Federal and State Policy

California Governor Jerry Brown signed legislation today (AB 19 from Assemblymember Santiago) that is widely reported to make community college tuition free for Californians. If fully funded by the legislature, the bill would provide dollars sufficient to cover tuition for first-time, full-time students who do not qualify for the California College Promise Grant (known until last month as the Board of Governors Fee Waiver), which has long fully covered community college tuition for students with demonstrated financial need.

But the bill actually provides much broader and more meaningful flexibility to colleges than is widely understood. The bill does not require colleges to eliminate tuition for these additional students, but instead allocates money to colleges to spend in ways that will increase college access and success and decrease inequities in which students get to and through college. Community colleges “may” use funds to cover tuition for those students who don’t already benefit from the fee waiver, but they don’t have to, and that is a good thing.

To qualify for the new funds, colleges must agree to implement certain student-oriented reforms, such as partnering with local school districts to foster college awareness among students before they leave high school, using evidence-based practices to assess students’ academic readiness, creating guided pathways to help students complete programs and degrees without getting lost, and ensuring students’ access to all the need-based financial resources available to them. 

These details are important, because a meaningful promise to increase college access, affordability, and success for California’s students has to address more than just tuition. College enrollment means little if students don’t know which courses to take or can’t get into them, if they’re stuck in unnecessary developmental coursework, or if they can’t afford their textbooks or transportation to campus. These are very real obstacles that hold students back from succeeding in college even when tuition is free. And the structure of AB 19 allows future funding to be used to help students overcome these hurdles. Here are just some of the important ways that colleges could choose to spend funds appropriated for the bill:

  • For low-income students with children, the lack of affordable childcare can be a tremendous obstacle to persisting in college. Money provided under AB 19 could be used to support childcare centers on campuses, or direct aid to low-income parents to help them cover childcare costs.

  • The new funds could be used to provide transportation passes or textbook vouchers for low-income students, better positioning them to get to campus and pass their courses.

  • More than 20 community colleges in California do not offer federal student loans, in part because they don’t feel they have the resources they need to administer the loan program responsibly. Offering federal loans is a requirement for receiving AB 19 funds; these colleges could use these funds to support loan counseling and other efforts that would enable them to reenter the loan program.

With the lowest community college tuition in the country, and an existing financial aid program that covers tuition for low- and middle-income students, challenges outside of tuition are almost certainly bigger determinants of student success at most community colleges in California. Thankfully, the bill Governor Brown signed today allows colleges the choice for how best to support the enrollment and completion of their students.

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Last month, the House Budget Committee released their fiscal year 2018 budget resolution, which sets Congressional funding priorities for the coming fiscal year starting October 1, 2017, and provides a fiscal blueprint for the next decade. This resolution lays out a plan even more extreme than the education cuts proposed by the Trump Administration’s FY18 budget. In addition to including well over $200 billion in cuts to education funding over the next ten years, the resolution also initiates the fast-track reconciliation process that would require at least $20 billion of these education cuts be made this coming year.  

Recent threats to college affordability and access are persistently coming from multiple directions: the FY17 spending agreement already raided $1.3b from Pell Grants, the President’s budget proposed deep cuts to federal education spending, and the House Appropriations Committee separately agreed to raid $3.3 billion from Pell Grants in FY18 at the same time this budget resolution was introduced. However, the House Budget plan is a uniquely devastating attack on federal support for higher education.

The budget resolution’s massive cuts to both the Pell Grant and student loans would magnify the already heavy burden of debt on students, families, and the economy. We’ve summarized the cuts to student loans, and their impact, on Twitter:

The proposed cuts to Pell Grants are likewise both numerous and extreme. This thread lays out each one, and what they mean for students and equity in higher education more generally:

It’s helpful to remember that the House Budget Committee’s framing of the link between federal financial aid and tuition costs — which we can only assume is an attempt to help justify all these deep cuts — is both deceptively narrow and unsupported by research.

The House Budget report furthermore claims that cuts are needed because the Pell Grant’s current funding is unsustainable, but evidence shows that is simply not true.

In reality, steady program costs and existing reserve funds signal an opportunity to make an increased investment in Pell Grants to better support the nation’s students and their career goals. As the FY18 budget process moves forward, we urge Congress to reject these needless cuts to federal financial aid that would take our country down a path of deeper inequity and a weaker economy, and instead heed the call of over 300 colleges and student advocates to strengthen Pell Grants.

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In March, we showed what it would mean for students if the House Republicans acted on their proposal to eliminate all mandatory Pell Grant funding. Republicans on the House Budget Committee are expected to include this extreme cut in their FY18 Budget this week. In response, we’ve updated our analyses with the latest data from the Department of Education and Congressional Budget Office (CBO). New data show the same grim story: eliminating mandatory funding threatens the existence of the Pell Grant as we know it, putting higher education out of reach for millions of Americans who rely on the grant to attend and complete college.

It’s worth repeating that mandatory funding currently pays for $1,060 of the current maximum Pell Grant (almost one fifth of the $5,920 grant in school year 2017-18), which already covers the lowest share of the cost of attending college in over 40 years.  

Eliminating mandatory funding would cut $78.5 billion from Pell Grants over ten years. For FY18 alone, mandatory funding provides $7.5 billion for Pell Grants, which is equivalent to the average Pell Grant award for two million students—over one in four students projected to receive Pell Grants in 2018. This is the same number of Pell Grant recipients attending college in Texas, Florida, Illinois, Pennsylvania, Wisconsin and Ohio combined.

The May FY17 spending agreement already cut $1.3 billion from Pell Grants, and the House FY18 Labor, Health and Human Services, and Education appropriations bill now under consideration includes an additional $3.3 billion cut (a move echoing the President’s own request in the Administration’s FY18 Budget Proposal). Eliminating mandatory funding on top of cutting $4.6 billion from Pell Grants would undermine the program’s current solid fiscal footing, abruptly creating a funding gap that would increase each year and require cuts to grant amounts, recipients or both.

If Congress cuts $3.3 billion from Pell Grants and eliminates the $7.5 billion in mandatory funding for FY18, simultaneous cuts to grant amounts and/or eligibility would be necessary to avoid a $2.9 billion funding gap that would immediately appear. Even if Congress rejects the $3.3 billion cut, eliminating mandatory funds in FY18 would lead to a $7 billion Pell Grant funding gap the next year (FY19). To close that gap, Congress would have to eliminate grants entirely for 1.9 million students or cut all students’ grants by an average of over $900, or both eliminate and cut grant amounts.

This brazen plan to create a funding crisis that could only be resolved by making severe cuts to Pell Grants is a clear assault on low-income students’ access to higher education. Rather than put college and a career further out of reach for millions of Americans, Congress should be safeguarding and investing in Pell Grants.


Graphics provided by Young Invincibles

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The House FY2018 budget resolution is expected to advance the President’s proposal to eliminate subsidized Stafford loans that go to students with financial need. With subsidized loans, interest does not accrue while students are in school, for six months after they leave school, during active-duty military service, and for up to three years of unemployment or other economic hardship. The billions of dollars in savings from ending subsidized loans for new students would not be used to make college more affordable. Instead, this proposed rollback would be exacerbated by other dramatic cuts to programs that help students afford college and repay their loans.

Eliminating subsidized loans would increase the cost of college by thousands of dollars for many of the six million undergraduates who receive those loans each year. The Congressional Budget Office (CBO) recently estimated that eliminating subsidized loans would add $23.4 billion in costs to students over 10 years.

The charts below illustrate how much more a student would have to pay if subsidized loans are eliminated and the student borrows the same amount in unsubsidized loans instead. The calculations assume the student starts school in 2018-19, borrows the maximum subsidized student loan amount ($23,000), and graduates in five years.

Using the most recent CBO interest rate projections (from June 2017), eliminating subsidized loans would cause this student to enter repayment with $3,650 in additional debt due to accrued interest charges. As a result, she would end up paying $4,700 (16%) more over 10 years and $6,600 (16%) more if she repaid over 25 years.

The added costs to students would be even higher if interest rates increase faster than current projections. If the undergraduate Stafford loan interest rate hits the statutory cap of 8.25%, eliminating subsidized loans would cause this student to enter repayment with $5,700 in additional debt due to accrued interest charges. As a result, she would end up paying $8,350 (25%) more over 10 years and $13,450 (25%) more if she repaid over 25 years.

At a time where there is growing public concern about rising student debt and broad consensus on the importance of higher education and postsecondary training to the US economy, we need to be doing more, not less, to keep college within reach for all Americans.  For more information on TICAS’ proposals to streamline and improve federal student loans, see our summary of recommendations and our recent report, Make it Simple, Keep it Fair: A Proposal to Streamline and Improve Income-Driven Repayment of Federal Student Loans.

Note: This borrower would only be eligible for a 25-year repayment plan if she borrowed unsubsidized Stafford loans in addition to subsidized Stafford loans and entered repayment with more than $30,000 in debt. The most recent data show that almost four in five (79%) undergraduates with subsidized loans also have unsubsidized loans.

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This post was revised on March 28 to include supplemental mandatory funding that would also be eliminated under the House proposal to cut all mandatory funding

While the Trump administration’s budget raids $3.9 billion in discretionary Pell Grant funding in fiscal year 2018 and remains silent on Pell Grant mandatory funding, House Republicans on the Education and Workforce Committee have made clear their plan to eliminate all $77 billion in mandatory Pell Grant funding over ten years.

This House plan to eliminate mandatory Pell funding would have profoundly harmful effects for students and put college further out of reach for millions of Americans. Mandatory funding currently pays for $1,060 of the current maximum Pell Grant (almost one fifth of the $5,920 grant in school year 2017-18), which already covers the lowest share of the cost of attending college in over 40 years.  

The $7.2 billion in mandatory Pell Grant funding in FY 2018 alone is the equivalent of the average Pell Grant awards for 2.0 million students—one in four students receiving Pell Grants. This is more than all the Pell Grant recipients attending college in Texas, Florida, Illinois, Wisconsin, and Ohio combined (1.9 million students).

Prior harmful cuts to Pell Grants, combined with an improving economy, have reduced program costs and created temporary reserve Pell Grant funding. Student advocates and more than 100 members of Congress have called for using this reserve to restore some of the lost purchasing power of Pell Grants and to reinstate access to grants year round. Rather than invest these reserve funds in Pell Grants for students, the president’s budget simply cuts $3.9 billion in FY 2018. The House plan that would restore grants year round while cutting $77 billion over 10 years means Congress will almost certainly drain the reserve funds, briefly hiding the full magnitude and consequences of eliminating mandatory Pell Grant funding.

The House proposal to eliminate all mandatory funding would cut Pell Grant funding by $7.2 billion in FY 2018 alone. Even if Congress used all the Pell Grant reserve funds to replace the Pell mandatory funding in FY 2018, it would lead to a $2.7 billion Pell Grant funding gap the next year (FY 2019). To close this gap, Congress would have to eliminate grants entirely for more than 700,000 students or cut all students’ grants by an average of almost $350, or both eliminate and cut grants. The funding gap would increase each year, requiring even more severe Pell Grant cuts going forward.

It is unconscionable to create a Pell Grant funding crisis by eliminating all mandatory funding and try to mask it using the program’s temporary reserve. Rather than making deep cuts to Pell Grants, Congress should instead invest existing Pell Grant funding in helping students whose urgent needs include restored access to grants year round, an increase in the maximum award, and an extension of the grant’s inflation adjustments that expire after this year (FY 2017). 

Graphics provided by Young Invincibles.

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It’s clear we need more student aid in California, and $1.5 billion could go a long way to reduce our state’s gaping inequities in college affordability and completion if spent right. However, the California Assembly’s $1.5 billion “Degrees Not Debt Scholarship” proposal unveiled today is unlikely to achieve those goals. While we applaud the desire to dedicate substantial new resources towards financial aid, and the proposal’s recognition that the cost of college extends well beyond the cost of tuition, the Assembly plan would provide generous awards to students with little or no need, and far less help to those with the biggest affordability barriers and most burdensome debt.

Here are our top questions and concerns:

  • How will the scholarships reduce debt burdens, as the program name suggests? We estimate that a low-income UC student would receive about $2,000 more in aid than they currently do, while a student with a six-figure income could get more than $15,000 more per year.  Yet half of all UC graduates who leave school with debt have family incomes under $52,000. Further, UC students who graduate with loans have average debt around $21,000. From the perspective of debt reduction, giving higher income students $15,000 per year is excessive, especially when most don’t borrow, and giving lower income students an additional $2,000 per year is not nearly enough.
     
  • What will the impact be on students of color? Cal Grant recipients at public colleges are more likely to be Latino, Black, Native American, or Pacific Islander, and more than half of UC and CSU students in these groups have family incomes of $50,000 or less.[1] Yet while low-income students’ disproportionate debt burden shows that their Cal Grants are not sufficient to address their needs, Cal Grant recipients would get smaller “Degrees Not Debt” scholarships than those with six-figure incomes. Many of the higher income students, who are disproportionately white, don’t even need the aid as defined under federal and state law.
     
  • Why does the plan leave out students at the schools where affordability challenges are often most severe? In many regions across the state, low-income community college students face higher college costs than UC or CSU students, yet community college students aren’t eligible for the scholarships. The Assembly’s separate proposal to increase Cal Grants for full-time community college students will help the small proportion of students who get a Cal Grant. But hundreds of thousands of students at the community colleges – as well as other colleges – can’t get Cal Grants because the program isn’t sufficiently funded, and half of them are living in poverty. Those students would get no additional support under the Assembly plan. Why should UC students with six-figure incomes get scholarships of $15,000 when high-achieving community college students living in poverty can’t get a Cal Grant worth a small fraction of that? For perspective, for a billion dollars, the state could give every eligible Cal Grant applicant an award.
     
  • Why does the Assembly plan diverge so sharply from the plan developed by the LAO, at the Assembly’s request? Last year, the Legislature, championed by the Assembly, tasked the Legislative Analyst’s Office with developing a proposal to create debt-free college options for California. Fully two-thirds of the LAO’s $3.3 billion proposal was slated to support community college students, so that students at all public colleges had a viable, full-time, debt-free path to graduation. The high share of estimated LAO program costs needed to help community college students underscores how important community college students are to the state, and how far the state is from supporting them sufficiently. Yet the Assembly “Degrees Not Debt Scholarship” proposal leaves them out. Why don’t students at community colleges, where most of the state’s low-income students and students of color enroll, deserve the option to enroll full time, too, when full-time enrollment greatly increases students’ odds of completion? Wouldn’t giving community college students a true full-time option help more of them transfer to UC and CSU?

California has major problems with college affordability and completion, but neither will be solved by the “Degrees Not Debt Scholarship” proposal. We hope that legislators will commit to retooling the proposal so that it addresses the realities facing California’s low- and truly middle-income college students.


[1] Author’s analysis of  the National Postsecondary Student Aid Study, 2007-08, the most recent publicly available data on California segments’ enrollment by race/ethnicity and income.

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Yesterday, the U.S. Department of Education announced it was giving schools about three additional months to comply with two requirements under the gainful employment regulation finalized in 2014. This delay is troubling given the urgent need to protect students and taxpayers from career education programs that consistently leave students with debts they cannot repay.  

In January, the Department released the first set of official career education program rates under the gainful employment rule. Fully three-quarters of the rated programs passed the modest standards outlined in the rule, which measure graduates’ debt compared to their incomes to ensure that federally-funded career education programs at public, non-profit, and for-profit colleges are complying with the statutory requirement that they “prepare students for gainful employment in a recognized occupation.” In fact, nine out of 10 colleges with rated career education programs had no failing programs, including the for-profit college chains American Public University, Capella University, Concorde Career College, ECPI University, Empire Beauty School, Grand Canyon University, and Strayer University.

But 803 programs (9%) failed the test because they consistently leave students with more debt than they can repay. Some of these programs were at schools that have since closed, including ITT Tech and Westwood College. But many other failing programs are still enrolling students and receiving hundreds of millions of taxpayer dollars. What do these programs look like? Here are some examples.

  • Florida Technical College in Orlando charges $31,555 for its associate’s degree in medical assisting, and its graduates typically earn only $14,500 a year – less than the federal minimum wage working full-time – and owe over $17,000 in federal student loan debt.
  • McCann School of Business and Technology in Hazelton, PA charges $30,860 for its associate’s degree in medical assisting, and it has only a 7% on-time completion rate and a 46% job placement rate. Its graduates typically earn only $20,300 – less than the average earnings of high school graduates – but graduates of this program at all McCann School locations in 2014-15 had over $26,000 in student loan debt.
  • Art Institute of Pittsburgh charges $44,804 for its associate’s degree in graphic design, yet only 12% of completers finish on-time, and those who graduate typically earn less  than $22,000 per year and have over $40,000 in federal student loan debt. 

These and other failing programs are leaving students worse off than before they enrolled, and taxpayer dollars should not be subsidizing them.

The good news is programs like these are now required to warn current and prospective students that they failed and will lose eligibility for federal grants and loans next year if they do not improve. This warning requirement was not affected by the Department’s announcement yesterday. And other failing programs have stopped enrolling new students, including all of the failing programs at the University of Phoenix, and Harvard University’s graduate certificate program in theater arts, where students typically graduated with $78,000 in debt but earned only $36,000.

Even better news? There are thousands of career education programs offered at locations across the country and online that are not leaving graduates with huge debts they cannot repay, including programs at for-profit, public, and non-profit colleges whose graduates earn over $60,000 a year. Many programs where graduates have manageable or no debt are offered near programs that are failing or in the zone requiring improvement. For instance, two for-profit colleges in Harrisburg, Pennsylvania, offer medical/clinical assisting certificate programs, but the graduates of Keystone Technical Institute typically earn $10,000 more and have significantly less debt than graduates of the Brightwood Career Institute. In Miami, Florida, graduates of the public Miami Dade College’s medical/clinical assisting certificate program typically have no debt and earn twice as much as the graduates of the same program at the nearby for-profit Florida Education Institute, where graduates also have thousands of dollars of debt.

Thanks to the gainful employment rule, career education programs are required to disclose key information like their cost, typical graduate earnings and debt levels, and job placement rates so students can make more informed decisions about where to enroll. Programs that fail the rule’s minimum standards also have to warn current and prospective students. And to protect taxpayers from subsidizing programs that consistently underperform and leave students worse off, failing and zone programs have to improve in order to continue to receive federal funding.

In anticipation of the rule, many schools have already improved their programs, ended failing programs, lowered their prices, and/or started providing more career placement assistance. These are positive reforms, but the hundreds of failing and zone programs demonstrate that far more improvement is needed to ensure that the more than $24 billion in federal grants and loans spent each year on career education programs are improving, not ruining, people’s lives. 

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Debbie Cochrane, TICAS vice president, provided expert testimony on college affordability before a joint hearing of the California Assembly’s Higher Education Committee and Budget Subcommittee on Education Finance on Monday, February 27. Her testimony described which students face the greatest affordability barriers, and included new TICAS research showing the severity of the affordability problem for California’s low-income students, and why free tuition is not the solution. (Debbie Cochrane's testimony starts at the 20:35 mark.)

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California Governor Jerry Brown last week released his proposed 2017-18 California state budget, which includes a proposal to phase out the Middle Class Scholarship (MCS) program. The MCS program, created in 2013, was designed to serve California students from families with incomes above typical Cal Grant income thresholds (above about $80,000 at the time) and up to $150,000 who don’t receive much other grant aid. For reference, median household income in California is just under $62,000 in 2015 dollars.

Since the program was created, we have raised questions about whether the money would be better spent on the lower income students who face the highest financial hurdles getting to and through college. We still believe this to be the right question. However, data from the California Student Aid Commission (CSAC) show that some lower income students do receive MCS awards. During the 2015-16 academic year, about 6,300 students (13% of all MCS recipients) had incomes within the Cal Grant B income range (up to about $50,000 for a family of four), and an additional 12,700 students (26% of all MCS recipients) had incomes within the higher Cal Grant A range (up to about $90,000 for a family of four). We estimate that these 19,000 students – who represent 39% of all MCS recipients in 2015-16 – received up to 51% of MCS grant dollars.

Why is a program designed to help upper-middle-income students also helping lower income students? Because there are substantial gaps in the state Cal Grant program, which is designed to help lower income students pay for college. Most critically, there are not enough Cal Grants available for all students who apply and meet the financial and academic requirements. Whereas recent high school graduates are entitled to a Cal Grant, all other eligible Cal Grant applicants must compete for a very limited number (25,750) of awards. In 2015-16, there were 14 eligible applicants competing for every grant, with over 300,000 turned away. The CSAC data suggest that some of these students who qualify for but don’t get a Cal Grant end up getting an MCS grant instead.

The huge gap between the number of applicants eligible for competitive Cal Grants and the number of awards available contributes to the substantial affordability challenges facing low-income students. While not by design, the MCS program has helped to fill a narrow slice of that gap, and it is important that the Legislature protect this progress if the MCS does get phased out. Redirecting the $117 million annual MCS allocation to the better targeted Cal Grant program would result in over 18,000 more competitive awards per year, increasing qualified applicants’ chances of receiving a competitive grant from one in 14 to about one in eight. And redirecting $60 million – the 51% of annual MCS spending that we estimate goes to students with family incomes within Cal Grant thresholds – is the least that should be done, particularly if the goal of phasing out the MCS program is to protect financial aid for lower income students.

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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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