Office of Planning and Budgeting

Yesterday, March 4th, President Obama submitted his fiscal year 2015 budget request to Congress. The Institute for College Access & Success (TICAS) has published their analysis of the budget as has the Education Policy Program at New America.

TICAS states that the President’s proposal “takes important steps towards making college affordable for Americans by reducing the need to borrow and making federal student loan payments more manageable.” Specifically, his budget:

  • Invests in Pell Grants and prevents them from being taxed.  The budget provides funds to cover the scheduled $100 increase in the maximum Pell award, raising it from $5,730 in 2014-15 to $5,830 in 2015-16. TICAS notes that although this increase will help nearly 9 million students, “the maximum Pell Grant is expected to cover the smallest share of the cost of attending a four-year public college since the program started in the 1970s.”
  • Makes the American Opportunity Tax Credit (AOTC) permanent.  TICAS supports making the AOTC permanent as they note research suggests the AOTC is the most likely of the current tax benefits to increase college access and success.  New America, however, recommends the administration convert the tax credit to a grant program as they state researchers have found grants to be a more effective way to deliver aid to low-income families.
  • Improves and streamlines income-based repayment (IBR) programs. Under the President’s budget, more borrowers would be eligible to cap their monthly payments at 10 percent of their discretionary income and have their remaining debt forgiven without taxation after 20 years. The budget also adjusts the IBR programs to prevent debts forgiveness for high-income borrowers who can afford to pay their loans.
  • Requests funding for the College Opportunity and Graduation Bonuses.  The budget proposes establishing College Opportunity and Graduation Bonuses, which would reward schools that enroll and graduate low-income students on time. Both TICAS and New America note that, unless this proposal is thoughtfully designed, it could incentivize schools to lower their academic standards in order to make it easier for Pell students to graduate. Further, as this proposal is one of several different efforts to reward colleges that provide affordable, quality educations, it is unclear how its goals and formulas would interact with those of initiatives like the Postsecondary Education Ratings System.

The UW’s Federal Relations blog notes that the budget also proposes $56 billion for an “Opportunity, Growth and Security Initiative,” which “aims to effectively replace the remaining FY2015 sequestration cuts for nondefense discretionary programs – the programs we care about the most.” Please stay tuned to their blog for more information and updates.

As you may have heard, President Obama recently announced his “Increasing College Opportunity for Low-Income Students” initiative, which aims to help more low-income and underrepresented minority students attend and complete college. On January 16th, the White House hosted a summit of the more than 100 colleges, universities, nonprofits, and foundations that made commitments to increase college opportunity. The Chronicle provides a detailed, sortable list of these commitments.

News coverage of the summit and the initiative includes the following:

Student Exchanges Hit Record High.  According to the Open Doors Report on International Educational Exchange, the number of international students at U.S. colleges and universities and the number of American students studying abroad are at record highs. In 2012-13, 820,000 foreign students attended American higher ed institutions, a 55,000 increase (7.2 percent) from the previous year. Chinese undergraduates exhibited the biggest increase, 26 percent, bringing the total number of Chinese students studying in the U.S. (undergraduates and graduates) to 235,000. In 2011-12 (the most recent year for which data are available) 283,000 American students went abroad for credit university courses, up 3.4 percent from the prior year.  For institutions hosting the most international students, the UW ranked 14th in the country.

New Studies Cast Doubt on Effectivenessof State Performance-based Funding.  Now that economies are recovering from the Great Recession, state legislators across the country have been hurrying to adopt systems that link state funding for higher education to student outcomes like degree production and completion rates. However, several research papers presented at the annual meeting of the Association for the Study of Higher Education question the effectiveness of these “performance-based funding” systems. See Inside Higher Ed for a summary of the findings.

College Completion Rates See Little Improvement.  College-completion rates remained largely unchanged this year, according to the National Student Clearinghouse Research Center. Of the first-time students who entered college in fall 2007, 54.2 percent earned a degree or certificate within six years—up 0.1 percentage points from the 2006 cohort. In the public sector, completion rates rose by 1.3 percentage points for students who started at public four-years and by 1.1 percentage points for those who began at public two-years. Unlike the federal government’s college-completion measure, the center tracks part-time students and students who transfer to a different college, sector, or state. Only 22 percent of part-time students earned credentials within six years, compared with 76 percent of those enrolled full time. The research center will issue its full report next month.

University of Michigan’s Shared Services Strategy Faces Opposition.  The University of Michigan is the latest campus to implement “shared services,” a cost-saving strategy that has academic departments rely on centralized staff, rather than department-level staffers. Theoretically, employees in the central pool could become more specialized, and thus more efficient, than departments’ jack-of-all-trades staff. Administrators at Michigan hoped to save $17 million by moving 275 staffers from their campus offices to a single building on the edge of town. However, not only are faculty and students speaking out in opposition, the plan is no longer expected to save nearly as much as once hoped and may barely break even in the short term. Read more at Inside Higher Ed.

The College Board recently published “Education Pays 2013: The Benefits of Higher Education for Individuals and Society,” which provides data on U.S. adults’ level of education and its impact on earnings, employment, health-related behaviors, reliance on public assistance programs, civic participation, and more. The goal of the report, the authors say, is to highlight the ways in which individuals and society benefit from increased levels of education. The authors note, “Financial benefits are easier to document than non-pecuniary benefits, but the latter may be as important to students themselves, as well as to the society in which they participate.”

Many old trends continue to hold true. Having a college education increases one’s chances of: being employed, earning a higher income, receiving health insurance and pension benefits, climbing the socioeconomic ladder, being an engaged citizen, and of leading a healthier lifestyle.  These individual benefits translate to larger, societal benefits, including less government spending on public assistance programs, more tax revenue, and greater civic involvement.

A few noteworthy data points about earnings include:

  • In 2011 (the most recent year for which income data is available), the median pre-tax earnings of full-time workers with a bachelor’s degree* were $21,100 higher than those of full-time workers with only a high school diploma.
  • As workers age, earnings increase more quickly for those with higher levels of education. For instance, at ages 25-29, full-time workers with a bachelor’s degree earn 54 percent ($15,000) more than their high school graduate counterparts; but at ages 45-49, they earn 86 percent ($32,000) more.
  • During a standard 40-year full-time working career, median earnings are 65 percent higher for those with a bachelor’s degree than for those with only high school diploma.
  • “Compared to a high school graduate, the median four-year college graduate who enrolls at age 18 and graduates in four years can expect to earn enough by age 36 to compensate for being out of the labor force for four years and for borrowing the full tuition and fee amount without any grant aid.”

The report also provides some interesting facts about participation and success in higher education, such as:

  • Large gaps in enrollment rates and patterns persist, particularly with lower income students. However, gaps between the enrollment rates of black and Hispanic high school graduates and those of white high school graduates narrowed significantly between 2001 and 2011.
  • Although educational attainment rates are increasing, attainment rates and patterns vary noticeably by demographic groups. For example, the percentage of black females ages 25 to 29 who have a bachelor’s degree doubled between 1982 and 2012—going from 12 to 24 percent—whereas the percentage of black males increased from 11 to 16 percent.
  • In the U.S., public funding makes up a smaller percentage of total funding for higher education than in most other developed countries.

* “Bachelor’s degree” means a bachelor’s degree, but not a more advanced degree.

Legislation was introduced in the California Senate on Wednesday that would require the state’s 145 public colleges and universities to grant credit for faculty-approved online courses taken by students unable to register for overenrolled, on-campus classes. If the bill passes and is signed into law by Gov. Jerry Brown (who has been a strong supporter of online education), online courses could go mainstream much more quickly than predicted. At the moment, however, Senate Bill 520 is just a two-page legislative placeholder, or “spot bill,” to be amended with details later.

According to Inside Higher Ed, the bill’s sponsor, Democrat State Senate President Pro Tem Darrell Steinberg, said the bill is meant to “break the bottleneck that prevents students from completing courses.” In Fall 2012, more than 472,000 of the 2.4 million students in the California Community Colleges system were put on waiting lists and at the California State University system, only 16 percent of students graduate within four years. Theoretically, increasing capacity to meet student demand for key, gateway courses could improve on-time graduation rates and more efficiently use state funds. The debate, of course, is whether online courses are actually effective and thus appropriate substitutes for traditional courses.

Under the proposed legislation, a nine-member faculty council representing the state’s three public higher ed systems would determine which 50 introductory courses are most oversubscribed and which online equivalents should be eligible for credit. When reviewing online courses, the panel is to consider whether a course:

  • Offers instructional support to promote retention;
  • Provides interaction between instructors and students;
  • Contains proctored exams and assessment tools;
  • Uses open-source text books; and
  • Includes content recommended by the American Council on Education.

MOOCs provided by Udacity and Coursera, as well as low-cost, self-paced courses from StraighterLine could all be up for consideration—several of which have already gained ACE approval.

Senator Steinberg emphasized at a news conference that the legislation “does not represent a shift in funding priority” for higher education in California, and is not intended to introduce “a substitution for campus-based instruction.” Nevertheless, for the many faculty and university administrators concerned about SB 520’s consequences, the devil may be in the yet-to-be-determined details. We’ll keep you apprised as those details are fleshed out.

Many of the white papers sponsored by the Bill & Melinda Gates Foundation’s Reimagining Aid Design and Delivery project have focused on modifications to the Pell program and/or student loans and repayment (including the two I summarized previously, found here and here). However, the white paper released on Wednesday by the Center on Postsecondary and Economic Success takes a different approach.  It argues that by making tax-based student aid more beneficial to low and middle-income students, the federal government could save billions of dollars, direct those savings to the Pell program and improve the financial aid system as a whole.

Current tax-based financial aid provides high-income families with much larger tax deductions, since the value of the deductions is linked to a family’s marginal tax rate. As The Chronicle notes, “a $100 tax deduction, for example, is worth early $40 to a high-income household but only $10 to a lower-earning family.”  To remedy this issue and refocus the benefits of aid onto low-income families, the Center proposes increasing the refundable portion of the American Opportunity Tax Credit (AOTC). The Center also recommends eliminating nonrefundable tax credits, such as the Lifetime Learning Credit (LLC), since they do not benefit households that pay no income tax (i.e. low-income families).

The table below shows the percent distribution of student aid by type and income category in 2013. As you can see, Pell Grants (in blue) primarily benefit low-income families, whereas tax-based student aid (in purple) does the opposite.  Another interesting table from the Tax Policy Center can be found here.

The paper includes three alternative proposals for making tax-based aid more helpful to low-income students and simultaneously boosting college access and completion.  It also discusses three options for improving performance measures used in student-aid policies.

The Gates Foundation has joined the nation’s financial aid conversation and is attempting to rethink how policies and practices can not only help maintain access (in the face of flagging state support and rising tuition prices), but also help students succeed. In September of last year, the Gates Foundation launched its Reimagining Aid Design and Delivery project, which provided 16 organizations with funding to develop and publish innovative financial aid strategies aimed at encouraging college completion. One of the 16 organizations, the New America Foundation, recently released its white paper, which recommends bolstering Pell Grants, limiting student loan options, and removing higher ed tax benefits.

To improve “both the effectiveness and sustainability of Pell Grants,” the New America Foundation recommends:

  • Making the Pell program a mandatory federal budget item;
  • Increasing the maximum grant faster than is currently scheduled while restoring summer grant support;
  • Limiting Pell eligibility to 125 percent of a program’s length;
  • Providing additional federal funding to public and private-nonprofit colleges that have a large proportion of low-income students and high graduation rates; and
  • Requiring four-year colleges that enroll a small percentage of low-income students and charge more than $10,000 per year (after financial aid) to match some of the Pell dollars they receive with need-based aid from institutional funds.

The plan, which is intended to be “budget neutral,” recommends that the Pell Grant changes be funded by:

  • Eliminating the American Opportunity and Lifetime Learning tuition tax credits, tax-advantaged savings plans for education, and the student loan interest deduction;
  • Ending the Supplemental Educational Opportunity Grant program; and
  • Encouraging borrowers to refinance old student loans into direct lending.

The authors also recommend consolidating federal student loan programs into a single, “enhanced” Stafford Loan sys­tem as a means of simplifying the student loan system and reducing the potential for default. This would involve:

  • Automatically enrolling all federal student loan borrowers in income-based repayment plans;
  • Eliminating subsidized undergraduate loans;
  • Setting student loan interest rates via a fixed formula that adjusts to market conditions;
  • Ending the Grad PLUS and Parent PLUS loan programs;
  • Increasing borrowing limits slightly to $40,000 total for undergrads and $25,500 per year for grads; and
  • Limiting federal student loan eligibility to 150 percent of a program’s length.

Although some (if not many) of these ideas are politically unpopular, the authors argue that their recommendations must be implemented together in order to be effective. However, it seems more likely that Congress will cherry-pick specific suggestions to pursue or perhaps ignore the report’s policy proposals altogether. The Gates Foundation hopes their project will, at the very least, stimulate discussion about reforming financial aid.

Last week, the National Commission of Higher Education published an open letter calling on “every college and university president and chancellor to make retention and completion a critical campus priority” and asserting that such efforts are “an economic and moral imperative.” Six higher-ed associations assembled the Commission in 2011 at President Obama’s request. The 18 college presidents that form the Commission’s membership come from every sector, except for-profits, and were tasked with investigating strategies that individual schools can use to improve graduation rates.

The NY Times quotes Dr. E. Gordon Gee, chairman of the Commission, as saying, “We concentrate most on the admissions side of things, getting the bodies in, and there’s no one in charge of seeing that they get through and graduate.”  Although enrollment rates are strong, nearly half of all college students nationwide fail to earn a degree within six years (79 percent of
entering freshman graduate from the UW within six years).

Completion efforts should take into consideration the changing face of higher ed: first-generation, mid-career, part-time, and veteran students are an ever-increasing share of the nation’s student body. The report notes that “adult learners are far less likely than their traditional-age peers to complete their degrees” and will need flexible schedules, more financial assistance, and targeted student services in order to succeed.

Other recommendations from the report include:

  • Narrowing course options so that students prioritize completion;
  • Putting someone in charge of overseeing completion efforts; and
  • Giving credit for previous learning.

The Commission asks colleges to avoid one-size-fits-all solutions and to eschew inflating their graduation rates by admitting only the best-prepared, lowest-risk students and/or by making it easier for students to pass.

The report acknowledges, however, that colleges need assistance in these completion endeavors, saying, “Disinvestment in higher education is terribly damaging and undermines efforts to expand and enhance academic and support services for students.”

The Commission believes the report will trigger a sense of urgency among leaders (academic or otherwise) and, hopefully, meaningful action.

Dartmouth will stop granting college credit for students with high AP test scores beginning with the class of 2018, which will enter in the Fall of 2014. Currently, Dartmouth students with scores of four or five (out of five) on an AP test can have certain lower-level courses waived, earn placement into higher-level courses, or receive credit toward their degrees. When the new policy takes effect, the first two of options will still be available, but students will not be able to earn credits. Dartmouth’s Committee on Instruction proposed the change in policy and the faculty passed it with an “overwhelming majority,” according to Inside Higher Ed.  However, faculty members say they “still value AP courses – just not as a replacement for a college classroom.” 

Dartmouth changed the policy after its psychology department performed an experiment to assess the college-level competence of top AP scorers. Students who had earned a five on the AP psychology test were asked to take a placement exam based on the final for intro psychology; 90 percent of those students failed, according to the college. The researchers also found that the students who failed and then chose to take intro psychology did not perform better than their peers who had never taken AP psychology or who had scored less than a five. These results challenge those of an independed study published by College Board. College Board officials say they question Dartmouth’s results and believe the college has an obligation to share the details of its experiment.

There are concerns that the college’s change in policy will discourage high school students from accepting the challenge of an AP course and/or could keep students on campus longer than they would if college credit were granted for their scores. Dartmouth’s Committee on Instruction plans to review the policy in three years.

In Washington, RCW 28B.10.053 requires that institutes of higher education “recognize the equivalencies of at least one year of course credit and maximize the application of the credits toward lower division general education requirements that can be earned through successfully demonstrating proficiency on examinations, including but not limited to advanced placement and international baccalaureate examinations.”

The Wisconsin Education Approval Board, which oversees all for-profit colleges located in the state and any online-learning programs offered to its residents, may require that those institutions achieve specific performance standards in order to operate within Wisconsin. Specifically, that board is proposing to require that at least 60 percent of a college’s students complete their studies within a certain time-frame and at least 60 percent of its graduates have jobs.  Public universities and private nonprofit colleges are not under the board’s jurisdiction and would therefore be exempt from the requirements.

The board already collects and publishes data on its institutions. According to those reports, average completion rates fell from 82 to 59 percent over the last six years and the percentage of graduates who were employed during a given year dropped from 44 to 22 percent (in the same time frame).

The Chronicle reports that the board is basing its standards on what they believe “Wisconsin consumers would find ethical, responsible, and acceptable for institutions choosing to enroll them.” However, for-profit colleges have already submitted letters to the board arguing that the proposed standards are “arbitrary and should not be broadly applied to a diverse set of programs, which often enroll underserved populations.”

While the federal government’s “gainful employment” rule is similar to Wisconsin’s proposal, it is unusual to see a state attempt this type of regulatory system. Some states have increased their requirements for online and for-profit institutions—but Wisconsin’s proposal is especially aggressive. For-profits that wish to operate in Washington must receive authorization from the Washington Student Achievement Council, which considers institutions; “financial stability, business practices, academic programs, and faculty qualifications”—but does not yet hold them to specific graduation or employment standards.

On Wednesday, Wisconsin’s board voted unanimously to postpone a final decision until a team made of board members, representatives from colleges and universities, and State legislators can review the proposal more thoroughly.  The team is scheduled to make recommendations to the board in June of 2013.

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