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91探花Ranks 1st among Public Schools and 2nd Overall for Federal R&D Funding

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Of the nearly 900 schools that received federal money for research and development (R&D) in FY 2011, the 91探花ranks first among public institutions and second overall in terms of federal research funding. According to a study by the National Science Foundation (NSF), approximately 20 percent of all federal R&D support went to just 10 universities. reviewed those universities, Table 1 summarizes their findings.

Johns Hopkins University, a private institution, topped the list with nearly $1.9 billion鈥攎ore than doubling what any other university received that year. The majority of Johns Hopkins鈥� federal funding came from the Dept. of Defense and NASA. The university also听brought in billions via fundraising efforts.

The 91探花came in second with almost $950 million in federal R&D funding鈥攖he most of any public school. The majority of the UW鈥檚 money came from the Dept. of Health and Human Services; however, the University was the top beneficiary of NSF funding, receiving more than $145 million in 2011.

Year after year, the same schools consistently receive the most money, said Ronda Britt, a survey statistician with the NSF. 24/7 Wall St. quotes her as saying, these universities 鈥渉ave big research programs that receive a lot of support year after year, and have a lot of infrastructure that helps them keep the money stable.鈥� This holds true for the UW, which has ranked first among public schools since 1974. Having large endowments was another commonality of the top 10 schools, yet federal funding covered the bulk of R&D expenditures in all cases.

As these universities rely heavily on the federal government to support their research, many are concerned about the sweeping cuts of sequestration. The 91探花and other universities are preparing for a range of possible impacts. As described in our , the sequester could reduce the UW鈥檚 federal grant and contract support by an estimated $75M to $100M during FY13. The 91探花community is encouraged to remain cautious and conservative in spending federal awards and in planning for future federal funding.

Sequestration Goes Into Effect at Midnight

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Sequestration will take effect tonight at midnight. While the cuts will be smaller than originally mandated ($85 billion instead of $109 billion), the impact in federal FY13 will be higher since the cuts must now be applied to only seven months instead of nine. Immediate and long-term impacts on the 91探花and Washington State are difficult to predict. However, during the remaining months of federal FY13, we estimate that the sequester could reduce the UW鈥檚 federal grant and contract support by an estimated $75 million to $100 million and cut Build America Bonds (BABs) subsidy payments by $500K to $700K. Additionally, the 91探花is projected to lose about $33,000 in work study funds for 2013-14. The potential impact on Washington State includes $11.6 million less for primary and secondary education, $11.3 million less for education of children with disabilities, and 1,000 fewer children receiving Head Start services.

Please see听the prepared by the Offices of Federal Relations, Planning & Budgeting, and Research听and be sure to visit at the UW’s for regular updates.

White Paper Focuses on Reforming Tax-based Aid

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Many of the white papers sponsored by the Bill & Melinda Gates Foundation’s Reimagining Aid Design and Delivery project have focused on modifications to the Pell program and/or student loans and repayment (including the two I summarized previously, found and ). However, the released on Wednesday by the Center on Postsecondary and Economic Success takes a different approach.听 It argues that by making tax-based student aid more beneficial to low and middle-income students, the federal government could save billions of dollars, direct those savings to the Pell program and improve the financial aid system as a whole.

Current tax-based financial aid provides high-income families with much larger tax deductions, since the value of the deductions is linked to a family鈥檚 marginal tax rate.听As notes, 鈥渁 $100 tax deduction, for example, is worth early $40 to a high-income household but only $10 to a lower-earning family.鈥澨� To remedy this issue and refocus the benefits of aid onto low-income families, the Center proposes increasing the refundable portion of the American Opportunity Tax Credit (AOTC).听The Center also recommends eliminating nonrefundable tax credits, such as the Lifetime Learning Credit (LLC), since they do not benefit households that pay no income tax (i.e. low-income families).

The table below shows the percent distribution of student aid by type and income category in 2013.听As you can see, Pell Grants (in blue) primarily benefit low-income families, whereas tax-based student aid (in purple) does the opposite.听 Another interesting table from the Tax Policy Center can be found .

The paper includes three alternative proposals for making tax-based aid more helpful to low-income students and simultaneously boosting college access and completion.听 It also discusses three options for improving performance measures used in student-aid policies.

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�

Report Says Colleges Should Prioritize Improving Graduation Rates

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Last week, the National Commission of Higher Education published an calling on 鈥渆very college and university president and chancellor to make retention and completion a critical campus priority鈥� and asserting that such efforts are “an economic and moral imperative.” Six higher-ed associations assembled the Commission in 2011 at President Obama鈥檚 request. The 18 college presidents that form the Commission鈥檚 membership come from every sector, except for-profits, and were tasked with investigating strategies that individual schools can use to improve graduation rates.

The quotes Dr. E. Gordon Gee, chairman of the Commission, as saying, 鈥淲e concentrate most on the admissions side of things, getting the bodies in, and there鈥檚 no one in charge of seeing that they get through and graduate.鈥澨� Although enrollment rates are strong, nearly half of all college students nationwide fail to earn a degree within six years (79 percent of
entering freshman graduate from the 91探花within six years).

Completion efforts should take into consideration the changing face of higher ed: first-generation, mid-career, part-time, and veteran students are an ever-increasing share of the nation鈥檚 student body. The report notes that 鈥渁dult learners are far less likely than their traditional-age peers to complete their degrees鈥� and will need flexible schedules, more financial assistance, and targeted student services in order to succeed.

Other recommendations from the report include:

  • Narrowing course options so that students prioritize completion;
  • Putting someone in charge of overseeing completion efforts; and
  • Giving credit for previous learning.

The Commission asks colleges to avoid one-size-fits-all solutions and to eschew inflating their graduation rates by admitting only the best-prepared, lowest-risk students and/or by making it easier for students to pass.

The report acknowledges, however, that colleges need assistance in these completion endeavors, saying, 鈥淒isinvestment in higher education is terribly damaging and undermines efforts to expand and enhance academic and support services for students.鈥�

The Commission believes the report will trigger a sense of urgency among leaders (academic or otherwise) and, hopefully, meaningful action.

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.

Private-College Presidents Champion Need-Based Aid

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Two years ago at the annual Council of Independent Colleges, a group of private-college presidents advocated for limiting the amount of financial aid awarded on criteria other than need鈥攗sually referred to as “merit-based” financial aid. Although the presidents received an enthusiastic response from the Council, little action followed. However, last Saturday at this year鈥檚 Council meeting, the conversation was revisited and two encouraging developments suggest progress may be more conceivable this time.

First, the presidents unveiled a draft 鈥渟tatement of principle,鈥� which they hope will unite colleagues who believe that meeting financial need should be the highest priority of aid policies. Titled “High Tuition/High Discount Has No Future,” the statement articulates that the merit-aid/tuition discounting model is unsustainable and those signing their support acknowledge they鈥檝e contributed to the problem. The statement cites a that found “the increased use of merit aid is associated with a decrease in enrollment of low-income and minority students, particularly at more selective institutions.”

Second, David L. Warren, president of the National Association of Independent Colleges and Universities, revealed information from preliminary conversations with U.S. Justice Department officials regarding ways in which groups of presidents could discuss their tuition and/or financial aid policies without penalty and, hopefully, reach collective agreements to make college more affordable. This is significant as the Overlap Group, a set of elite universities that joined forces on admissions and financial-aid decisions for several years, faced antitrust charges by the federal government in 1991. The federal case effectively ended any meaningful collaboration on such topics, keeping schools in the dark about each other鈥檚 financial aid and admissions strategies.

“The fear, obviously, is that unilateral disarmament” in the merit-aid race won’t work, said one of the efforts鈥� leaders according to . Presidents worry that increasing need-based aid and decreasing merit aid, which is used to attract top students, will result in less robust enrollment and less prestige. But hopefully between the statement of principle, which could align presidents behind common goals, and discussions with the federal government, which could result in permissible collaboration, some progress will be made and the game of financial-aid chicken can end.

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.

Proposed Bill Would Revamp Federal Student-Loan Programs

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A introduced to the House of Representatives earlier this month by Rep. Thomas E. Petri, a Wisconsin Republican, would overhaul the federal student-loan programs.听Under the proposal:

  • Monthly payments would be capped at 15 percent of discretionary income鈥攖he new income-based repayment program currently caps payments at 10 percent of discretionary income.
  • Payments would be withheld directly from paychecks鈥攅ssentially eliminating the potential for defaulting, a welcome thought for schools with high default rates (predominately for-profits) which are at risk of losing eligibility to participate in federal aid programs.
  • Interest accrual would be capped at 50 percent of a loan鈥檚 total at the time of graduation鈥攇ood news for borrowers, often low-income, who take upwards of 10 years to repay loans.
  • Subsidies would be eliminated that currently pay interest while undergraduates are in college鈥攁 means of offsetting the cost of capping interest, but potentially detrimental to low-income students.
  • Loan forgiveness after a certain number of years (usually 20 or 25) would be eliminated鈥攖his could dissuade students from entering public-service careers for which loans are currently forgiven after 10 years.

The proposed system resembles those used in the U.K., Australia, and New Zealand. If passed, the new rules would only impact new loans.

While some components of the bill could be beneficial, such as the cap on interest accrual, many other components appear problematic. 听reports that the 听expressed support for the proposal saying, 鈥淲e need to make it as easy as possible for borrowers to stay on the straight and narrow.鈥� But others, such as the advocacy group , worry the bill would 鈥渢ake away some key tools for managing federal student debt,鈥� such as forbearance and deferments.

Since similar proposals from Rep. Petri have had little success in the past and since his latest bill has no cosponsors, the bill is unlikely to be passed.听However, it could be discussed during next year鈥檚 Congressional debate over reauthorizing the Higher Education Act, which expires at the end of 2013.