Our Universities: Financial Aid and Its Impact on State Support

Third in a series on state funding for higher education

Addressing how the Monetary Assistance Program (MAP) is affecting the students of Illinois, the IBHE Task Force observed: 

The first issue is the increasing demand for financial aid. More students are attending college and the cost of doing so has grown faster than family incomes. More students seeking higher education that costs more has lead to double digit growth in demand for financial aid.

Illinois Board of Higher Education Task Force – Map Program Trends, January 2011


For four decades student loans have been an increasingly significant portion of post secondary education support rendered by legislatures.  The state’s contribution to the total cost of college attendance, while increasing in dollar terms, is decreasing as a percentage of the overall financial needs to keep the university doors open.

One might suspect, with the state reducing its commitment to higher education and loan availability decreasing, that the cost to students would discourage less financially advantaged students from attending.

Two factors, however, have kept enrollments up: the increasing availability of loan and grant funds, and a decline in entrance standards and performance expectations for students.  The pressure to maintain their budgets has encouraged poorly led universities to jettison academic standards to post higher enrollment numbers. 

While giving more people a chance to earn a degree seems noble at first blush, the resources of the universities, the Department of Education, and these students are being spent ineffectually if students cannot compete successfully.   

Community colleges have multiple missions, but a historically central one has been to prepare high school graduates with deficiencies to complete university studies.  While it may not seem a “conventional” route to some, students who aren’t willing to do whatever is necessary to prepare for academic success probably aren’t mature enough to benefit from a university experience.

Senior institutions should acknowledge the ability of community colleges to prepare students for advanced studies and facilitate community college transfers.  It is a self interest. University graduation rates would climb, as would student performance, while student indebtedness would decrease.  Over time, as a university’s reputation grew, the increased demand from entering upperclassmen could easily outstrip any reduction to freshman enrollment.

The City University of New York, in a bold and visionary move in 1998, eliminated all remedial courses at the four-year institutions in the System.  The jury is still out on this move, as effective change in universities is at best a long slow process to measure.  However, this type of innovation warrants watching. 

The cost of misallocating Pell Grants and other forms of financial aid to students who are unlikely to be successful is high.  According to a May 2005 report prepared for The National Center for Public Policy and Higher Education, 368,934 students who had entered university programs in 1995 and left without a degree had taken out loan, incurring an average debt load of $11,191, resulting in an aggregate debt amount of $4.1 billion.  That figure includes only loans for a single year’s freshman class, and only for students who did not complete the degrees that, presumably, they had counted on in their repayment plans.

The unfortunate trend continues even for those who finish their degrees.  James Kvaal, deputy undersecretary at the U.S. Department of Education, said the student loan default rate for borrowers who entered repayment in 2009 increased to 8.8 percent from 7 percent for the previous year’s group, according to the September 13, 2011, Diverse Issues in Higher Education. 

It is better to focus increasing Pell Grants on community colleges rather than universities, in support of students who might otherwise fail because of inadequate preparation.  And hold community colleges accountable for performance. David S. Baime and Christopher M. Mullin reported to the American Association of Community Colleges this past July, that nearly 80% of Pell Grant recipients attending community colleges in 2009–2010 had family incomes of less than 150% of the federal poverty threshold, and 60.7% were below the poverty threshold for a family of four ($20,000).

The surest way to stigmatize federal aid recipients is to give in to the national trend of expecting lower academic performance from students at those schools who receive the greatest proportion of these funds.  Rather, history teaches that students who enter the university with an associate’s degree succeed in their baccalaureate studies every bit as well as university students who enter as freshmen.

Diligent university leadership that relies on the demonstrated ability and motivation of students can hold costs down and make universities accessible to those who take the necessary steps to prepare themselves, and earn the right to be there.

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