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TICAS Paper Proposes New Approach to Federal Financial Aid

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鈥溾�� is the Institute for College Access & Success鈥檚 (TICAS) white paper for the Reimagining Aid Design and Delivery project, sponsored by the Bill & Melinda Gates Foundation (see our 听for more information). Some of the report鈥檚 suggestions have been echoed in other white papers and publications, such as simplifying the federal financial aid application process, making the Pell program a mandatory federal budget item, and fostering more understandable and comparable reporting of college costs. The paper鈥檚 others recommendations include:

  • Holding colleges accountable not only to the percentage of student borrowers who default on loans (represented by the currently-used cohort default rates), but also to the percentage of students who take out loans in the first place. TICAS proposes denying federal aid to colleges that score below a certain threshold on a combined index of the two measures. The group also recommends increasing federal aid to colleges scoring above a certain threshold. The amount of additional aid would be determined by how much Pell funding their students receive.
  • Shoring up the Pell Grant. TICAS proposes doubling the maximum Pell grant award, to about $11,000 a year, and extending the eligibility timeframe from 6 years to 7.5.
  • Creating a single federal student loan with no fees and a fixed interest rate. The rate would be low while students are in school and would rise, by a fixed amount with a cap, when they leave.
  • Streamlining repayment plans, replacing multiple options for income-based plans with only one. Delinquent borrowers would automatically be placed in the income-based plan; but, a non-income-based option would be available to other borrowers. TICAS wants to leave borrowers听with a choice, but argues they need real counseling鈥攏ot just disclosure鈥攖o help them decide.
  • Eliminating higher education tax benefits and sending the savings to Pell Grants and monetary incentives for states and colleges. 听If tax benefits are preserved, the group recommends restructuring them into an upgraded American Opportunity Tax Credit aimed at helping low- and moderate-income students.

TICAS鈥� paper outlines a few ways the government could fund these proposals in addition to potentially eliminating higher ed tax benefits.听 As 听nicely summarized, those options include, 鈥渓imiting the benefit of itemized tax deductions, taxing private equity and hedge-fund income like other income, and removing or reforming tax-exempt bonds for private nonprofit colleges.鈥�

Sequester Update

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Christy Gullion, Director of Federal Relations, recently provided an 鈥搕he large, automatic听federal spending cuts听originally scheduled听to take听effect January 1st of this year, but delayed until March 1st thanks to a last-minute, bipartisan deal.

For background information, please see our most recent post on the topic as well as the 听put out jointly by the 91探花offices of Federal Relations, Planning & Budgeting, and Research.

Moody’s Gives Higher Education a Negative Outlook

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Last week, issued a negative short-term outlook for the entire sector of higher education based on its conclusion that every traditional revenue source for even the most elite colleges and universities is under pressure. That pressure, according to the report, is the result of nation-wide economic, technological and public opinion shifts, which are largely beyond institutions鈥� control.

The outlook report, released annually, articulates the fundamental credit conditions that Moody鈥檚 expects higher education will face during the next 12 to 18 months. For the last two years, Moody鈥檚 gave elite colleges and research universities a stable forecast; but this year, the following factors contributed to a negative outlook for the entire industry:

Struggling Revenue Sources:

  • State appropriations are unlikely to increase meaningfully due to weak economic recovery.
  • Federal spending on research and student aid could be truncated in response to the nation鈥檚 fiscal concerns.
  • Tuition revenue continues to be suppressed by low family incomes and public/political pressure to keep prices down.
  • Endowment returns are vulnerable to any economic volatility that could stem from federal tax and budget decisions.
  • Donations are not expected to increase and could face pressure as Congress evaluates associated tax deductions.
  • Financial diversity is no longer helpful as all revenue streams are strained.

Additional Challenges:

  • Student debt and loan default rates have increased and thus challenged the perceived value of a degree.
  • High school graduates are declining in number.
  • Public and political scrutiny of efficiency and degree value could add to institutions鈥� list of regulatory requirements.
  • New technologies such as online learning and MOOCs could provide new revenue opportunities, but could also undermine traditional higher ed models.

Moody’s analysts warn that revenue streams will never rebound to post-2008 levels and leaders in higher education will need to adapt by thinking strategically and adjusting their operations.

But not all is gloom and doom.听Although Moody鈥檚 gave higher education a negative outlook, most of the country鈥檚 top colleges and universities still hold the strong credit rankings. The UW, for one, continues to maintain a 鈥攖he highest offered by Moody鈥檚.听Additionally, the report stressed that the intrinsic value of and demand for higher education remains stable.

Senate and Congress Reach Deal to Avert Fiscal Cliff

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Yesterday, the Senate and House of Representatives approved legislation to avert the fiscal cliff.听The deal postpones the automatic, across-the-board spending cuts鈥攌nown as 鈥渢he sequester鈥濃�攂y 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 provided by Christy Gullion, Director of Federal Relations, and the articles provided by and

Fiscal Cliff Update

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Christy Gullion, Director of Federal Relations, recently provided an –the combination of large decreases in federal spending and simultaneous increases in income taxes set to take effect January 1st. For background information, please see the 听put out jointly by the 91探花offices of Federal Relations, Planning & Budgeting, and Research.

NIH Proposals Could Impact Biomedical Research

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On Friday, the National Institutes of Health (NIH) approved a rough implementation plan for a set of initiatives that could affect biomedical studies and the faculty, postdoctoral,听and student researchers who conduct them.听Three working groups proposed the plan back in June and mean for it to guide, diversify, and improve biomedical research through new grant programs and guidelines.

The 听recommended that the NIH:

  • Help students prepare for careers by providing institutions with additional grants for training and professional development;
  • Encourage graduate students to complete their degrees on-time by capping the number of years they can receive NIH funds;
  • Urge institutions to financially commit to their researchers by slowly reducing the percentage of NIH funds that go toward faculty salaries; and
  • Support the decision-making of prospective graduate students and postdoctoral researchers by asking that NIH-funded institutions provide data on student career outcomes.

The 听was founded after an听NIH听report revealed that black researchers were underrepresented in grant applicant pools and that, when they did apply, they were significantly less likely to receive NIH grants relative to their white counterparts. The听group called for the NIH to:听

  • Help bridge diversity gaps by implementing a system of career mentorship 鈥渘etworks鈥� for underrepresented minority students;
  • Support under-funded colleges that have a history of training underrepresented minorities in the sciences by considering them for a 鈥渨ell-funded, multi-year鈥� competitive grant program;
  • Establish a committee to address implicit or explicit biases in the NIH peer review system; and
  • Experiment with 听by removing the names of researchers and their institution.

Lastly, the 听asked that the NIH develop a better framework for information exchange and fund more fellowships and training in statistics and other quantitative areas.

These initiatives may sound familiar as many have been pursued, yet subsequently aborted in the past due to a lack of funding. This time may be no different if Congress fails to resolve the fiscal cliff and 听that could slash the NIH鈥檚 budget by 8.2 percent in the coming year.

2012 Democratic and Republican Higher Education Platforms

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Now that both Democrats and Republicans have adopted party platforms at their respective conventions, what do we know about their plans for higher education? Below is a quick overview of each party鈥檚 higher education goals and associated action steps (past, present, or future) adapted directly from the parties鈥� formally-adopted platforms:

DEMOCRATIC PLATFORM

GOAL 1: To make college affordable for students of all backgrounds and confront the burden of loans.

  • Removed banks as student loan middlemen, saving more than $60 billion.
  • Doubled investment in Pell Grant scholarships.
  • Created American Opportunity Tax Credit of up to $10,000 over a 4 year degree.
  • Working to help student loan payments be only 10% of a student鈥檚 monthly income.
  • Pledged to incentivize colleges to keep their costs down.
  • Invested over $2.5 billion into strengthening our nation鈥檚 Minority Serving Institutions.

GOAL 2: To recognize the economic opportunities created by our nation鈥檚 community colleges.

  • Invested in community colleges and called for business-college partnerships to train 2 million workers.

GOAL 3: To make this country a destination for global talent and ingenuity.

  • Will work to help foreign students earning advanced degrees stay and help create jobs here.

REPUBLICAN PLATFORM

GOAL 1: Improve our nation鈥檚 classrooms.

  • Address ideological bias that is deeply entrenched within the current university system.
  • Protect the public鈥檚 investment in state institutions from abuse by political indoctrination.
  • Call on State officials to ensure that public institutions be 鈥減laces of learning and the exchange of ideas, not zones of intellectual intolerance favoring the Left.鈥�

GOAL 2: To address rising college costs and get back to programs directly related to job opportunities.

  • Expand new systems of learning (online universities, community colleges, etc.) to compete with traditional 4-year colleges.
  • Advance the affordability, innovation, and transparency needed to make lower cost alternatives accessible to everyone.

GOAL 3: To get federal student aid onto a sustainable path.

  • Provide families with information necessary to making prudent choices about a student鈥檚 future.
  • Shift the federal government鈥檚 role in student loans from being the originator of loans to an insurance guarantor for private sector student loans.
  • Welcome private sector participation in student financing.
  • Reevaluate any regulation that drives tuition costs higher.

Voters鈥� choices on November 6th will determine which party, and consequently which platform, has the greatest impact on the UW. In the meantime, any relevant updates or changes will be added to OPBlog.

Pell Expenditures Decrease as Recipients Increase

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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 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鈥攖o almost 9.7 million. In fall 2011, nearly one quarter of 91探花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 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鈥檚 鈥渇iscal cliff鈥� 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 , 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.

Research Universities and the Future of America: New NRC Report

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In 2009, the National Research Council received a request from Congress for a 鈥渞eport that examines the health and competitiveness of America鈥檚 research universities vis-脿-vis their counterparts elsewhere in the world鈥�.

Responding to the request, the NRC assembled a 22-member panel of university and business leaders and mandated them to identify the 鈥渢op ten actions that Congress, the federal government, state governments, research universities, and others could take to assure the ability of the American research university to maintain the excellence in research and doctoral education needed to help the United States compete, prosper, and achieve national goals for health, energy, the environment, and security in the global community of the 21st 肠别苍迟耻谤测鈥�.

The panel released its final report last week under the title . The following were the strongest themes:

  • State and federal governments must increase their investment in research universities, allow these institutions more autonomy and agility, and reduce their regulatory burden: The panel identified the state and federal governments as the key actors in the strategy it proposed; indeed, seven of its ten recommendations were primarily aimed at them. In one of its more ambitious statements, the panel recommended that states should strive to restore and maintain per-student funding for higher education to the mean level for the 15-year period 1987-2002, adjusted for inflation. In Washington, this translates into recommending a per-FTE funding increase of between 70% and 80%. The panel acknowledged that this could be difficult to implement in the near term given current state budget challenges and shifting state priorities, but nevertheless stressed that 鈥渁ny loss of world-class quality for America鈥檚 public research institutions seriously damages national prosperity, security, and quality of life.鈥�

  • Strengthen the role of business and industry in the research partnership: The panel recommended that tax incentives be put in place to encourage businesses to invest in partnerships with universities both to produce new research and to define new graduate degree programs. It also encouraged business leaders and philanthropists to help increase the participation and success of women and underrepresented minorities in science, technology, engineering and mathematics (STEM).

  • Research universities should strive to increase their cost-effectiveness and productivity: The panel recommended that universities should 鈥渟trive to contain the cost escalation of all ongoing activities [鈥 to the inflation rate or lower through improved efficiency and productivity鈥�. However, it made no mention of the difficulties raised in the concerning the impact of cost-reduction measures on quality.

The panel鈥檚 recommendations are not novel: they have already been made by multiple parties in the higher education sector over the last few years. However, given the weight of the signatures on the report, this document may prove useful in raising the profile of higher education in upcoming budget battles both at the state and federal level.