On Thursday, the American Association of State Colleges and Universities (AASCU) released its most State Outlook. According to the report, state operating support for public four-year colleges and universities is 3.6 percent higher for FY 2015 than it was for FY 2014. Of the 49 states that have passed a budget thus far, support for higher education increased in 43 states and decreased in only 6 states. Of those 6 states that reduced funding, all were under 3 percent: Alaska, Delaware, Kentucky, Missouri, Washington (0.8 percent decrease) and West Virginia.
There was a relatively small amount of variation between states in terms of their year-to-year funding changes. For FY 2015, the spread between the state with the largest gain and that with the largest cut was only a 24 percent—this is compared to 57 percent, 25 percent and 46 percent, respectively, in FYs 2012, 2013 and 2014. The report notes that this decreased volatility likely indicates “a continued post-recession stabilization of states’ budgets.”
Charitable contributions to U.S. colleges and universities increased 9 percent in 2013, to $33.8 billion—the highest recorded in the history of the Council for Aid to Education (CAE) Voluntary Support of Education (VSE) survey. In addition, college and university endowments grew by an average of 11.7 percent in FY 2013, according to a January 2014 study released by the National Association of College and University Business Officers and the Commonfund Institute. This represents a significant improvement over the -0.3 percent return in FY 2012.
The report also describes ten highlights/trends from states’ 2014 legislative sessions, those being:
- State initiatives linking student access to economic and workforce development goals.
- Tuition freezes or increase caps in exchange for state reinvestment—this occurred in Washington and another example is discussed in our previous post.
- Performance-based funding systems that attempt to align institutional outcomes with state needs and priorities.
- Governor emphasis on efforts to advance state educational attainment goals.
- Interest in policies related to vocational and technical education, including allowing community colleges to grant certain four-year degrees (as described in our previous post).
- Efforts to develop a common set of expectations for what K-12 students should know in mathematics and language arts.
- STEM-related initiatives, including additional funding for STEM scholarships in Washington.
- Financial support for the renovating and/or constructing of new campus facilities—unfortunately, Washington’s legislature did not pass a capital budget.
- Bills allowing individuals to carry guns on public college and university campuses—as of March 2014, seven states had passed such legislation.
- Legislation that extends in-state tuition or, as occurred in Washington, state financial aid to undocumented students.
Other noteworthy policy topics described in the report include:
- Student financial aid programs—some states broadened their programs while others limited them;
- Online and competency-based education reciprocity agreements;
- “Pay It Forward” Funding Schemes; and
- Consumer protection as it pertains to student recruitment, advertising and financial aid at for-profit colleges.
As the UW’s Office of Federal Relations reported on their blog, yesterday Senate Democrats released plans to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:
- Increasing affordability and reducing college costs for students,
- Tackling the student loan crisis by helping borrowers better manage debt,
- Holding schools accountable to students and taxpayers, and
- Helping students and families make informed choices.
In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:
For more information, check out the Federal Relations blog and a recent article by EdCentral. We’ll post more information on OPBlog over the coming weeks.
Representative Paul Ryan, the House Budget Chairman, released his FY15 budget proposal on Tuesday. The proposal would remove the in-school interest subsidy for all subsidized undergraduate student loans, eliminate mandatory funding for Pell Grants, and freeze the maximum Pell Grant award at $5,730 for the next 10 years.
As Office of Federal Relations put it in their blog post, “That essentially means that $870 in the maximum grant would have to be funded by increased discretionary funds or the maximum be cut from $5,730 to $4,860.”
Please see the Federal Relations website for more information, and check out articles by Equity Line, Inside Higher Ed, and The Chronicle.
A recent report by New America, titled The Graduate Student Debt Review, reveals that much of the nation’s “$1 trillion in outstanding federal student debt” is the result of expensive graduate and professional degrees, rather than unaffordable undergraduate educations.
The report, which analyses recently publicized data from the Department of Education, shows that around 40 percent of recent federal loan disbursements are for graduate student debt. Moreover, the paper shows that graduate student debt across a variety of fields—not just business school and medical school—comprises some of the largest increases in student borrowing between 2004 and 2012. Thus, the authors recommend that legislators, journalists, and the public at large adjust their understanding of student debt to recognize that it’s not just undergraduate problem.
Most news stories highlight the debt of graduate students—which tend to have much larger loan balances—yet journalists typically don’t differentiate graduate debt from undergraduate debt. EdCentral makes a compelling argument for why this lack of differentiation is a problem and why it deserves legislative attention:
“The failure to distinguish between undergraduate and graduate debt in discussions of college costs is a serious flaw in how we think about student debt. Students, families, and taxpayers invest significant resources in financing “college,” largely because a bachelor’s or associate degree is a must for anyone who wants to secure a middle-class income… But arguments for high levels of subsidy for students who attend graduate and professional school are on shakier ground. While a graduate or professional degree boosts a student’s earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides. Students pursuing graduate degrees should be far more informed consumers. Therefore, they shouldn’t need a lot of public support to finance their next credential, which is why there are no Pell Grants for master’s degrees. That spike in debt for graduate degrees should also focus policymakers’ attention on an impending tidal wave of loan forgiveness for graduate students and the lack of loan limits for students pursuing graduate degrees.”
You can read more about New America’s report at The Chronicle and Inside Higher Ed.
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.
On Thursday, The Equity Line, a blog by The Education Trust, posted a critique of Pay It Forward (PIF) that discusses some of PIF’s major flaws. As a reminder, under PIF, instead of paying tuition and fees upfront, students would pay back a certain percent of their adjusted gross income for 25 years. For more information about PIF and how its supporters have applied PIF to the UW, please see the full OPB brief.
The Equity Line’s blog post highlights that although PIF is marketed as a “debt-free” way to pay for college, it is actually just another student loan program:
- It is estimated (by the author and the UW) that many students would pay more under PIF than they currently do to pay back student loans.
- Students with significant need – who currently receive federal, state, and institutional grants to cover tuition and fees – may have their grants (which do not need to be paid back) replaced with loans (which do).
- Students would not be able to cover these other education costs with federal or state need-based grants because by removing the cost of tuition and fees from a student’s budget, that student’s level of calculated need would fall as would their eligibility for federal and state need programs. Thus, students would have to take out more loans (or find a way to pay upfront) for these expenses.
As the author notes, rather than “Pay It Forward,” it’s really “Pay It Yourself and Pay More Than Ever.”
The College Board released its 2013 edition of “Trends in College Pricing” on Tuesday. The report provides information on what colleges and universities are charging in 2013-14; how prices vary by state, region, and institution type; pricing trends over time; and net tuition and fees—what students and families actually pay after accounting for financial aid.
Here are a few noteworthy points about prices at public four-year institutions:
- The average published tuition and fees for full-time resident undergraduatesat public four-years increased by 2.9 percent between 2012-13 and 2013-14, going from $8,646 to $8,893—this is the smallest percentage increase in over 30 years.
- In 2013-14, full-time students at public four-years will receive an estimated average of $5,770 in grant aid and tax benefits.
- Thus, average net tuition and fees for full-time resident undergrads at public four-years will be about $3,120 in 2013‑14—up from a temporary low of $1,940 (inflation-adjusted dollars) in 2009-10.
And a few key points about private nonprofit four-year institutions:
- The average published tuition and fees for full-time students at private nonprofit four-years increased by 3.8 percent between 2012-13 and 2013-14, going from $28,989 to $30,094.
- In 2013-14, full-time undergrads at private nonprofit four-years will receive an estimated average of $17,630 in grant aid and tax benefits.
- Thus, average net tuition and fees for full-time undergrads at private nonprofit four-years will be about $12,460 in 2013-14—up from a temporary low of $11,550 (inflation-adjusted dollars) in 2011-12, but down from $13,600 a decade earlier.
Average net prices in all sectors took a noteworthy dip around 2010 due, in part, to significant increases in Pell Grants and veterans benefits that occurred in 2009‑10 as well as the 2009 implementation of the American Opportunity Tax Credit. However, some of those benefits have been scaled back since their initial launch. Moreover, total state appropriations declined by 19 percent between 2007-08 and 2012-13 and FTE enrollment in public institutions increased by 11 percent over that same time. Consequently, net prices have risen in the last few years for all sectors, but most noticeably in the public sector. It is important to remember that there are many variations by institution, region, and state. Even within institutions, different students pay different prices based on their financial circumstances, program of study, year in school, academic qualifications, athletic ability, etc.
See Inside Higher Ed and The Chronicle for additional analysis and discussion of the report.
On Monday, the U.S. Department of Education (ED) released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although both national and UW CDRs rose, the UW’s rates remain well below those of the nation.
As ED is in its second year of switching to the more accurate three-year CDR measure, this year’s report includes both the FY 2011 two-year and the FY 2010 three-year CDRs. These rates represent the percentage of student borrowers who failed to make loan payments for 270 days within two or three years, respectively, of leaving school.
The Department provides breakdowns of its data by institution type, state and school. Here are some key findings:
FY 2010 three-year CDR:
- The national three-year CDR increased from 13.4 to 14.7 percent overall—public institutions increased from 11.0 to 13.0 percent, private nonprofits increased from 7.5 to 8.2 percent, but for-profits’ whopping 22.7 percent rate decreased slightly to 21.8 percent.
- The UW’s three-year CDR increased slightly from 3.1 to 3.9 percent, but this is still nearly 11 percentage points below the national average.
FY 2011 two-year CDR:
- The national two-year CDR increased from 9.1 to 10.0 percent overall—public institutions increased from 8.3 to 9.6 percent, for-profits increased from 12.9 to 13.6 percent, but private nonprofits held steady at 5.2 percent.
- The UW’s two-year CDR increased from 2.1 to 3.2 percent, but this is still nearly 7 percentage points below the national average.
While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The UW reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them. Former UW students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (firstname.lastname@example.org, 206-543-6101). Students can also visit studentloans.gov to explore their repayment options.
On Monday, the U.S. Education Department (ED) began formal negotiationson the draft language of a proposed new “gainful employment” rule. The rule, originally published in 2011, was designed to enforce a requirement of the Higher Education Act that states career education programs—non-degree programs at all colleges and most degree programs at for-profit colleges—must “prepare students for gainful employment” in order to participate in federal student aid programs. The rule was meant to discourage these programs from misusing federal aid dollars and leaving students with debts burdens they are unable to repay. However, in 2012 a federal judge rejected major provisions of the rule, requiring that ED rethink its strategy.
Here’s a summary of the changes:
- The proposed rule applies to programs with as few as 10 students, whereas the old rule counted only career-focused programs with 30 or more students. Because of this change, ED estimates that the new rule could cover 11,359 programs at for-profit and nonprofit colleges—nearly twice as many as the old rule covered—and that 974 of those programs (9 percent) could fail to meet the proposed standards.
- The draft regulation omits loan-repayment as a criterion for federal student aid eligibility. The old rule severed federal aid to programs where too few students were repaying their loans or where graduates’ debt-to-earnings and debt-to-discretionary-income ratios were too high. The new rule removes the loan repayment standards, which the courts deemed “arbitrary and capricious,” and relies only on the latter two measures.
- Debt-to-earnings calculations would be based only on students who receive federal aid, rather than students who complete the program. The old calculations were based on all students who completed the program, whereas the proposed calculations are based on any students who receive federal student loans and Pell Grants, regardless of whether they complete the program. As the rule is designed to ensure that federal aid is used effectively, this seems a more appropriate approach.
- Schools would have fewer chances to improve their performance before losing federal aid eligibility. Under the previous rule, programs that failed the measures in 3 out of any 4 years would be ineligible for federal student aid. However, the new rule only lets programs fail in 2 out of any 3 years before they lose eligibility.
For details, see a comparison of the two versions prepared by the Education Department. Please continue to follow our blog as well as the Federal Relations blog for updates on this topic.
(This piece was originally posted on 07/11/2013, however it was lost due to technical issues and is therefore re-posted here.)
Last week, the Oregon legislature passed a bill that, if signed by the governor, will implement a pilot program to study the effects and feasibility of substituting upfront tuition payments with income-based, post-graduation payments. For 24 years after graduating, four-year college students would pay back 3 percent of their income and community college students would pay back 1.5 percent. Students who do not graduate would pay back a smaller percent determined by how long they were in school.
If, after several years of study, Oregon decides to adopt a plan (or some form of it), it would signify a major shift in the funding paradigm for public institutions. But that’s a big IF. The plan has received considerable criticism due to a multitude of unanswered questions that could pose significant logistical barriers. For example:
- How would institutions and/or the state pay for the plan’s implementation (i.e. the several years of foregone tuition revenue between when a student enters school and when they graduate and start earning pay)?
- How would the state efficiently collect accurate income data on students who move out-of-state?
- How would the state go about collecting and enforcing payments?
- How would the plan account for and apply to part-time students, transfer students, mid-career students, and other non-traditional students?
- How would the plan work with federal and state financial aid programs? Would low-income students be accommodated so as to avoid creating barriers to entry?
- How does one pilot a 24-year repayment program in just 2 or 3 years?
Even if Oregon’s higher education commission, which is tasked with implementing the pilot program, can find viable answers to those questions, the plan still has a number of possible (if not likely) negative consequences. For instance, the plan may:
- Magnify the public’s view of higher education as a private good (only benefiting the individual) rather than a public good (benefits for many) which, in turn, could spur the continuing and problematic trend of replacing state dollars with tuition revenue;
- Make institutions even more vulnerable to economic variations and recessions as their revenue would be tied to graduates’ earning and unemployment rates; and
- Create social and economic imbalance between Oregon and other states since students who expect to earn less—e.g. social science and humanities majors—would be incentivized to go to Oregon, and students expecting to earn more—e.g. engineering and medical students—would likely go elsewhere.
Granted, the idea of basing college payments on graduates’ income is not a new one. Some federal student loans are eligible for income-based repayment and a program similar to Oregon’s already exists in Australia. However, Australia’s version is administered at the federal level, meaning many problems inherent in Oregon’s plan (tracking students who move around the country, imbalance between states, etc.) are avoided.
The Economic Opportunity Institute, a liberal think tank in Seattle, proposed a version of the plan for Washington in October 2012; but, unlike Oregon’s version, it has yet to go anywhere. We’ll keep you posted.
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