Yesterday, the Senate and House of Representatives approved legislation to avert the fiscal cliff. The deal postpones the automatic, across-the-board spending cuts—known as “the sequester”—by two months and increases tax rates only for individuals earning over $400,000 and couples earning over $450,000. The bill also preserves funding for Pell Grants and extends for five years the American Opportunity Tax Credit (AOTC), which allows students and their parents to claim up to $2,500 a year for tuition and college expenses.
For details, please see the blog post provided by Christy Gullion, Director of Federal Relations, and the articles provided by Inside Higher Ed and The Chronicle
Here are a few noteworthy headlines from the past few days of higher education news:
- History professors at the University of Florida are fighting a proposed differential tuition strategy that would hold tuition rates stable for “high-skill, high-wage, high-demand” degree programs for at least three years. Most STEM degrees made the list of majors recommended for this tuition freeze, while core Humanities disciplines (such as history) did not. The Governor-commissioned task force responsible for the proposal said, “The theory is that students in ‘non-strategic majors,’ by paying higher tuition, will help subsidize students in the ‘strategic’ majors, thus creating a greater demand for the targeted programs and more graduates from these programs, as well.” Supporters feel such an approach will provide taxpayers with the maximum return on their investment and “improve the university system overall.” However, the opposition, championed by a number of history professors, argues the strategy would detract from the university’s prestige and lead to a less “richly educated” workforce. Over 1,300 faculty from Florida and beyond have petitioned Florida Governor Rick Scott to seek faculty input for future decisions regarding Florida’s higher education system. This particular form of differential tuition contrasts with the more typical, cost-driven approach, under which students in majors that cost the university more to provide (such as STEM fields) are charged higher tuition than students studying less expensive subjects (like history).
- Carnegie Corporation President, Vartan Gregorian, is advocating for a presidential commission on higher education to “generate the kind of attention and urgency that the circumstances demanded for the nation to keep its competitive edge.” The commission’s mandate would be to address the many challenges confronting higher education (cost, access, etc.) and help policy makers determine its future. Given the drastic demographic, technological, and economic changes already occurring in higher ed, Mr. Gregorian believes now is the appropriate time to discuss nation-wide reform.
- Apprenticeships are becoming more popular in the U.S. as a means of bridging the disconnect between what students learn in college and what their future employers actually want them to know. Several Harvard professors, inspired by Germany’s “dual system” of providing students with practical job-related skills and theoretical instruction, are working with six states to establish apprenticeship programs.
As a means of both acknowledging and analyzing the recession’s impact on students, this year’s National Survey of Student Engagement (NSSE) included a new set of questions asking how students’ finances affect their stress and academic activities. Approximately 15,000 first-year and senior students from “a diverse group of 43 institutions” responded to the new addendum. The results, which were released last week, indicate that “finances were a significant concern for the majority of students.”
As seen in Table 5 from the official report:
- The majority of students frequently worried about paying for college and regular expenses.
- Roughly 1 in 3 students said financial concerns interfered with their academic performance.
- About 30 percent said they frequently chose not to buy required academic materials due to cost.
- More students looked into working more hours than into borrowing more money as a way to cover costs.
- Approximately 3 in 4 students still agreed that college is a good investment.
In addition to these findings, the study found that over 55 percent of full-time seniors said that their choice of major was influenced by factors such as ability to find a job and/or the prospect of career advancement. Yet, 89 percent of students overall said the most influential factor in choosing a major was still how well it fit with their talents and academic interests.
Washington’s Economic Revenue and Forecast Council (ERFC) released November’s revenue forecast today. Overall, revenue collections for the current biennium are holding steady, while collections anticipated for the next biennium are slightly lower than the previous forecast.
2011-13 (FY12 and FY13)
For the current biennium, collections are $8 million higher than the previous forecast, and though this increase is extremely slight, it signals
to agencies that additional, current year budget cuts are unlikely when the legislature reconvenes in January.
2013-15 (FY14 and FY15)
The upcoming session will be at least 105 days in length and result in a new biennial (two year) budget for fiscal years 2014 and 2015. The revenue forecast for the upcoming biennium was also updated today and as predicted, shows a modest decline but largely holds anticipated collections to the previously forecasted level. As required by law, ERFC releases optimistic and pessimistic alternative forecasts for the coming biennium. The alternative forecasts suggest that a variance of $3 billion in new revenue or in new cuts is possible. For the time being, the actual forecast for the upcoming biennium is $88 million lower than the September forecast. Slow growth is expected in both Washington State and the US. However, high downside risks including the sovereign debt crisis in Europe, federal fiscal cliff, and the resulting employment and consumer confidence declines present significant reasons to be skeptical about any significant revenue growth.
Governor Gregoire will release her biennial budget in December, but new Governor Jay Inslee may present an alternative budget in January, at
the same time the legislature begins its budget process. Stay tuned! We have a long way to go!
The New York Times reported last week that the University of Phoenix will be shutting down 115 of its 227 locations over the next year—25 main campuses and 90 learning centers. The roughly 13,000 students affected by the closings (4 percent of the total student body) will have the option of either transferring to the university’s online classes or moving to another physical location. In addition, the Apollo Group, which owns the university, announced it is laying off 800 employees (4.7 percent of the university’s total staff).
The changes surprise some as Phoenix was a booming success for over a decade. However, in 2011, for-profits as a whole began to struggle. Tightened regulations; a poor economy; growing competition from MOOCs and other online providers; and scrutiny of the sector’s unethical recruiting practices, low graduation rates, high default rates, and use of federal funds caused for-profit enrollments to fall significantly relative to other sectors (as discussed in a previous post). And, as enrollments fell, so did revenue. The University of Phoenix was among the hardest hit. Compared with the same fiscal quarter a year ago, student enrollment at Phoenix dropped nearly 14 percent and Apollo’s net income plummeted 60 percent.
So, will the University live up to its name and rise anew from the remains of its finances and reputation? Or could Phoenix’s decline foretell the impending doom of other for-profit institutions? Time will tell.
The Pell Grant program, the largest federal student grant program, was expected to be $20 billion short of the $40 billion price estimated for FY12 (which ended July 1). However, the Department of Education surprised many with newly-released data showing the federal government not only spent well under that estimate at only $33.4 billion, but in fact $2.2 billion less than FY11.
Recently, Pell eligibility increased dramatically as college enrollments rose and the recession continued to impact family/student income. This trend continued in FY12 and, interestingly, the dip in Pell spending occurred despite a 58,000 increase in Pell recipients—to almost 9.7 million. In fall 2011, nearly one quarter of UW freshmen were Pell eligible.
Reasons for the decline in Pell spending include:
- The elimination of the year-round, or summer, Pell Grant, which allowed students to qualify for two awards in a year.
- More students attending college part time as part-time status reduces Pell award amounts.
- Fewer students attending for-profit institutions, which tend to enroll students who qualify for larger awards. Recent bad press and slumping enrollments have hit for-profits hard. Consequently, the number of Pell recipients at for-profits declined by 108,000 students, to roughly 2.1 million, and accounted for $1.4 billion of the decrease.
The drop in Pell expenditures is a relief for most lawmakers as they face next year’s “fiscal cliff” and must address both the impending tax hikes (when Bush tax cuts expire) and the automatic spending cuts (as mandated by the sequester). The Obama administration and congressional Democrats have resisted financial aid-related budget cutting, maintaining the maximum Pell award of $5,550 and writing specific protection for Pell Grant funding into the Budget Control Act. However, recent financial straits have already caused the federal government to eliminate several student loan programs such as the previously-mentioned summer Pell Grant, the six-month grace period for loan repayment, subsidized Stafford Loans for graduate students, and incentives for early loan repayment. With the sequester and difficult budget decisions looming on the horizon, it is safe to say that no funding is safe.
A new study from the State Budget Crisis Task Force concludes that in many states, anticipated revenues will be insufficient to cover mounting Medicaid enrollment caseloads, underfunded pension commitments, and local government budget obligations. The authors focused their investigation on California, Illinois, New Jersey, New York, Texas, and Virginia. They predicted that anticipated revenues (from sales, income, or other taxes) would be both insufficient to cover expenses and fairly instable, as personal income remains volatile and unemployment (and underemployment) high. In other words, we are edging towards the state budget precipice, even as the national economy distances itself from the official end of the Great Recession proclaimed in 2009.
These conclusions are not unfamiliar to readers; we recently blogged about state-level fiscal uncertainty and sluggish revenue growth. However, this study sheds additional light on the subject, being the first to make a comprehensive assessment of the tension between mounting expenses and shaky revenues in highly populated states.
While Washington State continues to experience slow economic growth in some sectors and in its generation of tax revenue, the Economic Revenue and Forecast Council (ERFC), in its July collections report, refrained from making any firm economic revenue projections due to the excessive variability of receipts. The ERFC report also emphasized slowing job growth: while reducing state unemployment by 0.5 percent would require 160,000 new jobs each month, the state only added 80,000 new jobs in June.
While anticipated revenue is increasing slightly, the downside risks of a second recession brought on by the debt crisis in Europe, disappointing job growth, and depressed consumer confidence are significant. Despite these concerns, ERFC predicts slight revenue increases for both the 2011-13 and 2013-15 biennia, due to legislative action from the 2012 supplemental budget.
Slow economic recovery and continuing high unemployment rates have significantly increased concern about student borrowing levels. OPB’s latest brief provides basic information and data about student borrowing (in the US and at the UW) to help contextualize such concerns.
Posted under Higher Ed News by
The Center on Budget and Policy Priorities has updated its ongoing state budget report: States Continue to Feel Recession’s Impact. On average, state tax collections increased 8.3 percent in 2011, but 30 states have so far projected $54 billion worth of budget shortfalls for Fiscal Year 2012, on top of the $530 billion worth of shortfalls closed by states since 2007. Even if revenue continues to increase at the same rate as it did last year, it would take over seven years for state budgets to recover to pre-recession levels.
As states continue to cut funding, including laying off government workers, unemployment remains over 8 percent and more people than ever are in need of government services, including education and social services. The report emphasizes the importance that increased tax revenue will likely have to play in the recovery of state budgets given how much spending has already been cut by states and how unlikely additional federal aid appears to be. Visit the CBPP website and blog often for updates on many state and federal budget issues.
Posted under Higher Ed Policy by
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.
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