Higher Education

The Ed Dept.'s New Proposed Language for Gainful Employment is Out. Here's What You Need to Know

August 30, 2013

With a little bit more than a week until the next round of negotiated rulemaking on gainful employment kicks off on Sept. 9, the U.S. Department of Education today released its initial proposal for the new rule along with reams of supporting data. Higher Ed Watch will be digging into this information over the coming days, but here's what you need to know right now.

Income Based Repayment Is One Sick Puppy

August 28, 2013
Publication Image

There’s not enough work for veterinarians,” NPR’s All Things Considered told us this week. The New York Times was onto the same story six months ago with the headline “High Debt and Falling Demand Trap Vets.” In other words, there’s a mismatch in the supply and demand for veterinarians, vet school is expensive, and students leave with lots of debt. NPR says that puts vet schools “in a bind – tuition money on one side, market realities on the other.” Or does it?

Thanks to the federal Income-Based Repayment program for student loans (what the Obama administration calls Pay As You Earn) it’s much easier for graduate and professional schools to charge tuitions that far outstrip what even a successful graduate could expect to repay based on his earnings. The new Income-Based Repayment (IBR) caps a borrower’s payments based on a share of his income and he never pays beyond 20 years. Because of that design, his payments have a maximum limit regardless of how much he borrows. (Graduate students can take out federal loans to pay for the entire cost of their education as determined by the school they attend.)

It turns out that for veterinary schools tuition is already so high that most graduates have borrowed well beyond the point at which borrowing more actually increases what they will have to repay on those loans – with one very important caveat. More on that later.

Consider a vet who earns a salary over the next 20 years that is greater than 75 percent of vets in his age group. Once he accumulates $105,000 in debt while in school, any additional amount he borrows is forgiven under the New Income Based Repayment program after 20 years of payments. He could borrow $150,000, $190,000 or more, but he makes the same monthly and total payments over the next 20 years had he borrowed only $105,000. See table.

Here is the kicker. According to the American Veterinary Medical Association, 70 percent of graduates leave school with more than $105,000 in debt today. And remember, the point at which a vet student stops incurring a cost for borrowing more in federal loans – $105,000 – was calculated for high earning vets, those making more than 75 percent of their peers, not the average.

IBR Vets Table_0.png

Now for the important caveat. The federal government taxes any debt that it forgives at the 20-year mark. Even though a borrower makes no additional payments on his loan once he accumulates a balance of $105,000 while in school, his tax payment in year 20 increases as he borrows more. (See table) Therefore, the taxability of loan forgiveness is the only check on what is otherwise an open-ended system of tuition increases, borrowing and loan forgiveness. But some lawmakers want to remove even that minimal safeguard.

Earlier this year, President Obama asked lawmakers to pass a bill that makes loan forgiveness tax-free. The top Democrat on the tax law committee in the House supports the proposal.

To be sure, taxing loan forgiveness does run counter to the intended purpose of Income-Based Repayment. The program cannot be a safety net for struggling borrowers if their debts are simply transferred from the Department of Education to the IRS – which, by the way, is probably the only federal agency with more punitive and powerful collection tools than the Department of Education.

That’s the dilemma for policymakers. They cannot make loan forgiveness tax free to ensure IBR works like a safety net without removing the only check on excessive tuition pricing and over-borrowing. Worse yet, low and high income borrowers alike would benefit, with high earners getting the biggest relief thanks to progressive income tax rates.

Lest you think high earners won’t get loan forgiveness, consider that in the veterinarian example above, a vet earning at the 75 percentile over his entire repayment term would earn about $120,000 in today’s dollars the year his debt is forgiven. How much would he have forgiven? A little over $204,000 assuming he leaves school with the average debt load of his peers.

President Obama said for the first time last week that he wants to “work with Congress to ensure that the benefits [of Income Based Repayment] are targeted to the neediest borrowers.” That sounds like progress, but he hasn’t offered any specifics. Meanwhile, his specific proposal to make loan forgiveness tax-free would disproportionately target more benefits to the least needy borrowers: graduate students and high earners.

Congress should make loan forgiveness tax-free, but only after the Obama administration agrees to a package of changes that put tighter limits on the benefits Income-Based Repayment provides to graduate and professional students – and the schools who enroll them.

The next time you hear a story about how vet school tuition is totally out of line with vet salaries, you can rest assured that there’s a federal program for that. And as long as there’s a federal program for that, you can rest assured that there will be stories about how vet school tuition is totally out of line with vet salaries. 

Obama: "Our National Mission Is Not to Profit on Student Loans."

August 23, 2013

This week President Obama added some new details to his plan to reshape federal higher education policy. He also added that “[o]ur national mission is not to profit off student loans,” referring to a talking point that loomed large in the now-concluded debate over how the government should set interest rates on student loans. That sure sounds good, but it contradicts the president’s policies.

The president has never proposed to wring what he calls “profits” from the federal student loan program. Worse yet, the Obama administration asked Congress to let more students from low-income families access supplemental federal loans. The extra loans would be restricted to schools that meet certain, unspecified performance standards, as a way of replacing the Perkins loan program.

One of the reasons that the White House likes that proposal is that it adds to the government’s apparent profit in the loan program because students overall take out larger loans – there is a net increase in federal loan volume. According to the president’s budget, the additional profits would total $14.3 billion over 10 years. The Obama administration would “spend” those profits on other higher education policies, but leave a little still to reduce the budget deficit (i.e. a net reduction in spending).

To be sure, we and others, including the Congressional Budget Office, have argued that those profits are an accounting illusion. The president's Perkins loan proposal would in fact cost about $6 billion according to a fair-value estimate from the CBO. Lending at favorable terms and rates does impose a cost on taxpayers – though the benefits of the program far outweigh that cost. Fair-value accounting reveals those costs and helps policy makers make more informed decisions. Yet the White House rejects our arguments and insists (see page 393 here) that the loans do in fact make a profit.

Much of what the president outlined in his speech this week was good policy. But the Obama administration needs to get its story straight on those student loan profits. If the president believes the profits are really there, then he must propose a policy to eliminate them, not increase them. Alternatively, he could start saying that our national mission is to profit on student loans.

Another option would be to support fair-value accounting. If the administration understands that the loan profits aren’t real, then the White House policies and statements all make sense together. In the meantime, the Obama administration is trapped in a web of its own contradictions that goes like this:

“The government profits on student loans. We have no plan to eliminate the profits. We propose to increase those profits. It is not our mission to profit on student loans.”

Elephant in the Room on Proposed White House College Ratings: Data

August 22, 2013

President Obama’s new higher education proposal, just announced in a speech at SUNY-Buffalo this morning, would require the Department of Education to develop college ratings that highlight schools’ value by the 2014-15 school year. Once the ratings are developed, the plan is to then tie federal dollars to performance. Though students could continue to choose whichever college they want, federal dollars, at least, would be funneled toward the highest-value programs (and presumably, funneled away from the lowest-value programs). A ratings system along the proposed dimensions of access, affordability, and outcomes would provide students and families much deeper and better information about the quality and cost of their prospective colleges than they have now.

But there’s an elephant in the room the plan doesn’t address: we don’t know the answers to the questions necessary to rate institutions. And we can’t find out, thanks to “one of the worst laws in the modern history of higher education,” passed by Congress five years ago.

That’s because knowing the answers to questions like, “How do Pell Grant students fare at X institution?” or, “Do students who graduate from Y college earn enough after graduation to pay back their loans?” requires student-level data. But in 2008, Congress passed a little-noted provision of the Higher Education Opportunity Act that prohibits the Department of Education from collecting such student unit records.

Despite the posturing as being committed to student outcomes, colleges don’t necessarily want the public to even know about their outcomes, let alone risk their access to their slice of the annual $150 billion federal financial aid pie. That’s why they’ve fought tooth and nail for institutional privacy (often under the guise of protecting student privacy) – to prevent the Department from holding them accountable for the results of such information.

Instead of providing useful information, schools report aggregate-level information on certain subsets of students (largely first-time, full-time students – the kinds of traditional students who make up only about 14 percent of the undergraduate student body today). That system, the Integrated Postsecondary Education Data System (IPEDS), is extremely limited. For example, in addition to skipping students who aren’t first-time, full-time, graduation rates in IPEDS don’t count transfer students at all, even though a primary mission at community colleges is transferring students to a 4-year institution.

So as it stands, we have the worst of all possible worlds: Schools report tons of not-very-useful information to the government, and public officials lack the ability to hold schools accountable to much beyond a few baseline measures.

The president’s proposal, if it’s backed up with a reversal of the ban on collecting institutional information at the student level, could be a game-changer. The Department issues more than $150 billion in student aid to schools ever year – largely with few strings attached. Holding colleges accountable to actual outcomes, the kind that can’t be easily gamed, and providing that information back to students and families could mean fewer students left with huge piles of debt and virtually worthless degrees, as well as fewer taxpayer dollars wasted on low-quality degrees.

But a student unit record data system is a critical component of that. Without the data to inform college rankings, students will be left as in the dark as they are now. Good institutions won’t be able to prove their value to students, and bad ones will be able to hide in plain sight. Data alone may not solve the problem of excessive college costs, but data can empower students, families, and other investors in higher education to make the kinds of good choices that improve the system on the whole.

For details on how the president’s plan makes use of experimental sites, check out this post. Stay tuned in the coming days for more analysis of the White House proposal.

A Path Forward For Higher Ed Innovations Such as Prior Learning Assessment

August 22, 2013
Today, as the President announced his new plan to make college more affordable, one of the three broad goals in his ambitious agenda focused on promoting innovation and competition in higher education. Plans like these are typically light on the details, asking for more investment – see the President’s Pre-K plan – and calling for legislative changes that are unrealistic in today’s political climate. Fortunately, this part of the plan seeks to capitalize on an existing policy tool that can help spur innovation by removing regulatory barriers: the Experimental Sites Initiative. 
 
For those who haven’t read through Title IV lately in the Higher Education Act, you may be scratching your heads and wondering what exactly experimental sites are. Well, in the 1992 Reauthorization of the Higher Education Act, Congress gave the Department of Education a powerful tool to test and refine innovative ideas in higher education. This provision within HEA now states that:
 
The Secretary is authorized to periodically select a limited number of additional institutions for voluntary participation as experimental sites to provide recommendations to the Secretary on the impact and effectiveness of proposed regulation or new management initiatives.
 
 
As Amy Laitinen elaborated in last year’s Cracking the Credit Hour:
 
With this language, the Department can create a small, controlled, voluntary virtual laboratory of “experimental sites” on which it test particular […] policies to see if they work, how they work, for whom they work, and under what conditions they work. It can get a sense of how the policy could be abused and create parameters that would prevent such abuse. It can then take the results of these experiments to Congress, so that lawmakers can adopt policies to encourage the growth of the most successful experiments at a larger scale.
 
 
With many of the innovations happening in higher education, statutory and regulatory barriers exist that prevent schools from offering students financial aid for enrolling in innovative, low-cost alternatives to traditional college coursework. Experimental Sites allow the Department to waive these barriers for a small group of participating institutions to, as Amy highlights: 1) test to see if they work, 2) control for potential abuses and pitfalls, and 3) use the results to advocate for informed policy recommendations that call for systemic change.
 
While this authority has existed for over two decades, the Department has not made much innovative use of experimental sites. The majority of experiments the Department has approved over the years have focused on reducing institutional burdens associated with administering financial aid, rather than piloting more innovative and affordable educational models. While changing leadership and legislation over the years have largely been responsible for their limited use, there is now a unique opportunity to leverage this policy tool.
 
One of the innovations the President highlighted involves using federal financial aid to support students seeking academic credit for prior learning. Prior learning assessment comes in several different forms, including commonly utilized tools such as Advanced Placement and College Level Examination Program (CLEP) tests. It can also encompass things like portfolio assessments and evaluations of training students may have received through their employers or the military. While there are Department regulations that currently prevent financial aid from paying for prior learning assessment, experimental sites would allow the Department to waive these regulations for institutions willing to work with students to give credit for prior learning.
 
Experimental sites offer a concrete way to help change institutional and student behavior in a way that leads to better student outcomes. As the Department moves forward with this initiative, designing experiments that conclusively measure student outcomes and cost-savings will provide the critical information needed to implement comprehensive policy changes.
 
Keep checking in with Higher Ed Watch for more background and information about Experimental Sites, as well as the latest in new experiment development.
 
For more about the data implications of the College Ratings system proposed in the President's plan, see Clare McCann's post also featured on Higher Ed Watch.

A Rapid Analysis of New Ed Department Data

August 20, 2013

This post also appeared on our sister blog, Higher Ed Watch.

Today, the U.S. Department of Education’s National Center for Education Statistics released its quadrennial survey of student financial aid. We are publishing our own rapid analysis of the new data, highlighting trends in borrowing and grant aid across different incomes, institutions, and other variables.

1. High Borrowing Rates among Pell Grant Students

These latest data from the Department of Education show that students receiving Pell Grants last year still had to employ student loans to pay for their college educations. In particular, more and more students at community colleges and private nonprofit universities had to borrow to pay for school. Students at for-profit colleges who receive Pell Grants still borrowed at the highest rate of any institution type, however, at 87.5 percent:

 

2. Growing Parent PLUS Loan Borrowing Rates at Some Institution Types…

Many institutions use Parent PLUS loans as an additional revenue source, as well as a way to avoid accountability rules like the student loan default rate measure. Last year, borrowing of federal Parent PLUS loans increased across parents at all types of schools except community colleges, while for-profit Parent PLUS borrowing increased to nearly one-quarter of all parents of dependent students.

3. …and Excessive Parent PLUS Debt at Some Colleges

The rate at Historically Black Colleges and Universities (HBCUs), at nearly 20 percent, outpaced the 9 percent overall rate at non-HBCU schools. HBCUs were some of the strongest advocates behind the Department of Education’s recent move to rescind regulations limiting availability of Parent PLUS loans.

Parent PLUS loans allow institutions to skirt accountability and avoid quality metrics. They can also saddle low- and moderate-income families with debt they can't afford and that isn't dischargeable in bankruptcy. The growth in PLUS borrowing rates offers evidence that institutions are using them to make their education appear more affordable and accessible to students and families. The growth in borrowing, particularly at for-profit institutions and HBCUs, is a disconcerting trend.

4. Campus-Based Aid Increasingly Missing the Target

Federal campus-based aid (including Perkins loans, work-study, and Supplemental Educational Opportunity Grants) relies on an outdated formula that disproportionately distributes funds to elite public and private colleges. The new data show that the percentage of higher-income dependent students receiving any campus-based aid has increased over time, especially at private nonprofit four-year institutions. Moreover, the fact that such a larger share of students at private nonprofit institutions are able to receive this support compared to those at public four-year schools should call into question the way these dollars are allocated to institutions. 

Campus-based aid has earned its reputation as a blunt, inequitable tool for delivering federal student aid. The new Department of Education data tell the story of campus-based aid as a program incapable of consistently reaching the lowest-income students while avoiding providing federal dollars to students from families with six-figure incomes.

5. Average Grant Size Raises Questions about Use of Institutional Dollars

Institutions are increasingly spreading their own funds so thin that they are now providing significant amounts of aid even to those families in the highest income bracket. This chart shows the average amount of grant aid given to all dependent students (including those who did not receive any grant aid) by parental income over time. It is also adjusted for inflation to provide a better comparison across years.

Grant aid is a precious resource for federal and state governments. That’s why they by and large award it to those with the lowest incomes and the most need. But the explosive growth in institutional grant aid, particularly for wealthier students at private nonprofit colleges, raises real questions about whether they are using their aid budgets to promote colleges’ access or as part of prestige-driven recruitment efforts.

We will continue to publish analysis of the Department of Education data over the coming weeks.

A Rapid Analysis of New Ed Department Data

August 20, 2013

This post also appeared on our sister blog, Ed Money Watch.

Today, the U.S. Department of Education’s National Center for Education Statistics released its quadrennial survey of student financial aid. We are publishing our own rapid analysis of the new data, highlighting trends in borrowing and grant aid across different incomes, institutions, and other variables.

1. High Borrowing Rates among Pell Grant Students

These latest data from the Department of Education show that students receiving Pell Grants last year still had to employ student loans to pay for their college educations. In particular, more and more students at community colleges and private nonprofit universities had to borrow to pay for school. Students at for-profit colleges who receive Pell Grants still borrowed at the highest rate of any institution type, however, at 87.5 percent:

 

2. Growing Parent PLUS Loan Borrowing Rates at Some Institution Types…

Many institutions use Parent PLUS loans as an additional revenue source, as well as a way to avoid accountability rules like the student loan default rate measure. Last year, borrowing of federal Parent PLUS loans increased across parents at all types of schools except community colleges, while for-profit Parent PLUS borrowing increased to nearly one-quarter of all parents of dependent students.

3. …and Excessive Parent PLUS Debt at Some Colleges

The rate at Historically Black Colleges and Universities (HBCUs), at nearly 20 percent, outpaced the 9 percent overall rate at non-HBCU schools. HBCUs were some of the strongest advocates behind the Department of Education’s recent move to rescind regulations limiting availability of Parent PLUS loans.

Parent PLUS loans allow institutions to skirt accountability and avoid quality metrics. They can also saddle low- and moderate-income families with debt they can't afford and that isn't dischargeable in bankruptcy. The growth in PLUS borrowing rates offers evidence that institutions are using them to make their education appear more affordable and accessible to students and families. The growth in borrowing, particularly at for-profit institutions and HBCUs, is a disconcerting trend.

4. Campus-Based Aid Increasingly Missing the Target

Federal campus-based aid (including Perkins loans, work-study, and Supplemental Educational Opportunity Grants) relies on an outdated formula that disproportionately distributes funds to elite public and private colleges. The new data show that the percentage of higher-income dependent students receiving any campus-based aid has increased over time, especially at private nonprofit four-year institutions. Moreover, the fact that such a larger share of students at private nonprofit institutions are able to receive this support compared to those at public four-year schools should call into question the way these dollars are allocated to institutions. 

Campus-based aid has earned its reputation as a blunt, inequitable tool for delivering federal student aid. The new Department of Education data tell the story of campus-based aid as a program incapable of consistently reaching the lowest-income students while avoiding providing federal dollars to students from families with six-figure incomes.

5. Average Grant Size Raises Questions about Use of Institutional Dollars

Institutions are increasingly spreading their own funds so thin that they are now providing significant amounts of aid even to those families in the highest income bracket. This chart shows the average amount of grant aid given to all dependent students (including those who did not receive any grant aid) by parental income over time. It is also adjusted for inflation to provide a better comparison across years.

Grant aid is a precious resource for federal and state governments. That’s why they by and large award it to those with the lowest incomes and the most need. But the explosive growth in institutional grant aid, particularly for wealthier students at private nonprofit colleges, raises real questions about whether they are using their aid budgets to promote colleges’ access or as part of prestige-driven recruitment efforts.

We will continue to publish analysis of the Department of Education data over the coming weeks.

How Well are Today’s Teachers Prepared for the Classroom?

August 16, 2013

This summer, the National Council on Teacher Quality released its first Teacher Prep Review, finding that many preparation programs poorly equip prospective teachers to meet the needs of today’s students. In fact, only four of the 1,200 undergraduate and graduate programs reviewed earned a spot on the “Dean’s List,” meaning they received four out of four stars.

Clearinghouse Data Leave More Questions than Answers, and We Need Answers

August 14, 2013
Publication Image

Twenty-nine percent of first-time community college students transferred to a four-year college within six years, according to a new report from the National Student Clearinghouse. About 8 in 10 of those transfer students completed a bachelor’s degree or were still enrolled in the four-year school after six years. These are just a few of the interesting and important findings of the report, many of which were previously unknown.

The report, which looked at students who enrolled at a four-year institution for the first time in the 2005-06 academic year and had previously been enrolled in a two-year college, found that 72.5 percent of those students transferred to public colleges, while 19.7 percent enrolled at private nonprofit institutions, and 7.8 percent enrolled at private for-profit schools. The choice of the type of institution to which a student transferred seemed to make a difference in his success. Nearly 65 percent of students who transferred to public four-year schools graduated within six years of transferring, and about 60 percent of students who transferred to private nonprofit schools did. Meanwhile, only about 35 percent of transfer students at private for-profit schools graduated within six years.

clearinghousedata.png

At all three types of institutions, students who enrolled full-time graduated at higher rates than students who were enrolled either part-time or who mixed part-time and full-time enrollment while in school.

● At public institutions, 84 percent of full-time students graduated within six years of transferring, while only one in four part-time students did;
● At private nonprofit schools, 79 percent of full-time students graduated within six years, while 31 percent of part-time students did;
● At private for-profit schools, the results weren’t quite as good for the full-time students. Only 57.7 percent of full-time students graduated within six years, while 18.1 percent of part-time students did.

Perhaps most surprising are the aggregate results the Clearinghouse reports. Students who began at two-year colleges and transferred to four-year schools graduated at a higher rate (71.1 percent) than students who attended four-year institutions throughout their academic careers (65.0 percent). But don’t be misled. That number excludes the many community college students who never transfer. Research suggests only about 29 percent of two-year college students transferred to a four-year school, when about half had once stated an intention to transfer – and the Clearinghouse report doesn’t specify its own figures for this category.

The Clearinghouse report offers unique and important insights in answering questions about higher education, like the one addressed in this report: What happens to students who transfer from community colleges? That’s because no one – not even the U.S. Department of Education – has data on higher education as granular as the Clearinghouse data.

The National Student Clearinghouse, originally the National Student Loan Clearinghouse, was developed twenty years ago to help schools track borrowers and that is now used to help schools comply with federal reporting requirements. Schools voluntarily provide the Clearinghouse with extensive student-level data.

But because of a ban passed by Congress in 2008, the Department may not gather student-level data or offer a sort of public Clearinghouse – instead, it only maintains the Integrated Postsecondary Education Data System (IPEDS), which offers a profoundly limited look at aggregate, institution-level data. Because of this limitation, IPEDS is unable to answer some of the most simple and fundamental questions, like what happens to community college students who transfer.

It’s an important question, given that IPEDS shows a graduation rate of only 17.9 percent at two-year schools. That’s because the IPEDS definition doesn’t consider transfers in the graduation rates, despite the fact that community colleges consider transferring students to four-year degree programs one of their primary missions. Without student-level data, there’s no way to give community colleges much-deserved credit for transferring those students -- many of whom, the Clearinghouse report shows, ultimately do complete their degrees.

The data from the Clearinghouse report are interesting, but they’re not enough. We need a public version of the Clearinghouse to answer the other questions important to students and families, researchers, and policymakers. We still don’t know how many community college students wanted to earn a four-year degree and never transferred. We don’t know which specific institutions are helping transfer students graduate and which aren’t serving those populations well. Those, and a whole host of other questions, could—and should—be answered with a national student-level database.

University of Virginia: Proving Me Right Since 1819

August 12, 2013
Publication Image

The University of Virginia is no stranger to controversy. Just over a year ago, in June 2012, the school’s governing body, the Board of Visitors, voted to oust the president after less than two years at the helm.

The dethroned President Teresa Sullivan was popular among faculty and students; the ousters on the Board of Visitors, led by Virginia real estate mogul Helen Dragas, were less thrilled with her performance. Sullivan fell out of favor with the board, the Washington Post noted, “because of her perceived reluctance to approach the school with the bottom-line mentality of a corporate chief executive.” After students, faculty, and administrators turned out to defend Sullivan and criticize Dragas, the board reinstated Sullivan.

Flash forward to 2013. In April, Sullivan was at the forefront of the charge to increase the university’s tuitionby 3.8 percent and 4.8 percent for in-state and out-of-state students respectively. Last week, Sullivan was one of the chief supporters of a plan to cut back on the AccessUVa program, the school’s financial aid commitment to low- and moderate-income students that began in 2004. Whereas previously the school covered all costs for students from families making up to twice the federal poverty line (about $47,000 per year for a family of four), the school will now only cover part of the cost, with the student needing to borrow the remaining amount.

The proposal to raise tuition eventually passed the Board of Visitors in a 14-2 vote, as did the proposal to scale back financial aid. The main dissenter in both cases? Helen Dragas.

***

I’m not normally in favor of a person selectively picking examples that support a pre-existing position, but in this case I am the one doing it so I am willing to make an exception.

A short while ago, I argued in The Atlanticthat the high-tuition, high-aid model was not working. Facing too many funding priorities, it was difficult for schools to keep aid in line with tuition when aid is an easy target for cuts. This parallels closely to the world of social insurance, in which means tested programs for the poor fail to have the same widespread level of support that universal benefit programs do.

The recent decisions at UVA showcase this theory in practice. An article about the April tuition hikes made the point clearly: “In its current form, AccessUVa is diverting a widening stream of university money from other priorities the university is trying to fund, such as faculty salaries, which increasingly lag behind competing schools’.”

This adds further confirmation to the idea that in many cases, even at elite public universities, financial aid and tuition will not rise together. A more likely situation is that tuition will rise and financial aid will fall, putting the burden on low-income students to either not enroll or take on more debt. In either case, the ability for low-income students to maintain access to higher education decreases. Unlike some schools – in which the “other priorities” that take away support for low-income students include funding for ‘merit aid’ and new buildings – UVA’s problems are not so cut and dry. But the problem with high-tuition, high-aid still remains.

In some ways, the financial aid program at UVA is a victim of its own successes: it has worked well enough to attract and enroll low-income students that the school says it now costs too much money. Previously, UVA was able to keep its financial aid costs low because it enrolled extremely few low-income students: in 2004, a mere 8.7 percent of students received federal Pell Grants, a number that actually decreased through 2007. While the share is still very low today relatively to other elite institutions – only 12-13 percent of the undergraduate student body receives Pell Grants – the almost 50 percent increase in the number of low-income students, likely due both to AccessUVa and the impact of the recession, has made the budget pressures of the program more apparent.

This is not to put the blame squarely on the shoulders of the university (or, perhaps, we probably shouldn’t be blaming anyone at all). As UVA is quick to note, it receives lower state appropriations for higher education than many other flagships. The state’s southern neighbor, North Carolina, provides nearly three times as much funding per full time student at the University of North Carolina Chapel Hill than Virginia does for its flagship campus. UVA provides this handy chartto show that it receives less funding per in-state student than its competitors. Of course, this chart handpicks which schools it wants to compare to UVA and leaves out other prominent public schools like University of Texas at Austin, which receive less state appropriations than UVA. When I selectively choose examples to help prove my point it’s acceptable, but when other people do it’s far less enjoyable.

Additionally, the school emphasizes that it needs to pay its faculty more to stay competitive – which it cannot do given the increasing amount of money it is using for financial aid. The UVA budget claims that it wants to move its compensation ranking higher on the list produced by the Association of American Universities (AAU). This premise means, however, that UVA is competing with both public and private universities. If fair compensation has to match that of private elite universities, it is not surprising that UVA falls behind. A quick comparison with other large, top-tier public schools based on AAUP data shows that UVA’s faculty compensation, while behind UC-Berkeley and Michigan, is similar to that of Texas and Maryland. So while the concerns about adequate faculty pay are legitimate, it is important to keep in mind how the school defines the competition.

Thus, the pressures facing UVA, while perhaps overstated, are indeed real – and the state’s low level of funding has been a primary contributor to UVA’s funding woes. However, it would also be wrong to let UVA completely off the hook. As Kevin Carey pointed out last year, UVA has an endowment of $5 billion, making it the wealthiest public school per capita in the country. And part of the reason it is struggling is because previously it enrolled very few low-income students. If the school’s distribution of students was unequal before, the best response to an increase in low-income students cannot be to try to make them go away by making college more expensive. By moving further toward a high-tuition, high-aid model, the school has exposed itself to a greater possibility that access for low-income students will continue to fall away.

***

The third part of a trilogy is always difficult to judge ahead of time, and we may well have to wait until next summer before the third installment of the Dragas-Sullivan showdown occurs. There is an equal chance that it will be a positive development (think: Return of the King) or a negative one (think: Spider-Man 3).

Without knowing more about the internal deliberations and perspectives of each player in this saga, it would be unfair to cast Sullivan’s decisions as a pure embrace of corporate bottom line strategies. But they will certainly make it more difficult for students to afford college, both deterring potential students from enrolling and adding to the student debts of those who do. As Dragas pointed out in the Washington Post, “This goes against our mission of affordable excellence and undermines [university founder Thomas] Jefferson’s insistence that excellence and access were both essential to perpetuating a democracy.”

For those who watched last year’s ouster with a combination of confusion and horror, to view Dragas as the crusader for low-tuition and more access feels a bit strange. And given the many concerns that Dragas voicedabout the state of the budget during the saga, it is unclear what other cuts she would favor to help make up the shortfall. For all we know, it could involve gutting huge swaths of certain departments, which, too, would conflict with a vision of academic excellence.

The policymakers and administrators watching, though, should take note: the combination of decreased state funding, adverse economic conditions, increasing numbers of high-achieving low-income students, and the systemic problems of the high-tuition high-aid model has shifted more of the costs of higher education onto the backs of low- and moderate-income students. This is not just a problem at UVA: all of the incentives in the higher education system are designed to continually push out low- and moderate-income studentsin favor of the rich. As a leading institution, hopefully next summer will see UVA: Episode III in which the school – and state – leads the charge to make quality public higher education available to students of all backgrounds.

Joshua Freedman is a Policy Analyst for the Economic Growth Program at the New America Foundation

Syndicate content