University of Wisconsin System Joni Finney December 4, 2003 1 A - - PDF document

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University of Wisconsin System Joni Finney

December 4, 2003

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I.

A Context: The State of Financial Aid in America

II.

State Financing of Higher Education

III.

State Financial Aid Options

IV.

The Wisconsin Context

V.

Some Suggestions

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I. A Context: The State of Financial Aid in America

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A Context: The State of Financial Aid in America

The Purchasing Power of Federal and State

Aid Has Declined

Six States Account for 60% of Total Need-

Based Aid Awarded

Financial Aid Shifted from Grants to Loans

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In Total, Higher Education Has Become

Unaffordable Particularly for Many Low- Income Families

In 1990-91, Merit Aid Constituted 11% of

State Grant Aid. Merit Aid Has Grown to 24% of all state grant aid, by 2000-01

In the 12 states with the largest merit aid programs, they collectively awarded $863 in merit aid – triple the $308 million awarded in need-based aid in 2000-01. Source: NASSGAP quoted in Heller and Marin Who Should We Help? The Negative Social Consequences of Merit Scholarships (Boston: Harvard Civil Rights Project.) In 2001-02 total non-need-based grant aid awarded to undergraduates: $1,208 million Source: NASSGAP (2003). Table 1.

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Grant Aid Has Not Kept Pace with Tuition Increases

Average Pell Grant and State Grant Aid as Percent

• f Public 4-

Year College Tuition, 1986- 2002

98% 59% 75% 67% 50% 60% 70% 80% 90% 100% 1986 1988 1990 1992 1994 1996 1998 2000 2002 Pell Grant State Grant Source: College Board

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Six States Provide a Majority

• f Need-based Aid

Source: NASSGAP

Distribution of Need-based Undergraduate Aid 2001-2002

The six states award $2.3 billion dollars in need-based undergraduate aid, or 60% of total need-based aid. There was a total of $3.866 billion in need-based aid awarded in 2001-02. Source: NASSGAP (2003). 33rd Annual Survey Report. p. iv. Chart Two.

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Student Financial Aid Shifted from Grants to Loans

Percent of Grants and Loans out of Total Aid, 1982-2002

40% 50% 54% 46% 30% 35% 40% 45% 50% 55% 60% 65% 1982 1986 1990 1994 1998 2002 Grants Loans Source: College Board, 2003

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The Share of Family Income Needed for Tuition Has Increased at Community Colleges, 1980- 2003

0% 2% 4% 6% 8% 10% 12% 14% 16% 1980 1985 1990 1995 2000 Lowest Second Third Fourth Highest sources: College Board; Census 6% 3% 2% 1% 1% 14% 6% 4% 2% 1% Note: 2002 and 2003 figures are based on 2001 income.

Community College Tuition as Percent of Average Family income, by Income Quintile, 1980-2003

Average tuition and fees at public two-year colleges: $1,905 Tuition increase over last year: 13.8% Source: College Board Trends in College Pricing

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33% 14% 6% 9% 4% 6% 3% 3% 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 1980 1985 1990 1995 2000 Lowest Second Third Fourth Highest

sources: College Board; Census

13%

Note: 2002 and 2003 figures are based on 2001 income.

The Share of Family Income Needed for Tuition Has Increased at Public 4-Year Colleges, 1980- 2003

Average public tuition at public four-year institutions for in-state students: $4,694 Tuition increased over last year: 14.1% Source: College Board Trends in College Pricing

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56% 141% 26% 61% 17% 38% 12% 26% 7% 12% 0% 20% 40% 60% 80% 100% 120% 140% 160% 1980 1985 1990 1995 2000 Lowest Second Third Fourth Highest sources: College Board; Census Note: 2002 and 2003 figures are based on 2001 income.

The Share of Family Income Needed for Tuition Has Increased at Private 4-Year Colleges, 1980-2003

Average private four-year tuition: $19,710 Tuition increase over last year: 6% Source: College Board Trends in College Pricing

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• II. State Financing of Higher

Education

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State Financing of Higher Education

I.

Common State Higher Education Goals

II.

Elements of Financing Policy

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Common State Higher Education Goals

To encourage a higher proportion of

students to graduate from secondary school and achieve proficiency in academic subjects in the process

To encourage more students attend

college and persist to graduation

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To ensure that college attendance

remains affordable to students from all socioeconomic groups

To create employment opportunities for

a highly skilled workforce

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Elements of State Financing Policy

State

Other Programs/Agencies

Higher Education

Student Financial Aid Appropriations Students Institutions Tuition Institutional Aid

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• III. State Financial Aid

Options

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Trade-offs in State Financial Aid

Access Choice Portability Predictability Sticker price effects Targeting different income groups Signaling

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Georgia – Merit Aid

Georgia has spent more than $2 billion on

its HOPE scholarship since the beginning of the program.

More students remain in-state for college. Students shift from 2-year to 4-year schools. Greater disparity in participation between

low-income students, and their peers.

Source: Dynarski, 2002

Georgia HOPE began in 1993. Dynarski found that the HOPE scholarship both pulled students who would not

• therwise enroll in college into 2-year institutions and pushed students in

community colleges into 4-year institutions. The net effect was a shift towards 4- year schools. In addition, she found a increase in the gap of college participation between low- income and minority students and all other students. From Jenny: I can't find data on student course taking in high school. However, Binder and Ganderton (2002) have found that New Mexican students take fewer courses per semester in college in order to maintain their scholarships. Source: Binder and Ganderton (2002) "Incentive Effects of New Mexico's Merit- Based State Scholarship Program: Who Responds and How?" In Heller, Donald E. and Patricia Marin, eds. Who Should We Help? The Negative Social Consequences

• f Merit Scholarships. (Boston: Harvard Civil Rights Project.)

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California – Low Tuition and Need-Based Aid

California is a low-tuition state with a

relatively high need-based aid program.

Cal Grants have increased college

enrollment.

Cal Grants support for students

attending private colleges and universities

Source: Kane, 2002

Kane found that the probability that a student attends college increased if the student become eligible for the Cal Grant. In 2001-02, Cal Grants were 7.07% of all student aid in California (including federal loans). In total, the state expended $512,873,000 on the program. In 2001-02, the Cal Grant covered 48.5% of average tuition and fees at independent colleges. 30.8% of all Cal Grant recipients attended Independent Colleges and Universities in California.

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• IV. The Wisconsin Context

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How Wisconsin Stacks Up

Change in State Rankings

• ver the

Last Decade

5 27 18 12 23 10 25 19 11 11 pub 2yr tuition pub 4yr tuition income appropriations per student state grant per student

$256 $319 $6,312 $6,931 $56,461 $66,476 $2,516 $3,526 $1,944 $2,902

(25% Up) (10% Up) (18% Up) (40% Up) (49% Up)

State grant per FTE, from 1992 to 2002 (source: NASGAP) Appropriations (state plus local), from FY1992 to FY2001 (source: Grapevine) Income (median family income for four-person families), from 1991 to 2001 (source: Census) Tuition (2yr or 4yr), from AY1992-93 to AY2002-03 (source: Washington State Higher Education Coordinating Board)

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College Participation Rate for Low-Income Students

Over the last few years Wisconsin has slipped in low-income participation, declining by 15 percentage points – the 4th largest loss in the nation: 43% in 1998 (9th) 28% in 2001 (17th)

Source: Postsecondary Education Opportunity, July 2003

College Participation Rates = number of dependent Pell Grant recipients divided by number of 4th-9th graders nine years earlier who were approved for free- or reduced- price lunch programs.

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12% 7% 4% 4% 4% 3% 3% 2% 2% 2% 0% 0% 0% 0% 0%

• 1%
• 1%
• 1%
• 1%
• 1%
• 1%
• 1%
• 3%
• 3%
• 3%
• 3%
• 3%
• 3%
• 3%
• 4%
• 4%
• 4%
• 4%
• 5%
• 6%
• 6%
• 6%
• 7%
• 7%
• 8%
• 9%
• 11%
• 12%
• 12%
• 13%
• 14%
• 15%
• 17%
• 23%
• 49%

Nebraska Haw aii New Mexico A labama Indiana Virginia Delaw are Montana Oregon Tennessee Texas A laska Illinois Colorado North Dakota South Carolina Georgia Mississippi Louisiana Michigan North Carolina Arkansas Arizona Iow a Ohio Kansas Nevada Utah Idaho Wyoming Kentucky Washington Maryland Oklahoma South Dakota Calif ornia Missouri Massachusetts West Virginia New Hampshire Pennsylvania Florida New Y ork New Jersey Maine Vermont Wisconsin Minnesota Rhode Island Connecticut

US Average -3.5%

Change in College Participation Rates for Low-Income Students, 1998 - 2001

Source: Postsecondary Education Opportunity, July 2003

Figures are change in percentage points (Not a rate of change). College Participation Rates = number of dependent Pell Grant recipients divided by number of 4th-9th graders nine years earlier who were approved for free- or reduced- price lunch programs.

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Wisconsin’s Educational Pipeline

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Wisconsin’s Pipeline Compared to Top Performing States

86 58 42 28 78 45 33 22 10 20 30 40 50 60 70 80 90 100 Graduate High School Enter College Enroll as a Sophomore Graduate College NJ ND

MA & IA

ND WI WI WI WI

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State Political Leadership Decides

The total amount of funding to be provided to

higher education

The division of these funds between students

and institutions — how much for student financial aid and how much directly to institutions for support of general operations

The mechanism by which funds will be

distributed to individuals and institutions

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• V. Some Suggestions

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Some Dos and Don’ts

Policies and decisions should be made

as a coherent package, not as unconnected independent actions

Recognizing that the economy that

leaves states with revenue shortfalls also negatively affects students and their families

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Don’t undertake to establish financing

policy in the absence of some understanding of funding adequacy for institutions

Don’t make student financial aid policy

solely an institutional responsibility

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Do align some part of institutional

funding specifically around state priorities (using performance or investment approaches)

Do make funding distinctions among

institutions; protect funding for those institutions making the greatest contributions to the state priorities