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Pell Grant Changes Hit Transfer Students Hardest

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One of several recent Pell Grant changes has made it harder for some students to finish school and earn a degree, according to Inside Higher Ed. Effective July 1st this year, the federal government decreased the duration of Pell eligibility from 18 semesters to 12 semesters as a means of both cutting costs and incentivizing students to graduate on time. While most students take less than 12 semesters to earn their bachelor’s degree, existing Pell recipients (who expected to receive 18 semesters of eligibility) were not grandfathered in when the changes took place.

Of the estimated 62,000 students affected by the change, colleges say the hardest hit were transfer students and students who have attended some college, but never earned a degree. More specifically, many impacted students seem to be those who:

  • Left school before graduating, but have returned to complete their degree;
  • Transferred, or “swirled,” between multiple schools—a growing trend in higher education;
  • Enrolled with a for-profit institution, but transferred elsewhere before graduating; and/or
  • Changed programs multiple times within the same school.

According to an “informal tally” by the California State University system, about 6,100 of the system’s students (4 percent) lost Pell Grant eligibility because of the new 12-semester limit.

Since some students who lose eligibility may not be able to afford to continue their education and earn a degree, this change could conflict with the government’s emphasis on improving graduation rates and increasing the number of degree-holders. However, as Congress gears up to deal with impending sequester cuts, the financial benefits of these types of tough decisions are increasingly likely to outweigh the nonfinancial costs.

Supreme Court Justices Hear (and Question) Arguments in Fisher v. University of Texas

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The U.S. Supreme Court heard arguments yesterday in the landmark affirmative action case Fisher v. University of Texas (UT) (please see our previous blog for more information). Four Justices will need to support UT if it and, potentially, public colleges across the nation are to continue using race and as a factor in admissions decisions. Three justices hearing the case have historically supported affirmative action. A fourth supporter, Justice Kagan, recused herself because she played a role in preparing the Obama administration’s UT-supportive brief. The other five justices have typically expressed doubt over affirmative action’s value. Of these, Justice Kennedy is regarded as the most plausible swing vote. A 4-4 tie would uphold the federal appeals court ruling that UT’s program is constitutional.

Justices seeming to favor Fisher questioned:

  • If UT could know it had achieved a desired level of diversity without setting a target and verifying its students’ self-reported race; and,
  • Whether an admission process is truly fair if it benefits minority students from affluent backgrounds as much those from poverty. Justice Alito Jr. said: “I thought the whole purpose of affirmative action was to help students who come from underprivileged backgrounds.”

Justices seeming to favor UT questioned:

  • Whether Ms. Fisher’s suit is even legal, given UT’s statement that she would have been rejected regardless of race considerations; and,
  • Why the Court should change its 2003 decision on Grutter v. Bollinger—“A case into which so much thought and effort went and so many people around the country have depended,” said Justice Breyer.

Both sides agreed that the Court may have led colleges astray in 2003 by ruling that applicants’ race could be considered in order to assemble a “critical mass” of minority students. They said the term “critical mass” (defined by Grutter as the sufficient number of minority students to ensure they feel comfortable speaking out, not isolated) encourages colleges to aim for some numerical threshold of minority students, but such an approach could violate the Court’s ban on college’s use of quotas. After the arguments, the esteemed SCOTUSblog offered that: “Affirmative action is alive but ailing, the idea of ‘critical mass’ to measure racial diversity is in very critical condition, and a nine-year-old precedent may have to be reshaped in order to survive.”

The Court is expected to decide the case in spring or summer of next year.

Supreme Court Case Calls into Question the Use of Race in Higher Ed Admissions

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On October 10th, the U.S. Supreme Court will hear arguments in Fisher v. University of Texas (UT)—the first Supreme Court case on the use of race in higher education admissions since Grutter v. Bollinger in 2003. The case asks that the Court either declare UT’s admissions policy to be in violation of Grutter v. Bollinger or entirely overrule their 2003 decision that race could play a limited role in universities’ admissions policies. An overruling of Grutter could effectively end affirmative action at public universities.

Although around 80 percent of UT’s admissions decisions are made via a unique, race-blind method called the Top 10 Percent Plan, the case challenges whether UT’s “holistic file review” system (which is used to fill the remaining 20 percent of openings) exceeds their right to consider race and ethnicity. Under the holistic file review system, admissions officers and hired readers assess the full application submitted, reading essays and recommendation letters, assessing writing skills, and importantly, seeking to understand the context in which SAT scores and GPAs were earned. Race is one of many contextual factors considered. The UW adopted a race-neutral version of the holistic approach when it became clear, several years after the passage of I-200, that a composite score admissions platform (which essentially scores applicants based on GPA and SAT or ACT scores) insufficiently accommodated diverse applicants. Over time, the UW’s holistic review, even without a race factor, was found to significantly increase the diversity of entering classes.

In fact, schools across the country use similar systems to foster diversity in their schools, and many have voiced their avid support for UT. In August, the American Council on Education filed a brief on behalf of itself and 39 higher education groups backing UT. The Obama administration also filed a UT-supportive brief, as did a group of U.S. senators, and a number of states (including California, where voters barred public universities from considering race in admissions).

However, last Friday, opponents of UT’s holistic review caught a break when the Brookings Institute, a nonprofit public policy organization based in D.C., presented new research suggesting that eliminating the consideration of race would have a lesser impact on minority students than some believe. In addition, their research implies that under affirmative action, minority students may actually achieve less academic success than they would otherwise. The studies received criticism for their methodology and lack of peer-review, but have still caught the attention of the media and public.

Debates will likely continue through next month. If the Court rules in favor of Fisher, the use of holistic review across the country may be called into question, although the UW’s race-neutral model should be significantly less vulnerable.

Federal Report Makes Economic Case for Higher Ed

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The US Departments of Treasury and Education teamed up to analyze higher education and economic data, and released a short report that highlights the following familiar points:

  • Education is correlated with higher earnings: median weekly earnings for a worker with a BA degree are now 64% higher than for a worker with only a high school degree.
  • Education is key to socio-economic mobility: almost half of children born into the bottom income quintile remain there as adults compared to only 20% of those who receive a degree.
  • Funding cuts result in higher tuition: Public funding for institutions has, on average, declined from 60% of revenue to less than 40% over two decades while tuition revenue has increased by almost the same amount of the decline.

As a result of the above, federal financial aid has become an increasingly important contributor to college affordability, comprising over half of all grants and loans awarded to students. While protecting and increasing federal funding for aid is imperative, the report makes clear that states and institutions will have to make changes as these trends continue or broad access to higher education in the US will be at serious risk.

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.

New OPB Brief on Massive Open Online Courses (MOOCs)

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Today, with public financing for higher education eroding, tuition on the rise, and little growth in household income, the idea that technology can and must revolutionize higher education has once again taken strong hold. Recent start-ups, Coursera and Udacity, founded by Stanford faculty members, and a joint MIT/Harvard venture called edX have the country talking once again about the future of higher education. A new OPB brief  describes these new developments, clarifies the differences between classroom learning, online learning and Massive Open Online Courses (MOOCs), and evaluates their roles in and impact on higher education in the US.

Tom Friedman published a glowing op-ed about MOOCs this week that reads more like a commercial for these start-up companies than a careful consideration, but many of the Reader Picks comments are quite good in pointing out the many, many questions that remain about how this use of technology will fit into education into the future.

Fewer Californians Enrolling at UC/CSU

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The Public Policy Institute of California (PPIC) released a report addressing the effects of state disinvestment on enrollment rates in Californian higher education institutions. California high school graduates, despite applying and being eligible for enrollment, are less likely to enroll in the UC or CSU system today than five years ago. The report blames this decline on state cuts in higher education spending, which has led to skyrocketing tuition and enrollment limits at California schools. While California community colleges have absorbed some of this decrease, the report finds that students are increasingly going out-of-state or not enrolling in college at all.

Highlights from the report include:

  • Enrollment rates of Californians at UC and CSU have fallen by one-fifth in the past five years, from 22 percent of CA high school graduates in 2005 to 18 percent in 2010.
  • UC and CSU have rationed enrollment and increased tuition in order to blunt the effect of decreasing state support on educational quality. Tuition rose by 50 percent between 2007 and 2011 at UC, and by 47 percent at CSU.  Tuition at CA community colleges has also almost doubled in that time.
  • UC has reduced its campus enrollment targets and places students not accepted to their campus of choice into a referral pool, which grants them admission to less popular campuses where they are less likely to enroll. CSU now requires a higher SAT/GPA combination for CA students that live further from their chosen campus in an effort to limit enrollment. Community colleges cannot officially deny enrollment, but they have increased class sizes and decreased program offerings which effectively limits slots.
  • Most students accepted to UC who decide not to enroll there, go to private institutions, usually out of state (34 percent).  30 percent enroll at CSU, 12 percent to community colleges in California, 8 percent to public schools out of state, and 10 percent do not enroll in college at all.

The report finds these trends troubling, since it represents a great loss of human capital to California. Estimates say that two out of five jobs in CA in 2025 will require a bachelor’s degree; if current trends continue, California will be short one million bachelor’s degree holders by that time. The report recommends locking in tuition for four years for each incoming class, offering deferred tuition payment plans, reinvesting in higher education and increasing the availability of financial aid to students in order to combat decreasing enrollment rates. The full report is available in this PDF link.

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.

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.

As Expected, Federal Loan Borrowing Has Increased

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The US Department of Education’s Stats in Brief from October 2011 entitled “Borrowing at the Maximum” investigates the percentage and demographics of students who take out federal subsidized and unsubsidized Stafford loans, and how this has changed over time. The report also seeks to differentiate between those who take out the program maximum loan amount and those who take out their personal maximum amount (adjusted for their financial need and the cost of their education). Some interesting findings include:

  • the proportion of borrowers has increased significantly over time, from 27 percent of students receiving federal Stafford loans averaging $7,200 (inflation adjusted) in 1989/90, to 46 percent borrowing an average of $10,300 by 2007/08.
  • 43 percent of those borrowing in 2007-08 took out the program maximum Stafford loan amount, while 60 percent took out their personal maximum amount (which can equal the maximum amount for some).
  • 30 percent of those taking out Stafford loans also took out private loans, whereas only six percent of students not taking out federal loans did. Furthermore, 16-18 percent of the parents of those students borrowing through the Stafford program also took out Parents PLUS loans.
  • Students taking out Stafford loans to help finance their education were less likely to have full-time jobs.
  • 73 percent of students who took out Stafford loans also received grants.

To read more about the findings or methodology of this report, check out the full report here.