We’re big advocates of providing students and families with tools and information to help them decide where to go to college and how to pay for it, and the Obama Administration deserves credit for making huge progress in this area. They created the College Scorecard, released new college-level data, and encouraged schools to use its voluntary “Shopping Sheet” format for financial aid award letters. Without the Shopping Sheet, college financial aid packages can be incredibly difficult to decipher and compare. It serves the same purpose as the standard window sticker required on all new cars since the 1950s—to provide key information in a consistent format so consumers can more easily understand their options.

Unfortunately, the Shopping Sheet and College Scorecard currently display different cumulative debt figures, such that the same institution can appear to be a low debt school on the Shopping Sheet and a high debt school on the College Scorecard.  While the College Scorecard shows the median debt of program completers only, the Shopping Sheet displays the median debt of all students entering repayment, regardless of whether they completed their program.* Including non-completers in the median debt calculation will often produce lower debt figures because non-completers borrow for a shorter period of time, sometimes only a semester or two before leaving a program. This is especially true for colleges where many students borrow but fail to graduate. As a result, the debt figure included on the Shopping Sheet inadvertently makes colleges with low completion rates (and high borrowing rates) look much more affordable than they actually are. This makes it harder for students to determine where they are likely to graduate without burdensome debt.  

The College Shopping Sheet Should Show Median Debt Among Completers, Just Like the College Scorecard

The table below demonstrates just how different the debt figures for the same school can be when you include all students entering repayment versus only program completers, particularly at colleges with low graduation rates.** For example, the median debt of completers at Ashford University is nearly three times higher than the median debt figure of all students who borrowed ($32,813 versus $11,190). This difference can be explained by the fact that 79 percent of students drop out of Ashford before they accumulate as much debt as those who complete their program. A similar difference is also evident at the University of Phoenix-Online, where 80 percent of students do not complete their program.

Differences in Median Debt Calculations

The problem is compounded when you compare schools with low and high graduation rates. To illustrate the potential magnitude of the impact of completion rates on median debt, we looked at median debt figures for Ashford University (where just 21 percent of students graduate) and Stanford University (where 95 percent of students graduate). While the typical Stanford graduate has 63 percent less debt than the typical Ashford graduate ($12,224 versus $32,813), the median debt among all students for the two schools is nearly identical ($11,190 versus $11,500).  Similarly, students at University of Phoenix-Online Campus and Florida State University have nearly identical median debt figures when non-completers are included. But the schools have dramatically different graduation rates (20 percent versus 76 percent), and graduates of the University of Phoenix-Online Campus typically have 67 percent more debt than graduates of Florida State University ($35,500 versus $21,250).

Students shopping for schools based on affordability are aiming to graduate with a degree, and should be informed about the debt they can expect when they accomplish that goal.  We’ve previously called attention to the problems with combining the debt levels of completers and dropouts (e.g., here and here), and we praised the Department last year for putting the median debt at graduation on the College Scorecard. We’re disappointed that the Department did not put median debt at graduation on the Shopping Sheet as well this year. Given the Department’s efforts to highlight colleges that do a good job of graduating students, it is particularly surprising that the Shopping Sheet uses a debt metric that makes colleges with high borrowing rates and low completion rates look more affordable than they are. We hope the next version of the Shopping Sheet will show debt for completers only, so students and families will know how much debt they can expect to have at graduation from different colleges.

* In addition, Shopping Sheet figures reflect one year of data, i.e., median cumulative federal student loan debt for undergraduates entering repayment in 2013-14, while Scorecard figures represents the same metric for those entering repayment in 2012-13 and in 2013-14 (pooled).

** Calculations by TICAS on data from U.S. Department of Education, College Scorecard.  Graduation rates shown here measure the share of first-time, full-time students who started in 2006-07 and 2007-08 who completed their programs within 150% of normal time by 2013-14. Median debt figures represent cumulative federal student loans borrowed for undergraduate education among borrowers who entered repayment in 2012-13 and 2013-14.

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Today the Administration announced a multifaceted plan to protect and support student loan borrowers. The announcement includes commitments to improve loan counseling, institute clear servicing standards and disclosures, and to help more borrowers enroll in income-driven repayment plans.

Students should have the best information in the right format to make critical decisions about how to pay for college. Loan counseling can play an integral role in helping student loan borrowers make wise decisions and avoid delinquency and default. The Department of Education’s online loan counseling tools serve 6.5 million students a year, and the Administration’s plan to make improvements based on input from borrowers and other stakeholders will help more students make the choices that are right for them. For TICAS’ recommendations to improve loan counseling that do not require legislation, click here.

Student loan servicers are paid more than $800 million a year to help borrowers access the repayment options, protections, and benefits that come with federal loans. Yet even so, a record 7.9 million borrowers are in default, and there are more than two million federal student loan borrowers over 90 days delinquent. Servicing failures, exacerbated by a lack of standards and misaligned incentives, are widespread. Once implemented and enforced, the standards outlined by the Administration – as well as the commitment to seek input on them – will make a huge difference for borrowers.

Providing borrowers in repayment with better information at the right time is a clear-cut next step. The Consumer Financial Protection Bureau’s Payback Playbook would share personalized information with borrowers to improve their understanding of repayment options, a positive move in the right direction. For TICAS’ recommendations on student loan servicing, click here.

Strengthening servicing standards by fully implementing the Administration’s new Student Loan Borrower Rights would improve servicing for borrowers in the following ways: (1) ensure servicers provide accurate and actionable information; (2) establish a clear set of expectations for minimum requirements for communication and services with borrowers; and (3) hold servicers accountable to borrowers and taxpayers. And, when servicers fail to do the right thing, the Department’s forthcoming complaint system can help ensure that borrowers’ concerns are addressed and resolved. We have recommended that the complaint system be public and searchable, connected to the complaint systems used by other federal and state agencies, and made clearer and easier to use.

Lastly, a key part of ensuring that fewer borrowers default on their loans is boosting borrower awareness of repayment plans that tie monthly payments to income. Our Project on Student Debt developed the policy framework and led the campaign that resulted in enactment of the Income-Based Repayment (IBR) plan, which has been available to borrowers since 2009. The Administration announced a new goal today to enroll two million more borrowers into income-driven plans like IBR. Although income-driven repayment is not the best choice for every borrower, clearly many more borrowers could benefit from tying their monthly payments to an affordable share of their income and knowing that they will not be repaying their student loans for the rest of their lives. The Debt Challenge, the Administration’s campaign to promote employer outreach and boost awareness of repayment options, will help even more borrowers make better informed repayment decisions. We will do our part to get the word out by contacting more than 100,000 subscribers to our website, IBRinfo.org, and sharing information with our Twitter followers and Facebook friends to remind them about income-driven repayment plans.

As the Administration moves forward on taking action to help borrowers manage student debt, we look forward to seeing these steps, tools, and standards put in place so that fewer borrowers end up delinquent or in default.

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This week, the U.S. Department of Education announced two changes that will simplify an important but frequently overlooked part of the financial aid process, starting with the 2017-18 school year. As a result, low-income students who file a Free Application for Federal Student Aid (FAFSA) will face fewer barriers to receiving the aid they qualify for, and college financial aid offices will be able to spend more time helping students instead of chasing paper.

The financial application process doesn’t end when students submit the FAFSA, which is the gateway to federal grants, loans, and work-study as well as most state and college aid. Last year alone, 5.3 million students – one in four FAFSA applicants – were required to provide extra documentation to their colleges before they could receive federal student aid. This added step in the FAFSA process is called “verification,” and it mostly affects students with family incomes low enough to qualify for a need-based federal Pell Grant. Our 2010 study, After the FAFSA, found that that the complexity of the verification process unnecessarily prevents many low-income students from receiving aid they are otherwise eligible for. Even for those who get through all the paperwork, the added hurdles delay access to needed aid by weeks or even months into the school year.

The Department has now announced that it is eliminating certain burdensome verification requirements based on clear evidence that they are not worth the trouble for students, schools, or taxpayers.

One of the reasons the Department of Education currently flags students for verification is if the income reported on their FAFSA appears too low to support their household. These students must then document their sources of income and may have to explain how their family survives financially. A recent Boston Globe piece details just how difficult this process can be, and college financial aid administrators have reported tremendous and unnecessary costs to students and schools.

Starting in 2017-18, students will no longer be targeted for verification simply because their families are very poor. The Department of Education said it is eliminating this type of verification because evidence showed that “the burden on families […] far outweighed the benefits.” Nearly all students selected for this form of verification (95%) did not see changes to their Expected Family Contribution (EFC), which is used to determine federal aid amounts.

In addition, students who are flagged for verification for other reasons will no longer have to provide extra paperwork if someone in their family received SNAP benefits (formerly called food stamps) or if they made child support payments. The Department of Education found that verifying those pieces of information did not make students more or less eligible for aid.

We applaud the Department of Education for removing these unnecessary verification requirements, which made the aid application process more complicated for the neediest students. This is an important step, but more still needs to be done to ensure that the FAFSA verification process protects the integrity of the federal student aid program without unduly denying or delaying access to aid that eligible low-income students need to succeed.

This Administration has already dramatically simplified the initial FAFSA filing process for millions of students and families, making it possible for them electronically transfer their tax information into the FAFSA and apply for aid when they typically apply to colleges, as TICAS and many others have urged. We look forward to working with Congress and the Department of Education to further simplify the aid application process from beginning to end for students and schools, both by eliminating unnecessary questions on the form and by further reducing unnecessary verification and paperwork.

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While the President’s proposed budget fully funds the scheduled increase in the maximum Pell Grant and continues to tie it to inflation after 2017, the House Budget Committee’s FY17 budget eliminates the $120 increase scheduled for 2017-18 and freezes the maximum grant at $5,815 for 10 years.

In the 1980s, the maximum Pell Grant covered more than half of the average annual cost of attending a four-year public college. Cutting the maximum grant and freezing it for the next 10 years would reduce the share of covered costs from an already record low of 29 percent in 2016-17 to just 21 percent by 2026-27, making college even less affordable. 


Sources: Calculations by TICAS on data from the College Board, 2015, Trends in College Pricing 2015, Table 2, http://bit.ly/1Pyv2sJ, and U.S. Department of Education data on the maximum Pell Grant. Calculations for 2017-18 through 2026-27 assume that the maximum Pell Grant is frozen at the 2016-17 level. College costs are defined here as average total in-state tuition, fees, and room and board costs at public four-year colleges. Projected college costs for future years were estimated by using the average annual increase in costs over the most recent five years.  

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Both the 2014-15 and 2015-16 California state budget agreements contained crucial and long-overdue increases to need-based financial aid, including Cal Grants. Those investments are helping to make college more accessible for thousands of low-income Californians, though severe affordability gaps remain for the state’s lowest income students.

The good news is that the legislature can continue closing those gaps in 2016-17, and there are resources available to do so right in financial aid’s backyard.

The Middle Class Scholarship (MCS) program was created in 2013 to reduce tuition for middle-income students at the University of California and the California State University who were ineligible for grant aid yet unable to comfortably afford tuition. Last year, lawmakers downsized the program in order to bring eligibility terms more in line with Cal Grants and to exclude students with substantial financial resources, resulting in projected savings of $112 million for 2016-17.

Yet it appears that the program still has more money than it needs, and that even more savings could be achieved without affecting MCS recipients. In both of the years that the Middle Class Scholarship has been available, there have been far fewer eligible applicants than anticipated. Still-nascent awareness about the program could explain the underutilization in 2014-15 – the first year of implementation. But even in the wake of concerted efforts by the California Student Aid Commission and California public colleges to bolster outreach to students and families, the program still has a significant surplus in 2015-16.

When the MCS has a surplus, it means that dollars intended to help Californians afford college are being returned to the state’s coffers. For 2016-17, we project that about $41 million will go unused. Combined with the 2016-17 budget savings from the eligibility changes agreed to last year, that’s a total of about $153 million previously scheduled to be spent on the MCS in 2016-17 that will not be spent on the MCS. By 2017-18, when the Middle Class Scholarship will be fully phased in, this amount could grow to $200 million or more.*

As we’ve previously argued, savings from the Middle Class Scholarship program should remain in financial aid and be reinvested in Cal Grants specifically. Some of it already has been: for instance, the 2015-16 budget, which scaled back MCS eligibility, also increased the annual number of Competitive Cal Grants, which serve students who do not transition straight from high school to college. However, far more could be done given the amount of MCS savings. The $41 million surplus in 2016-17 could increase the Cal Grant B access award, which helps low-income students pay for non-tuition costs of college, by $175.  Alternatively, it could increase the number of new Competitive awards available annually by nearly 5,700.** The legislature could triple those increases by reinvesting all of the MCS savings – the surplus as well as ongoing savings realized through eligibility changes – into Cal Grants. Both the Cal Grant B access award and Competitive Cal Grants serve the state’s lowest income students, but not nearly well enough.

For more on how and why to deepen investment in the Cal Grant program, see the report released by TICAS and twenty other organizations last week.

* Projections of future spending are based on 2015-16 MCS award utilization. Projections reflect the scheduled phase-in of award coverage, from 50 percent in 2015-16 to 100 percent in 2017-18.  

** Projections of 2016-17 Cal Grant awards and dollars are based on data from the California Department of Finance: California Student Aid Commission, The Cal Grant Chart: Baseline Budget Forecast thru end of Sep 2015 - updated November 20, 2015.

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