As college costs have increased, and more federal and state aid has become merit-based, the doors of educational opportunity have closed for many students. Countless numbers are being denied access to college simply because they cannot afford it, undermining the fundamental policy object of the Higher Education Act of 1965.
On Capitol Hill, legislators are considering various measures to provide more financial support to students, such as a proposal to halve the interest rate on federal student loans. These are overdue steps in the right direction — but they are definitely not enough. Our nation needs a comprehensive overhaul of the entire system, so that it reflects today’s changed environment and adequately supports independent, low-income, and first-generation students.
When the Higher Education Act was passed, more than 40 years ago, it focused primarily on 18-year-old high-school graduates who transitioned immediately into full-time, four-year, postsecondary institutions. But today the majority of students follow nontraditional paths from high school to college. They often are older and have jobs, families, and other commitments. They are more likely to attend a community or proprietary college and to enroll part time. And many are financially independent of their parents.
Indeed, independent students represent 64 percent of the students at community colleges and 37 percent at four-year colleges, according to a 2005 report from the National Center for Education Statistics. Fifty-eight percent of those students work at least 35 hours a week, and 67 percent have delayed college enrollment after high school.
Under federal law, all students age 24 and older are considered independent students for financial-aid purposes. Younger students become independent if they are married, have dependents of their own, are veterans of the armed forces, or are orphans or wards of a court. In addition, financial-aid administrators can use their professional judgment to declare students independent in special circumstances — for instance, if the students have been abandoned at an early age or removed from their home because of abuse, or if their parents have been institutionalized or incarcerated.
Yet the government has not automatically equated financial self-sufficiency with independent status since 1992, when it eliminated student income from consideration, thus preventing many students who are truly independent from qualifying as such. All too often students from broken homes get kicked out of the house when they reach the age of majority and are left to fend for themselves. Their college aspirations are derailed, however, by financial-aid application forms that require them to submit parental information. Such students are forced to wait until they turn 24 before they can enroll in college. Education Department restrictions on the use of “dependency overrides” do not allow financial-aid administrators to declare such students independent, even if they demonstrate total self-sufficiency.
Furthermore, the formulas that student-aid officers use to evaluate financial need are not geared to independent students. For example, because those formulas are weighted heavily toward current income, they penalize students who make more money than others without considering that independent students must maintain a reasonable standard of living for their families at the same time they are pursuing their degrees. In addition, many independent students cut their working hours once they enroll, making prior-year income a poor predictor of their ability to pay while in college.
Going to college is also more expensive for independent students than for traditional ones, given the costs, among others, of married-student housing and health insurance for spouses and children. But cost-of-attendance formulas don’t take that into account. For example, the current needs-analysis formulas include an “income-protection allowance,” a modest allowance for basic living expenses that is based on Bureau of Labor Statistics data of spending patterns in 1967. Although the allowance is adjusted annually for inflation, it does not reflect the different mix of expenses today’s families face, nor the faster-than-inflation growth in health-care and other costs.
Those are just a few of the ways that our current financial-aid system puts independent students at a disadvantage. To truly ensure access for all qualified students, government leaders should consider several important and practical ways to revise it. They should:
Restore financial self-sufficiency as grounds for independent-student status. The bright-line test for independent-student status was repealed because it was prone to abuse. In part that was because the bar for self-sufficiency was set too low: Parents could not claim the student on their income-tax returns, and the student should have earned at least $4,000 per year over the previous two years. Wealthy parents could easily pay their children to work for the family business and could forgo claiming an exemption for two years in order to qualify them for increased financial aid. In reality, such students were still financially dependent on their parents and not truly self-sufficient.
In addition to current methods, the federal government should restore financial self-sufficiency as a basis for determining independent-student status. But it should increase the income threshold to a more reasonable level, such as twice the poverty level, and require that such income not be derived from a relative, either directly or indirectly. That approach would clearly identify students whom any reasonable person would consider to be financially independent of their parents. While it wouldn’t resolve the issues of all students who are kicked out of their homes, it would help many more to matriculate sooner.
Allow the expected family contribution to go “negative.” Under the current system, the expected family contribution is not allowed to drop below zero in needs-analysis formulas, even if family income is below the minimal standard of living represented by the income-protection allowance. Many poor students must support spouses and children as well as their parents. Yet colleges are reluctant to recognize cost-of-attendance expenses like married-student housing or health insurance for other family members because such expenses do not fit well in the current schema — which focuses on student costs, not family costs, and takes into account only those expenses closely associated with enrollment in a postsecondary institution.
That effectively sets a cap on aid to lower-income students and fails to adequately compensate for their inability to pay for college. If such expenses could be included in the needs-analysis formulas, a poor student’s expected family contribution might be, for example, -$500, instead of, say, $1,000, enabling that student to qualify for additional aid.
Let undergraduates take out PLUS loans by themselves. Loan limits have not kept pace with increases in college costs. In addition, parents of independent students are often unwilling to borrow through the PLUS loan program because it is a parental obligation. That forces more students to borrow through more-expensive credit-based financing, like credit cards and private education loans. Yet few needy independent students have a credit score, and when they do, it is usually too low to qualify them for such sources of alternate financing.
Meanwhile, even at an inexpensive community college, the cost of attendance can outstrip the combination of a full Pell Grant and full Stafford Loan. Thus, despite the higher Stafford Loan limits available to independent students, many independent students find it difficult to make ends meet.
Congress appears reluctant to increase Stafford Loan limits any further because the costs increase with loan volume, largely because of student and lender interest subsidies — for instance, the government pays the interest on those loans while the students are still in college. Allowing undergraduates, with or without their parents, to borrow from the PLUS loan program — which has an interest rate that never exceeds 9 percent and no automatic subsidies like government payment of students’ interest — would increase their loan limits at no extra cost to the government. That represents a reasonable compromise.
Eliminate loans from the financial-aid packages of low-income students. With low-income students, the form of the financial aid matters almost as much as the amount. They fear debt and have much less experience with it than middle-income and upper-income students do. Would you go to college if you were told that you would have to borrow more money than your parents earn in a year?
Arguments about after-graduation income being sufficient to repay the debt are not persuasive. If the purpose of student aid is to increase access to higher education, governments and institutions should tailor both the amount and the type of aid to the populations that need to be served. Otherwise, promoting access without facilitating enrollment presents students with an empty promise.
Several elite colleges, led by Princeton University, have developed policies that eliminate or significantly reduce loans in the financial-aid packages of low-income students, usually defined as those who are eligible for Pell Grants. As a result, the number of low-income students matriculating at Princeton has doubled.
But eliminating loans requires handing out more grant aid, and most colleges cannot do that without government help. Congress has hesitated to increase the maximum Pell Grant — which has remained unchanged for four years — in part because doing so would not only increase grants to current recipients but also expand the pool of eligible students, causing costs to balloon. For every $100 increase in the maximum Pell Grant, about 85,000 more students would qualify.
A possible solution is to double the maximum Pell Grant while keeping the eligibility cutoff at the current $3,850. The cutoff corresponds roughly to the bottom income quartile, a reasonable definition of low income. While expensive, that would remove the major obstacle that prevents otherwise qualified students from pursuing a college education. Setting the maximum Pell Grant high enough to eliminate loans from the financial-aid packages of low-income students would also establish a clear philosophical basis for determining the maximum Pell Grant instead of pegging it to an arbitrary figure. What’s more, it is an expense that could pay for itself. If only 200,000 additional low-income students graduate with bachelor’s degrees each year, and each of those students contributes only $5,000 more in federal income taxes every year, it would bring in millions of dollars in additional revenues. The program could be self-sustaining in less than a decade.
Federal student-aid policy should ensure access to college regardless of one’s ability to pay and should focus on maximizing the number of talented students who graduate. Yet major improvements in financial aid occur only when the nation’s leaders actively participate. Presidents Franklin D. Roosevelt and Harry S. Truman led the charge for various versions of the GI Bill; President Lyndon B. Johnson, Education Commissioner Francis Keppel, and Congressman John Brademas led the support of the Higher Education Act; and President Bill Clinton and Education Secretary Richard W. Riley spearheaded the passage of the direct-student-loan program.
For further major improvements to occur today, the president and Congressional leaders must also support change. The battle cry of the Higher Education Act — that no one should be denied the opportunity of an education because of money — is just as relevant today as it was in 1965.
Leo Kornfeld is managing director of a consulting firm that focuses on education. He formerly was vice president for enrollment management at Pace University and a presidential appointee in the U.S. Department of Education in both the Carter and Clinton administrations. Mark Kantrowitz is publisher of FinAid.org and director of advanced projects at FastWeb.com, an online resource for student financial-aid information.
http://chronicle.com Section: The Chronicle Review Volume 53, Issue 23, Page B11