to higher education, and improve completion rates. The report is one in a series of 16 commissioned by the Bill & Melinda Gates Foundation's Reimagining Aid Design and Delivery project.

"For the sake of the students, the structure of federal financial-aid programs must foster achievement as well as access," Michael Tanner, the association's project leader, said in a written statement.

Mr. Tanner, the association's chief academic officer and vice president, writes in the report that federal aid-eligibility guidelines should take into account the effects of different backgrounds in the student populations served at an institution, as well as the default rates of students with federal loans.

"Institutions serving many students from disadvantaged backgrounds often feel they do not get the recognition they deserve," the report says.

The report suggests tightening guidelines that determine institutional eligibility for Pell Grant and student-loan programs. Now an institution loses eligibility if the student cohort default rate exceeds 40 percent in one year or is more than 30 percent for three consecutive years. According to the paper, that high cutoff is meant to protect institutions with many students at special risk of defaulting.

Instead, Mr. Tanner writes, eligibility should depend on the particular risk factors of students at each college, and be reduced or revoked if a cohort's repayment rate falls below a determined threshold or if the three-year default rate goes above a defined threshold, though the report does not provide specific rates.

Other recommendations include providing some per-student financing for institutions with high retention and completion rates, creating a national career-advising system for students, and limiting the number of new aid recipients at institutions that accreditors feel fall below a reasonable standard.

The report also suggests putting conditions on veteran and military benefits, such as requiring evidence of satisfactory academic progress for continued student eligibility.

Previous reports in the Gates series have been produced by the National College Access Network, the Institute for Higher Education Policy, the Committee for Economic Development, the consulting firm HCM Strategists, and the New American Foundation.