Admissions and Financial Aid Policies

Delinquency By the end of October, U.S. colleges must meet a federal requirement to create online “net price calculators.” These calculators are intended to help prospective students and their families gauge college affordability, providing early individualized estimates of what particular colleges will cost them after grants and scholarships.

We took an early look at how colleges are approaching this requirement and found mixed results for how easy the calculators were to find, use, and understand.

Our recommendations include:

  • Colleges should make their net price calculators easy for prospective students and their families to find.
  • Colleges should create net price calculators that allow prospective students and their families to easily get and view results.
  • Colleges should make the results from their net price calculators easy for prospective students and their families to understand and compare.
  • Colleges should protect prospective students' information and clearly communicate how that information will be used.

Read the issue brief

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The Delta Cost Project recently released the study “Trends in College Spending: Where does the money come from? Where does it go?” which analyzed enrollment patterns, revenue trends, spending for education, and spending increases between 2002 and 2006 at 1944 colleges and universities. The report found that students are carrying a greater share of the cost of their education, even as institutions spend less on instruction.

Additional findings include:

  • The fastest growth in enrollment occurred at public community colleges with the least resources and with the greatest evidence of budget cuts.
  • At public institutions, spending on instruction declined from 2002 to 2005, and increased in 2006, but the increases did not make up for earlier reductions.
  • Private universities have increased spending through tuition and endowment increases. Total educational spending per student increased by 10 percent at $33,000, while spending at public universities remained stagnant and totaled less than $14,000 per year.

Read the report here.

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We joined 12 other national organizations to send a letter to Congressional leaders urging that their economic stimulus bill include major new investments in college affordability. Our proposal includes a dramatic Pell Grant increase, a boost in funding for Federal Work-Study, more access to PLUS loans, and emergency federal loan funds for some students. Read the letter

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By Srikanth Sivashankaran, Research Associate Vassar College's plan to replace loans with grants for students with family incomes below $60,000 was the subject of several newspaper articles last week. Meanwhile, the University of Arizona is implementing its "Arizona Assurance," first announced in early November, to replace loans with grants for students with family incomes below $42,400. Unlike Vassar's, the Arizona initiative has not attracted much attention from major media in the last four months. This disparity in coverage is puzzling, considering the potential impacts of the two programs: federal data show that 428 applicants for financial aid at Vassar met the income criterion of the college’s new policy in 2006-07. At Arizona, that number was 4,281 – a tenfold difference that puts the absence of public institutions from the mainstream discussion of no- and low-loan announcements into glaring perspective. Financial aid pledges to limit the use of loans in financial aid at elite private colleges are significant. They represent real savings for some families, and a mounting consensus that an unmanageable debt burden is unacceptable. But policymakers and the media should not forget that students with family incomes below $60,000 are much more likely to attend public colleges and universities than private ones – at a rate of six to one in 2003-04 (the last year for which reliable data of this sort is available). The University of Arizona and other public institutions that have taken steps to reduce student debt burdens for low-income students deserve due credit. See here for a full list of institutions – public and private – that have instituted financial aid pledges.

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By Deborah Frankle Cochrane, Research Analyst UPDATE: We’ve looked more deeply into the issue of community college loan program participation since this post was published. Please see the issue brief, Denied, for a more thorough analysis of this issue. ------------------ No one wants students to borrow unnecessarily or to borrow too much, but students who do need and want to borrow should be able to do so in the safest way possible. That is why the federal guaranteed student loan programs were created. The federal loan programs are entitlements, meaning that they were designed to be available to all students who apply for loans. Sure, loans are not as desirable as grants, but these aren't just any old loans. As one California community college financial aid administrator explains federal loan aid to students: "See what happens if you go into your bank and ask for a loan at the same fixed interest rate of the federal student loans. Explain that you don’t want to pay it back for a few years – or be charged interest in the meantime. And while you're at it, you want to be able to delay your payments in the future if you ever hit hard times." Clearly, the federal loan programs provide a more generous and safe way to finance an education than private student loans that offer none of these same benefits. But what about the colleges that don’t provide access to federal student loans? In our recent report, Green Lights and Red Tape, we documented the number of California community colleges that do not participate in federal loan programs, and questioned the decision to restrict access to this important source of financial aid. Looking at community colleges nationally, it is evident that this isn’t just happening in California: in ten states, half or more of community colleges do not provide access to federal student loans! Some colleges withdraw from the federal loan programs because too many former students have defaulted on their loans. There is a danger that excessively high default rates over several years can jeopardize a school’s ability to offer all federal aid, including grants. But under current rules, this is not an imminent threat to most community colleges. The vast majority of community colleges do offer loans and adequately manage their default rates, which suggests that withdrawal from the programs is an unnecessary precaution. Default rates are not the only rationale for restricting borrowing: financial aid offices often cite the need to protect students from their own choices. Their students, you see, may not fully understand the implications of borrowing. Some students, they explain, aren’t committed enough to their education to finance it through credit. We do not doubt for a minute that these sentiments reflect real aid office experiences and challenges. But if it's protection that students need, why take away the safest borrowing option, inevitably driving some towards risky private loans and credit card debt? Students and families rely upon college financial aid offices to provide informed advice about how to finance a college education. What should they make of statements like this (from a community college financial aid office’s web site), a typical example of how non-participating colleges address loan aid?

"Currently, our institution does not participate in the federal student loan program; however, you can independently get a private loan or non-certified loan to help pay for your educational expenses if you meet the lender’s requirements."

This isn't protecting high-risk students; it's throwing them to the wolves. Students and families trust college financial aid offices to provide informed advice about how to finance a college education. Neither this message nor the restriction of financial aid options helps the low-income and high-risk borrowers who financial aid offices serve.

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By Deborah Frankle Cochrane From Massachusetts Governor Deval L. Patrick to Democratic Presidential Candidate Chris Dodd, the idea of making community college "free" has been thrown around quite a bit recently. College tuition is getting too expensive – so the affordability problem is solved, right? Wrong. We're glad that people are thinking about ways to make college affordable, but like the music club that offers you ten "free" CDs but charges an arm and a leg for shipping and handling costs, these proposals aren’t all they’re cracked up to be. Average annual college costs at a community college add up to more than $12,000 after you factor in books, transportation, room and board, and other expenses (College Board). Tuition charges, which would be eliminated by these "free college" proposals, are only 18% of costs for a typical community college student (or only 4% in California, with the largest community college system in the country). While no college student would turn down free tuition, the price of textbooks and other educational expenses could leave students scrambling to cover the costs of "free" college. The reality is that a student drawn in by the promise of free college is less likely to consider and apply for federal and state aid. After all, who needs aid to go to college if it’s supposed to be free? They may think they’re already receiving aid. A needy community college student with grant aid to cover tuition plus other expenses is likely in a much better position than the same student with free tuition, but no extra aid. The message of "free" college is attractive, and we’re glad that national leaders are getting serious about making college affordable. But false promises can be hurtful if they serve to get students in the door without a way to succeed. The best way to make college free is to address true student costs and financial need by investing in financial aid for those who can’t afford it.

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By Deborah Frankle, Research Analyst Tuition discounting is the practice of using institutional aid to adjust tuition levels to best match what students and families are willing to pay, a widespread trend that is tracked by annual reports from the College Board. We recently used publicly-available federal data to get a sense of the phenomenon at private four-year institutions, and were surprised to find that almost half of private, four-year institutions with at least 1,000 students provide discounts to 90% or more of their students. Four out of five colleges (83%) provided discounts to at least half of their students. In many cases, the average discount was quite large. What does this mean? Actual discounting strategies vary dramatically between colleges, and the numbers above do not distinguish between need-based and merit-based aid. Some colleges use their institutional aid to help meet the financial need of low-income students, increasing access; others use it to attract students with less or no need who serve to maximize the prestige of the institution. Because we cannot distinguish between pricing and aid strategies at individual colleges, we cannot say for sure. But one recent analysis suggests that the overall picture is troubling: institutional aid, a larger source of financial aid than state and federal aid combined, goes to higher-income students at rates far exceeding those of federal and state aid. For dependent students, 46% of institutional need-based grant funding went to those with family income above the median, compared to 3% of federal aid. Why is this interesting? These issues bring up a number of questions: • When institutional aid ($10 billion) far outweighs federal and state aid combined ($7 billion), what does it mean for college access that institutional aid tilts to those with higher incomes? (NPSAS, dependent students only) • What does 'need-based' aid mean when it’s almost evenly distributed across all income levels? • What is the point of tuition increases when almost all students receive a discount? Does the "sticker shock" of high tuition scare low-income students away before they learn about available discounts? • Should detailed institution-level data on discounting practices be made public? Other resources on this topic: Tuition Discounting, Not Just a Private College Practice, College Board Tuition Discounting and Prudent Enrollment Management, Association of Governing Boards

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The Education Writers Association just had their national conference in New Orleans. One of the sessions was called "How the Game is Played in Enrollment Management -- is richer always better?" Panelists included Tally Hart, outgoing Director of Financial Aid at Ohio State University; Ken Redd, Director of Research and Policy Analysis at NASFAA; and Matthew Quirk, a reporter-researcher at the Atlantic Monthly. Quirk has written an in-depth article about enrollment management, an important piece of the financial aid and admissions puzzle that increasingly influences economic diversity at colleges across the country. The discussion focused on the effect of enrollment management techniques on economic diversity and access for low-income students. All three panelists agreed that financial aid is increasingly used as a carrot to attract certain types of students to an institution, rather than simply a way to help lower income students afford college. Nationally, only 2/3 of financial aid dollars go to financially needy students. Enrollment managers can engineer the admissions and financial aid processes to increase tuition revenue, raise a school's US News ranking, attract more academically high-performing students, or increase ethnic and/or economic diversity. Panelists agreed that good enrollment management should also be about retention, success, and persistence. Quirk said it is three times more expensive to recruit a student than to retain one. Redd and Hart spoke about the problem of qualified students passing up competitive institutions for cheaper, less challenging ones due to financial concerns. When students downsize their aspirations, they are less successful, Hart said. The panel discussed the elite colleges' competing programs to attract low-income students. They expressed some concern that intense media coverage of these efforts may overshadow other (often more affordable) methods of increasing economic diversity.

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