New America Foundation
By: Stephen Burd
June 9, 2011
Despite the federal government's substantial investment in federal student aid, low-income students still face extraordinarily high financial barriers in their efforts to obtain a higher education, the Education Trust, a research and advocacy group, states in a new report. The organization puts much of the blame on colleges for increasingly devoting their institutional aid dollars to attract the students they desire, rather than for meeting the financial need of the low-income students they enroll.
The report, "Priced Out: How the Wrong Financial Aid Policies Hurt Low-Income Students," comes at a critical time, as both the Obama administration and Republican lawmakers are looking to cut spending on the federal Pell Grant program, which is the government's primary source of aid for low-income students. The report does not suggest that the Pell Grant program is failing, but rather that policymakers need to find ways to ensure that colleges are not undermining the government's mission of making college accessible and affordable for low-income students.
Ed Trust analyzed data that the Department of Education's National Center for Education Statistics released earlier this year on institutional net price, which represents the average price students must pay to attend a college after all sources of grant and scholarship aid are taken into account. A 2008 law requires colleges to report to the Department of Education the average net price paid for all of its first-time, full-time students for the academic years 2006-07, 2007-08, and 2008-09. In addition, starting with the 2008-09 academic year, Congress mandated that colleges break down these data by income for students who received federal financial aid. (You can see these data by institution at http://febp.newamerica.net/higher-ed.)
Ed Trust found that of the 1,186 colleges that have reported comparable net-price data, students from families making $30,000 or less (with an average income of $17,000) paid, on average, an amount equivalent to 72 percent of their annual family income to attend a four-year college in the 2008-09 academic year, after all grant aid was taken into account. In comparison, students from families making between about $54,000 and $80,000 paid, on average, 27 percent of their annual family income.
In total, low-income students at more than two-thirds of the colleges that reported data contributed at least 50 percent of their family's income that year to pay for college. At about a quarter of the schools, these students contributed more than 100 percent of their family's annual income.
How does this translate to net prices for students at individual schools? Students from families making $30,000 or less at Pennsylvania State University, for example, were on the hook for nearly $14,500 in the 2008-09 academic year, and at the University of South Carolina at Columbia, nearly $15,600. Financially needy students, on the other hand, were best off at public universities in low-tuition states, such as at the University of North Carolina at Chapel Hill, where they only paid about $2,400, and at the most elite private colleges and universities, which can afford to offer generous need-based financial aid packages to the relatively small proportion of low-income students they serve. Meanwhile, low-income students attending for-profit colleges faced especially high net prices, the report says, because these schools receive no direct support from state governments and provide little to no institutional aid, resulting in high prices overall.
Because low-income students at the vast majority of colleges have high levels of unmet need, many of them go deeply into debt to pay their college bills, including taking on high-cost private student loans, the report states. Others engage in activities that lessen their likelihood of completing their degrees, such as working full time while attending college or dropping out until they can afford to return.
Ed Trust puts the brunt of the blame on colleges, which finance more than a third of all grant funds available to students. While four-year public and private colleges provided nearly $15 billion of grant aid in 2007, "these institutions chose to distribute this aid in a highly regressive manner," by devoting significant sums to merit aid, the report states. "Private nonprofit colleges and universities spent almost twice as much on students from families in the top quintile of family income as they did on those in the bottom quartile," the organization writes. "Even public institutions spent roughly the same amount on students from the wealthiest families as they did on those from low-income backgrounds." (Italics in original)
As the Ed Trust report shows, the relatively new net-price information broken down by income provides policymakers with a clearer picture of the financial hurdles that low-incomes students are facing at individual colleges, and at least a limited view of how campuses are spending their institutional aid dollars. The data is far from complete, as it looks only at first-time full-time students who receive federal financial aid, rather than for the student body overall. But it's a start and should help inform policymakers as they consider options for revamping the Pell Grant program.