Pell Grants

President Obama’s Greatest Higher Ed Hits

November 1, 2012

With the presidential election only days away, we thought it would be a good time to take a closer look at President Obama’s higher education record. In this post, we highlight the administration’s five greatest hits. Tomorrow, we will examine the administration’s five biggest misses.

So without further ado, here are the Obama administration's most significant higher ed accomplishments:

1. Reforming Student Loans: President Obama achieved his single most significant higher education victory in March 2010 when he signed into law legislation ending the wasteful practice of subsidizing private lenders to make federal student loans. Overcoming the fierce opposition of the student loan industry, the Obama administration and Democratic Congressional leaders eliminated the Federal Family Education Loan program, which had long been racked by corruption, and shifted to 100 percent direct lending, which delivered the same federal loans to students at a much lower cost for taxpayers and without all the scandals. And despite dire warnings from the industry and its allies in Congress about the risks of moving thousands of colleges out of FFEL and into direct lending, the U.S. Department of Education pulled off the transition without disturbing even a single student’s access to federal student loans.

Getting What We Pay for: Using Financial Aid to Pay for Learning, Rather than Time

September 13, 2012

Our entire massive multibillion-dollar federal financial aid system runs on credit hours. Credit hours are used to determine a student’s full- or part-time status, which changes the amount of aid an individual can receive. But as we note in our report Cracking the Credit Hour, credit hours simply measure time, not learning. Despite the trillions of dollars spent by students and taxpayers on higher education, we don’t know whether students are learning or not (and there is increasing evidence to suggest that students aren’t learning much at all). As higher education becomes increasingly necessary and increasingly expensive, measuring time, rather than learning, is a luxury that students, taxpayers, and the nation can no longer afford.

The U.S. Department of Education should use the three financial aid tools it currently has at its disposal to pay for learning, rather than time. This could go a long way in helping institutions think differently about how they do or do not think about learning.

Cracking the Credit Hour

  • By
  • Amy Laitinen,
  • New America Foundation
September 5, 2012

The basic currency of higher education — the credit hour — represents the root of many problems plaguing America's higher education system: the practice of measuring time rather than learning. Cracking the Credit Hour traces the history of this time-based unit, from the days of Andrew Carnegie to recent federal efforts to define a credit hour.

Shopping Around

  • By
  • Rachel Fishman,
  • New America Foundation
August 20, 2012 |

Imagine you’ve just been accepted to the college of your dreams. At first you feel elation, but then anxiety sets in — will you and your family be able to afford it? Since financial aid packages often blur the line between grants and loans, it might be hard to tell. A $40,000 "award" at one school might seem like a much better deal than a $20,000 package at another — unless you realize the larger "award" consists mostly of loans. With borrowing and loan default rates on the rise, aid packages have huge consequences for students’ educational and financial lives.

NASFAA's Unfortunate Stance on the Financial Aid Shopping Sheet

August 1, 2012
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Jane recently found out she’s diabetic. To control her insulin levels, she’ll need to pay close attention to her carbohydrate intake. She knows she’ll have to cut down on sugar-laden desserts, but what about her daily bowl of Total? And the raisins and pretzels she eats as an afternoon snack? Twenty-five years ago, Jane would have had difficulty comparing and choosing among the food in her pantry.  But now, thanks to the passage of the Nutrition Labeling and Education Act of 1990, all she has to do is consult the food labels to make an informed decision about what to eat. Even though standardized nutrition labels may seem ubiquitous today, the Food and Drug Administration (FDA) had to battle against the food lobby, which relentlessly tried to prevent even the most basic of disclosures, to get this legislation through Congress.

Today, we’re witnessing a similar struggle play out in higher education. The Department of Education announced last week that it wants to provide better, simplified, and consistent information to students about their financial aid packages. They released a model financial aid award letter, known as the “Shopping Sheet,” that would present financial aid packages to students in a standardized way—separating grants from loans, and clearly listing a student’s net price. This would help students understand how much they will pay out-of-pocket and in loans, and also help them compare financial aid packages among institutions. (More on the necesity of the Shopping Sheet here and here).

New Financial Aid Shopping Sheet Standardizes Award Letters—But Will Anyone Use It?

July 24, 2012
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How can you tell the difference between a grant and a loan? While this shouldn’t be a trick question, for many students it is. When students apply for financial aid, they receive a financial aid “award” letter detailing their financial aid package. These letters can (and often do) blur the lines between grants, work-study, need-based and non-need based federal loans to yield a seemingly generous “award package.” Since each institution develops its own letter, it is difficult for students to compare packages across institutions.  Today, the Department of Education and the Consumer Financial Protection Bureau (CFPB) released a tool they hope will help provide students with clear and comparable information—a financial aid “shopping sheet.”

The CFPB released a draft of the shopping sheet last October. Since then, it has collected and incorporated more than 1,000 comments from various stakeholders, including students, parents, financial aid administrators, and college access professionals. The end result is a simplified model financial aid award letter that clearly lists cost of attendance, and separates grants from federal loans and work-study. It provides a link to loan calculators to learn more about repayment options and also offers a small amount of space for an institution to add customized information. Ideally, this shopping sheet could become a cover sheet for all financial aid packages.

While the final version is much improved from the draft, there is one glaring, fatal problem that has nothing to do with its design or component parts—institutional adoption of the shopping sheet is voluntary. I doubt that even a majority of the more than 6,600 Title IV institutions will decide to use the shopping sheet. I can hear (and have already heard) some of the arguments for why institutions won’t opt-in: “my institution is not ‘one-size-fits-all’” and “conforming to the letter is overly burdensome.” I don’t imagine I’ll hear institutions say that they benefit from student confusion, and yet some do. In either event, these arguments often lose sight of what students, not institutions, need in order to make informed choices about where to go to college.

In anticipation of the inevitable burden complaints, the Department has made it easier for institutions to adopt the letter, by working with existing financial aid delivery software to incorporate the shopping sheet as a template.  But what incentive will institutions have to actually use it? None.

Right now the impact of the “shopping sheet” largely depends on who decides to use it. If some big-name institutions (Harvard et al) start using the “shopping sheet,” competing peer institutions (and those striving to emulate) may feel they need to use it as well. And let’s not forget the group of ten college presidents who met with Vice President Joe Biden and pledged to be transparent about costs—they should walk the walk and agree to adopt the shopping sheet. These presidents represented a broad range of institutions—like Miami Dade College and the entire State University of New York System—that could reach a diverse group of students.

These institutions, however, will only be a drop in a large bucket of more than 6,600 institutions. Interestingly enough, the shopping sheet will have the biggest impact on prospective military and veteran students. That’s because for them, the shopping sheet will be required. According to President Obama’s recent Executive Order, institutions receiving funding from Federal military and veterans educational benefits programs must provide the shopping sheet to military students.

Senator Franken understands the importance of a model financial aid letter for students, which is why he has introduced bipartisan legislation that would mandate its use. He wants to ensure that all students, not just those lucky enough to apply to schools that voluntarily adopt this letter or those using military benefits, understand the true cost of college. A scattershot approach will not help a student and her family line up and compare four different award letters on the dining room table. 

Asset Building News Week, July 16 - 20

July 20, 2012
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The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include college financing, housing policy, consumer protection, and asset limits.

FACT or Fiction? New Online Tool Will Help Students Manage Loan Debt

July 12, 2012
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Yesterday, the Department of Education launched a new interactive online tool that provides students with financial management basics, including personalized information about a student’s current federal loan debt. Students access the resource, known as the Financial Awareness Counseling Tool (FACT), using their FAFSA PIN. This allows them to use their individual federal loan history to personalize five interactive tutorials about loans, budgeting, repayment, default, and financial planning.

Always curious (and admittedly critical) about the resources the Department of Education provides to students, I took FACT for a test drive using my own student loan information. While the tool is a good start, there is still a long way to go to ensure students will use it.

The Pros:

  • When students launch FACT, the first thing they see is their total federal student loan debt. The loans are disaggregated by type (i.e. subsidized, unsubsidized) with information about interest and principal. In addition, students can manually enter any private student loans. The data is presented in a graphically appealing way, giving students a relatively clear understanding of their federal loan debt.
  • FACT includes an interactive budgeting tool that helps students estimate what they will owe, spend, and earn. This is one of the most useful features of FACT:
  1. It takes a student’s current loan balance and shows them—both numerically and graphically—what their monthly and total payments would be under the standard, graduated, extended-fixed, and extended-graduated repayment plans. It shows how each different plan changes the total amount repaid when accounting for interest and principal.
  2. Students enter their income and monthly expenses to better understand the effect of student loans on their budgets. They can also change their student loan balance if they know they will be borrowing in the future

The Cons:

  • Students have to fill out an interactive quiz as they go along, and if they leave any field unanswered they cannot continue to the next page. This includes entering current educational expenses. If the purpose of this tool is to provide entrance counseling, that might be okay. But it’s frustrating and limiting for those, like me, who are already out of school. Many will exit the tutorial without seeing all that it has to offer.
  • Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) are not included in the personalized table of repayment options. While there is a link to both calculators, the calculators should be on the interface so students can better understand whether it’s a good option for them.

Ultimately, the opt-in nature of this tool will make it limited in its scope. But as I was filling out the quiz, I couldn’t help but remember the incredibly useless (and bland) exit and entrance counseling I was required to go through as a student for my federal student loans. If the Department of Education tweaks FACT, it could become a new and better version of exit and entrance counseling, reaching many students with highly personalized data. Otherwise it will probably languish in obscurity.

Event Summary: Jobs are Not Enough

July 12, 2012
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The Asset Building Program hosted an event Wednesday, July 11 to release the July/August issue of the Washington Monthly. The issue focuses on the importance and applicability of the asset building agenda in the lives of all Americans. Utilizing the magazine's focus as a frame for the event, our panelists tackled critical themes such as savings as a path to higher education, the importance of life-long savings mechanisms, the role of federal policies in promoting prosperity, and a growing political divide between young and old Americans.

Death to Tuition Tax Breaks?

July 5, 2012
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This post first appeared on HigherEdJobs as part of their iFocus feature.

By 2018, nearly two-thirds of American jobs will require a postsecondary credential.While our economic success as a nation depends on getting millions more people to and through college, college has never been so expensive. As prices go up and state support dwindles, students are forced to bear a larger share of college costs. Instead of shoring up the resources meant to help low-income students, the federal government is pouring more money into financial aid programs that disproportionately help middle- and upper-income students who would have gone to college anyway. 

The success of low- and moderate-income students often hinges on their ability to receive financial aid, especially grant aid like the Pell Grant. If we don't overhaul our federal financial aid programs to make them sustainable and better targeted toward low- and moderate-income students, we risk never being able to fulfill our nation's labor market needs. And when it comes to finding the resources needed to revamp the federal financial aid program, the lowest hanging fruit, ripe for the picking, are the higher education tax credits and deductions. 

The main problem with higher education tax benefits, like the American Opportunity Tax Credit (AOTC) and the Student Loan Interest Deduction, is that they are not effectively directed toward the students who most need them. According to a recent report by Education Sector, tax filers earning more than $75,000 were two-and-a-half times more likely to receive AOTC benefits than those earning less than $25,000. In addition, millions of tax filers lack the financial literacy required to figure out if they are eligible for one of the higher education tax credits and how to best maximize their benefit. 

In 2009 alone, the federal government spent $14.7 billion on these tax credits that overly benefit upper- and middle-income families. Since higher education is not only a private good, this is both a bad education and economic policy. Federal financial aid programs were developed in part to make a college degree attainable for lower- and moderate-income students since the return on investment to the nation is high. A college education leads to higher earnings resulting in more tax revenues. The magnitude of this effect is astonishing - a four-year-equivalent degree gives the government $471,000 more in income, payroll, property, and sales tax revenue. 

The government could roll back the thresholds of these tax benefits to ensure they are better targeted to low- and middle-income families, but that would do nothing to reduce the complexity that prevents millions of these families - usually the least savvy and most needy - from claiming them. Instead, the government needs to get rid of them - the American Opportunity, Lifetime Learning, and Hope tax credits, plus both the Tuition and Fees, and Student Loan Interest deductions. With the savings, we could better target students who need the most financial aid help by restructuring and rethinking federal aid programs. 

This will be an uphill battle since the tax credits poll well. But in an age of shrinking resources, increasing college costs, and an urgent need to get more students to and through college, we have to put aside popular but poorly-targeted policies in order to help those who wouldn't otherwise attend college, go and succeed.

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