Letters & Op-Eds

A Partnership Approach Could Improve Student Aid

By William C. Nelsen, Kristen D. Conklin, and Sarah A. Flanagan

Last month, the Congressionally established Advisory Committee on Student Financial Assistance released a follow-up report to last year's "Access Denied" that documents in even greater detail the barriers that inadequate student aid poses for hard-working and talented young people who want to enter and complete college. "Unmet need," the gap between the cost of attending college and all the resources a student has available (including family money, grants, and scholarships), is the emerging policy question of the forthcoming reauthorization of the Higher Education Act.

This year alone, as the advisory committee's report demonstrates, record-high financial barriers will prevent more than 400,000 high-school graduates who are qualified to enter four-year institutions from attending those institutions -- and 170,000 students won't attend any college at all. Over the next decade, unmet need -- which averages between $3,200 and $6,200 per student -- could keep millions more qualified low-income students out of college.

Beyond the obvious waste in human capital, such an outcome would have a devastating effect on the U.S. economy. According to the Inter-American Development Bank, each additional year of average education in a nation increases its economic output by from 5 percent to as much as 20 percent. Moreover, Anthony P. Carnevale, vice president for education and careers at the Educational Testing Service, estimates that the United States will need 12 million more people with some postsecondary education over the next 20 years to perform increasingly complex and technical jobs. To meet the demand, everyone with talent and drive should have the education that he or she deserves.

Already, the federal and state governments, higher-education institutions, and the private sector give billions of dollars of grant aid to students each year. But to make college affordable for all people, regardless of their economic circumstances, all four sectors must work together more effectively. Instead, they often work at cross-purposes -- devising a federal solution, a state solution, or a private-sector solution, without first considering the consequences for the other sectors, and, more important, the consequences for students. As a result, the available financial aid is distributed inefficiently, the impact on students and families is uneven, and too many students who most need aid are left out of the picture.

At the federal level, the government's commitment to need-based aid has grown significantly since the mid-1990s. The Pell Grant maximum award, for example, has increased 74 percent since 1995, allowing the grant to recoup some of the value that it lost over two decades of decline, after adjusting for inflation. Meanwhile, however, the federal government has operated under a practice of suspicion, not partnership, with other aid providers.

The most egregious example is the Department of Education's regulations governing the GEAR UP program of scholarships for disadvantaged students. For years, students received their first dollar of support from the federal government, empowering them with the financial resources to pursue the college of their choice. Under the GEAR UP rules that the Department of Education put forward in 2000, however, scholarships are awarded only after all other aid, private and public, is given -- a "last dollar" approach. Such inflexible rules have discouraged institutions from participating in the program and made GEAR UP students ineligible for hundreds of scholarship programs. Fortunately, the Bush administration seems likely to remove the rule by the end of the year.

State financial-aid policies have also unintentionally limited access for needy students. A decade ago, when state revenues were increasing and the college-age population was decreasing, many states made commitments to merit-aid programs and tuition freezes at public colleges. Both policies ended up directing public subsidies toward upper-income students and families. Data separately analyzed by Donald E. Heller, a senior research associate at the Center for the Study of Higher Education at Pennsylvania State University, and the National Association of Student Financial Aid Administrators show that upper-middle-income and upper-income students are overrepresented across state merit-based scholarship programs. Now, as state tax revenues dry up and the college-age population booms, not enough money is available to expand important need-based programs.

States need to conduct comprehensive reviews of their limited higher-education expenditures to ensure that their scarce resources are being used as efficiently as possible to promote access. Reasonable amounts of merit aid and tuition subsidies are a good way to recognize hard work and to moderate price increases. But in tight fiscal times, excessive assistance to upper-income families may deplete funds from the need-based programs that make a difference in whether a low-income, but talented, student can attend college at all.

Private charities contribute to the patchwork approach to financial aid with their specific scholarship rules. Those rules sometimes also overemphasize merit-based scholarships -- giving too much money to the brightest students, while the neediest fall desperately short of funds. Some private scholarship providers also play the last-dollar scholarship game, and are inflexible, seeking to grant scholarships late in the process and only after every other possible player has stepped forward. Others may seek to grab headlines by providing large merit grants to just one or two students. Merit grants can be an effective way to encourage and reward achievement, but they do not need to be $15,000 or more to accomplish that goal.

Colleges have also added to the problem. By failing to negotiate with scholarship providers on how to treat outside money when packaging student aid, they have discouraged some private-aid providers from raising new money. Many higher-education institutions are justified in using their own aid dollars to make sure they have classes of students that are diverse and seats that are full. But when they are inflexible or fail to communicate how their policies work, they create mistrust.

The Collegiate Partners program of the Citizens' Scholarship Foundation of America, where one of us serves as president, is one successful example of the opposite approach. Under that program, financial-aid officers and the CSFA work as partners to form agreements, updated annually, on the treatment of private scholarships in financial-aid packages in ways that are positive for both the students and the institutions.

Our disjointed, nonproductive approach to helping more needy students go to college must stop. The different types of financial-aid providers must work together to improve college access. Several concrete steps can, and should, be taken to:

Promote cross-sector research and dialogue. We must encourage regular discussions among our different sectors about how to create the most effective student-aid packages possible. Our central goal must be to reduce unmet need for all qualified students and their families.

Focus on policy coordination, not uniformity. Financial-aid policies will continue to serve multiple purposes, and we should welcome all forms of scholarship aid. However, we can coordinate our policies to focus our resources and avoid wasteful overlaps in how we serve students. Better communication and analyses of the impact of aid from all four sources on students' unmet financial need will help us package our policies and programs more efficiently.

Make the most of financial-aid resources through partnerships. Private foundations and individual donors frequently tell students to get their federal and institutional aid first and then come back if they still don't have enough money for college. That approach allows donors to stretch their own dollars and know the precise impact of each contribution. But only one person or entity can provide the last dollar. And if no one is willing to give the first dollar, the total pool of scholarship money will shrink. Negotiating partnership approaches rather than playing the last-dollar game will be more productive for everyone.

Follow the financial-aid office's lead. All sectors need to appreciate the important role of the financial-aid offices on our campuses. Those professionals are ultimately closest to individual students; they should be given as much authority and flexibility as appropriate to assemble the final aid packages.

Provide improved information. Families are confused about how and where to get financial aid. Those of us in the four sectors must combine our talents and communications networks to improve outreach to families. We should help students plan for college as early as possible and demystify the financial-aid process.

Develop a coordinated advocacy effort. The supporters of need-based assistance spend far too much time battling each other, and too little time promoting legislation for financial and other support for needy students in Congress and statehouses. The Washington-based Student Aid Alliance, a coalition of more than 60 national higher-education groups representing colleges, students, parents, scholarship providers, and others, is an excellent example of how diverse groups can come together to create a uniform, positive, and effective message about the importance of need-based assistance. Advocates, philanthropists, researchers, and political leaders who are committed to college access should work in concert and not in competition with one another.

As the number of needy, college-ready students soars, we must meet the challenge head-on. If we can turn our lack of trust into a strong and active partnership, the future of postsecondary opportunities for all America's students will be much brighter.

William C. Nelsen is president of the Citizens' Scholarship Foundation of America. Kristin D. Conklin is a senior policy analyst for the National Governors Association. Sarah A. Flanagan is vice president for government relations and policy development for the National Association of Independent Colleges and Universities.

Letters to the Editor
The New York Times
229 W. 43rd St.
New York, NY 10036

To the Editor:

The Times needs to drop out of the coverage of trends in private higher education ("More Small Colleges Dropping Out," May 7), if it can’t provide forthright and fair reporting. The Times failed to include fundamental data and compelling examples of the institutional vitality of the nation’s 1,600 private colleges and universities (about which we gave reporter Yilu Zhao information several times during her reporting). Your story focused only on a few fallen trees, and missed entirely the growing forest of independent higher education.

For instance, the Times chose not to mention that for nearly 30 years the private sector’s share of higher education has held steady at around 20 percent. Furthermore, according to Education Department data, the number of students attending liberal arts colleges has increased by 50 percent during that period, while the number of students attending all four-year institutions has grown by 30 percent.

Your report also ignored Education Department projections that over the next 10 years, full-time enrollment at private colleges will increase at an average rate of 1.7 percent per year. This is the same rate of growth expected at public institutions, and a higher rate than the 1.4 percent annual increase at private colleges over the past decade.

Also missed was that since 1995 at least 14 private colleges and universities have announced plans to open. Since 2000, this includes three four-year liberal arts colleges in Atlanta, southern California, and Washington, D.C., and a four-year undergraduate engineering school in Boston. Since 1995, the private sector has experienced the de minimus net loss of about 1 percent of our 1,600 institutions. This is hardly a crisis in the making.

In each of the past five decades, prognosticators have predicted the imminent demise of private colleges and universities, for many of the same reasons given today: new competitors, evolving technology, changing student preferences, and economic recession. The tiny handful of institutions that could not adapt have closed or merged. However, the nation is dotted from coast to coast with hundreds of success stories: private colleges that have responded to shifting market forces and economic challenges—by refocusing their missions, developing new market niches, and enhancing operating efficiency—and have gone on to prosper. Through flexible and entrepreneurial leadership, the vast majority of America’s private institutions will continue to thrive well into the 21st century.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities

Letters to the Editor
The New York Times
229 W. 43rd St.
New York, NY 10036

To the Editor:

It is fundamental to America’s economic and national security that all qualified students, regardless of their family background, have the opportunity to earn a college degree (“Pricing the Poor Out of College,” March 27). In the next 10 years, undergraduate enrollment will increase by more than 14 percent. Eighty percent of these new students will come from minority backgrounds, and 20 percent will be from families living below the poverty level. This is no time for the Bush administration’s FY 2003 budget to axe the entire budget of one of the most important financial aid programs for needy students (Leveraging Educational Assistance Partnerships), and freeze funding increases for other key student aid programs, including Pell Grants, Perkins Loans, and Federal Work-Study.

Despite a 76 percent increase in the maximum Pell Grant since 1995, federal policymakers need to do more to ensure that our neediest students can realize the dream of a college degree. Private colleges and universities now provide more than four times as much in grant aid to their students than is provided by the federal government--a far cry from two decades ago, when the amounts were almost equal.

Private institutions believe in access and affordability, and they act on it. Our colleges have made significant advances in opening the doors of higher education to students from all backgrounds. Twenty-four percent of students at private colleges and universities are racial and ethnic minorities, and 28 percent are the first in their family to attend college. Today, because of their commitment to need-based aid and individualized attention, private institutions enroll virtually the same percentage of minority students as their public sector counterparts (24 percent vs. 25 percent, respectively), and almost the same percentage of undergraduates with family incomes below $25,000 (27 percent vs. 31 percent, respectively). Private colleges also graduate these students at nearly twice the rate as public colleges do.

We will continue to be steadfast in our commitment to equal educational opportunity for all students. However, without a significant new investment in student aid by federal and state policymakers, the ability of private and public college leaders to provide a quality education that is accessible and affordable to the nation’s neediest students will be severely tested.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities

Barron’s Mailbag
1025 Connecticut Avenue, NW
Washington, DC 20036

To the Editor:

Most college presidents would love to live in the economic fairytale land envisioned by Jonathan Laing ("Old College Pry," March 4). In his world, private colleges could just check the Consumer Price Index or the annual increase in family incomes. Then they could set their tuition accordingly, without concern for the real-world costs they incur. Our colleagues at public universities would be equally happy to live in a world where their tuitions could be kept low, even when state governments slash funds for operating budgets. Unfortunately, college presidents have to operate in the real world, balancing tuition increases against increased operating costs, while remaining sensitive to the challenges families face in sending their children to college.

The cost of salaries and health care, library acquisitions, information technology, and facilities and equipment upkeep are running at rates significantly higher than the Consumer Price Index. Unhappily, an uptick in the rate of tuition increase is largely unavoidable--especially when other college revenue streams slow during a slumping economy. However, private college presidents remain committed to keeping student out-of-pocket costs as low as possible, without sacrificing academic quality.

In recent years, significant changes in student aid policies at private colleges have made more students eligible for institutionally provided grant aid, and increased the amount of aid they receive. At the same time, the average rate of tuition increase at our institutions is less than half of the double-digit increases that were common in the late ’80s and early ’90s. (At some colleges, tuition increases in recent years have been the lowest in decades.) Since 1990, institutionally provided grant aid has increased 188 percent—more than twice the 76 percent growth in tuition.

In many ways, colleges resemble other organizations that must deal with economic realities. Since the last recession, private institutions have improved operating efficiency while maintaining their academic quality. They have streamlined administration and outsourced more campus services. They have entered into collaborative partnerships with other colleges that allow them to jointly purchase certain goods and share services, while maintaining their distinct institutional identity and mission. These efforts, along with the prudent management of endowment earnings during the bull market of the late ’90s, have enabled most institutions to weather the latest economic downturn, without resorting to the high rates of tuition increase seen 10 years ago.

In other ways, colleges are completely different from for-profit firms. Most manufacturers price their products to cover production costs as well as to make a profit. But the price of tuition at a private college is actually less than the cost of delivering education. No student pays what the college spends on him or her.

The heated competition private colleges face from one another, and from state universities and the growing for-profit sector, will ensure that they continue to act in the most cost effective and academically responsible way possible. Their commitment to quality, personal attention, and student aid ensures that they will remain an attractive option to millions of students.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities

Letters to the Editor
The New York Times
229 W. 43rd St.
New York, NY 10036

To the Editor:

As I mentioned in my interview with Yilu Zhao, while economic downturns often lead to an uptick in the rate of tuition increase at colleges and universities ("As College Endowments Dwindle, Big Tuition Increases Fill the Void," Feb. 2), the vast majority of students at private institutions will not see their out-of-pocket costs rise nearly as quickly. The generous student aid policies of private colleges and universities mean that few students pay the published price of tuition, and this will temper the annual increase in the costs that students actually pay. In 1999-2000, 84 percent of undergraduate students attending private colleges received some form of financial aid, with an average award of nearly $14,000. Since 1990, institutionally provided aid has grown more than twice as fast as tuition--188 percent vs. 76 percent, respectively.

Private institutions have also redoubled their efforts to control operating costs, while maintaining academic quality, since the last recession in the early 1990s. They have enhanced their operating efficiency through innovative cost-saving changes—including new administrative and academic partnerships with other institutions, and more outsourcing of campus services—to remain affordable. This, along with the wise management of endowments during the 1990s, will help keep tuition increases at the vast majority of private institutions significantly lower than the double-digit rates that were often seen at our colleges 10 years ago, and are now being announced by many public universities.

Sincerely,

David L. Warren
President
National Association of Independent Colleges and Universities