How Federal, State, and Institutional Policies Matter

USW 31, November 19, 2014

Theda Skocpol

DEBATING THE FUTURE OF AID TO HIGHER EDUCATION

Attendance is growing, but many students fail to complete college and/or leave with growing debt burdens.

States have reduced support for students and institutions, and for-profit colleges drain taxpayer funds to produce poor results for students.

Congress is now debating renewal and changes to the U.S. Higher Education Act first enacted in 1965.

Bipartisan agreement on simplifying financial aid applications and making information about costs and graduation rates more transparent.

Democrats want to crack down on for-profit colleges, create incentives for states to invest more in public higher education, and perhaps allow student debts to be discharged in bankruptcy.

Conservative Republicans favor steps to reduce college prices and further learning based on mastery of content rather than time in classes.

Source: Michael Hout, Berkeley.

US COLLEGE GRADUATION TREND

0% 10% 20% 30% 40% 50% 60% 70% 80%

Bottomquartile

2ndquartile

3rdquartile

Topquartile

Percent with four-year college degrees by age 24

FAMILY INCOME AND COLLEGE DEGREE ATTAINMENT BY AGE 24

2011

1970

Source: Mettler, Degrees of Inequality, Fig. 1.2 from Mortenson.

0% 20% 40% 60% 80%

Low income

Midde income

High income

INCOME, TEST SCORES, AND ATTAINMENT OF COLLEGE DEGREES

High scores

Middle scores

Low scores

Percentage of students with a four-year degree or more, 2000 Source: Mettler, Degrees of Inequality, Fig. 1.3.

U.S. Higher Ed Policies: From Opportunity to Elite Subsidies

19th-early 20th c.: Morrill Land Grant college system established; federal subsidies to agricultural colleges.

WWII and after: federal research programs spread capacities to many universities and fund faculty projects.

1944: GI Bill offers tuition and family allowances. 1958: National Defense Education Act establishes low-interest

student loans. 1965, 1972: Higher Ed Act and its reauthorization create need-

based grants, Work-Study Program, Pell Grants, and matching grants for states that offered need-based student grants.

After mid-1970s: value of Pell Grants erode as tuitions skyrocket. 1990sff: federal legislation subsidizes/guarantees bank-offered

student loans and offers tax credits to middle-class borrowers. 1990s: Justice Department outlaws agreements to prevent

escalating “merit” offers – unless institutions offer purely need-blind aid (which only the richest can do).

U.S. Higher Education Aid 1965/1972 through 2008:Intended and Unintended Consequences

Higher Ed Act (‘65, ’72) emphasis on need-based student aid via Pell Grants. allows subsidized loans for some in middle class, but not tax credits.

Equal Opportunity Era, 1966-80 Liberal Dems and bipartisan consensus. Sallie Mae created in 1978 to enlarge private loan pool; middle class

access to grants and loans broadened. Pell Grants boosted in this period to broaden opportunity.

Divisions and Contradictory Directions, 1981-94 GOP gained power via Reagan, eventually Congress. Student aid trimmed, Pell Grants not regularly increased -- as tuition

rose 145% from 1980 to 2002 as family incomes rose by only 23%. Bank lending with federal guarantees becomes profitable, and private

interests organize to lobby. By early 1990s, loans for the middle class outpace aid to the needy.

Aid to the Privileged Comes to the Fore, 1995-2007

Supported by more conservative Republicans, subsidies and guarantees to private lenders become more lucrative.

Supported by Democratic President Bill Clinton, tax credits for the middle class and privileged are added to federal college aid.

Grants to needy continue to erode in value, while loans and tax credits allow more privileged students to afford the rising tuitions, especially at selective colleges.

Students end up with high debt burdens when (if) they graduate.

Source: Mettler, Degrees of Inequality

Source: College Board.

Obama Administration Higher Ed Policies

• Remove banks as middlemen with guaranteed profits from student loan programs, and use some of the savings to increase Pell Grants and improve loan terms.

• Expand and improve levels of Pell Grants.

• Give more aid to community colleges – and strengthen their ties to area employers.

• Simplify information about college funding and make it available earlier in high school.

• Push colleges to limit tuition hikes, improve graduation rates, and make more information available about costs, graduation, jobs.

SOURCE: The College Board, Trends in Student Aid 2010, Figure 13A.

Pell Grant Expenditures, in Billions of Dollars

U.S. PELL GRANTS: Recipients and Expenditures, 1976-77 to 2009-10

0

5

10

15

20

25

30

1976

-77

1978

-79

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

2004

-05

2006

-07

2008

-09

2009

-10

Ex

pe

nd

itu

res

(b

illi

on

s o

f 2

00

9 d

oll

ars

)

0

1

2

3

4

5

6

7

8

9

Mil

lio

ns

of

stu

de

nt

rec

ipie

nts

Source: College Board from U.S. Dept. of Education

Ave. grant in 1976-77 = $2,862 (in 2009$)

Max grant = $5,280

Ave. grant 2009-10 = $3,646 (max $5,350)

Ave. grant 2008-09 = $2,909 (max $4,632)

Undergraduate Student Aid by Source (in Billions), 2009-10

SOURCE: The College Board, Trends in Student Aid 2010, Figure 2A.

Maximum Pell Grant as a Percentage of Tuition and Fees and Room and Board (TFRB),

1990-91 to 2010-11

SOURCE: The College Board, Trends in Student Aid 2010, Figure 13B.

Percentage Distribution of Pell Grant Recipients

by Family Income and Dependency Status, 2008-09

SOURCE: The College Board, Trends in Student Aid 2010, Figure 14A.

Ten-Year Trend in Student Aid and Nonfederal Loans per FTE Used to Finance Postsecondary Education Expenses

in Constant 2009 Dollars, 1999-2000 to 2009-10

SOURCE: The College Board, Trends in Student Aid 2010, Figure 1.

Source: College Board.

Need-Based and

Non-Need-Based

State

Aid

Grants

SOURCE: The College Board, Trends in Student Aid 2010, Figure 15.

State Grant Dollars per Full-Time In-State Undergraduate Student and Percentage Receiving State Grants, by

Dependency Status and Income, Selected States, 2007‑08

SOURCE: The College Board, Trends in Student Aid 2010, Figure 16.

Low-Income Undergraduates at Leading U.S. Universities, 1983-2006(percent receiving Pell Grants)

0% 5% 10% 15% 20% 25% 30% 35% 40%

U of North Carolina

U of Michigan

UCLA

UC Berkeley

Columbia

Cornell

Stanford

Princeton

Yale

Harvard

1983

1993

2004

2006

Source: Journal of Blacks in Higher Education 1/22/08

INSTITUTIONAL FINANCIAL AID

Only super-wealthy, highly endowed universities can afford to be need-blind or give very generous grants to low and middle-income students.

But these universities admit only a tiny proportion of all students and very few from low-income families. Most have not expanded entering classes much or at all.

When private, super-wealthy institutions boost grants to middle-income students, they put pressure on larger public universities to shift aid toward “merit” rather than need-based grants.

Harvard University Applications and Admission Rates

Classes admitted 2003 through 2011

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1 2 3 4 5 6 7 8 9

App

licat

ions

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Per

cent

acc

epte

d

2007 2008 2009 2010 2011 2012 2013 2014 2015Class of:

Very generous financial aid, up to $180K per year

ADDITIONAL ISSUES FOR U.S. HIGHER EDUCATION

Future use of racial criteria in admissions, as new challenges reach the Supreme Court.

Role of on-line learning versus physical classrooms – are there inequality questions?

College completion rates -- what can be done to help students finish and earn degrees, especially less privileged students and students enrolled in poorly endowed institutions?