Dan Weaver Assistant Commissioner July 26,

 Students entering higher education are increasingly needy  Tuition and fees continue to increase  More students are using community college as an affordable option before transferring to a university  How can we best use financial incentives to increase completion? Current financial aid structure for state programs is not responsive to these changes and worsens over time. 2

 Cost of Attendance (COA) includes academic charges (direct costs) and indirect costs: ◦ Tuition and Fees ◦ Books and Supplies ◦ Room and Board ◦ Transportation ◦ Personal and Miscellaneous Expenses  Expected Family Contribution (EFC) ◦ Determined and defined by Federal Student Aid through the FAFSA ◦ Indicates the family’s financial ability to contribute to the student’s educational costs.  Financial need is determined: COA – EFC – other educational resources = need. 3 Academic Charges

STATE GRANT PROGRAMS: A NATIONAL CONTEXT SANDY BAUM GEORGE WASHINGTON UNIVERSITY TEXAS HIGHER EDUCATION COORDINATING BOARD JULY 2012

WHAT’S HAPPENING TO PELL GRANTS?

MAXIMUM AND AVERAGE PELL GRANT IN CONSTANT 2010 DOLLARS, TO SOURCE: The College Board, Trends in Student Aid 2011.

MAXIMUM PELL GRANT AS A PERCENTAGE OF TUITION & FEES AND ROOM % BOARD (TFRB), TO SOURCE: The College Board, Trends in Student Aid 2011

Academic Year Expenditures in Millions of 2010 Dollars Maximum Grant in 2010 Dollars Number of Recipients (in Thousands) Percent of Recipients Independent $3,725$5,6311, % $6,293$4,6132, % $7,275$4,2472, % $8,251$3,8453, % $7,822$3,3453, % $10,038$4,1633, % $14,162$4,5195, % $13,731$4,3395, % $15,361$4,5115, % $18,129$4,6896, % $30,362$5,4168, % $34,762$5,5509, %

RECENT AND POTENTIAL CHANGES Recent cuts include lowering eligibility from 18 to 12 full-time semesters. Lower income protection allowance or other changes in EFC Define full-time as > 12 credit-hours Eliminate Pell for less-than half-time students Bigger changes: Simplification Institutional eligibility Job training

RISKS TO THE FEDERAL AID SYSTEM Budget deficit Concern over rising prices Student debt issues What to do about the for-profit sector

STATE GRANT PROGRAMS

Public Four- Year TF ( ) Public Two- Year TF ( ) State Grant Aid per FTE ( ) Percent Need-Based OH$8,904$3,608 $211 71% MD$7,993$3,700 $450 95% CA$9,022$1,119 $ % Nation$8,244$2,963 $627 73% TX$8,078$2,049 $ % IL$11,600$3,150 $727 96% PA$12,079$3,663 $ % FL$5,626$3,006 $795 25% NY$6,213$4,253 $1,062 97% TN$7,209$3,551 $1,335 23%

ISSUES FOR STATES Targeting Based on financial circumstances Relationship to Pell Complexity Multiple programs; Tuition set-asides vs. state grants Rationing First-come /first-served (IL, KY, TN) Distributing cuts (MN formula modification) Relationship to academic progress (TX proposals for enrollment intensity, semesters of eligibility) Incentives for success Past vs. future success Aid and credits Time to degree

14 University, Dependent Students Source: Financial Aid Database Reports

15 Source: Integrated Financial Reporting System (IFRS)

16 Source: Financial Aid Database Reports

 Adjust TEXAS Grant (TEXAS Grant) Program to efficiently distribute funds to students ◦ Assure funds to entering students (front load) ◦ Smaller awards to more students  Restructure and expand current BOT designated set asides to incent all graduating university students though a more robust tuition rebate program – keeping all tuition on campus  State Loan Programs – strategic resource ◦ Restructure B-On-Time (BOT) Loan Program ◦ Expand availability of College Access Loans 17

 Serve more students with smaller awards.  Extend eligibility to award in-coming transfer students.  Limit to students attending public 4-year institutions, while preserving community college focus through TEOG  Set the Maximum TEXAS Grant = Direct Cost – Pell – EFC, not to exceed the student’s need  Amend TEXAS Grant requirements to encourage timely completion of undergraduate degrees. ◦ Require a minimum of 12 SCHs enrollment for an award ◦ Define each student’s eligibility period as 8 regular semesters within a 5-year period, prorated for longer degree plans. 18

 20% of designated tuition in excess of $46/SCH is used to fund two programs: ◦ 15% for grants, work study and loans ◦ 5% for forgivable BOT Loans  Restructure and expand current BOT designated set asides to fund a more robust undergraduate tuition rebate program available to all graduating university students. ◦ Increase this set aside amount from 5% to 10% ◦ Same requirements as current BOT forgiveness  Decrease the amount of designated tuition set asides for grants, works study, and loans to 10% (LAR Exceptional Item Request for TEXAS Grant will mitigate this reduction) 19

20 BOTL - (new)CALCAL lite - (new) Interest rate in school 0.00%5.25% Interest rate in repayment 6.80%*5.25%* Origination fee 3%1%5% Maximum loan Up to average T&Fup to COAUp to average T&F Credit required Noyes - current standardsyes at lesser standard Cosigner No not required if borrower meets standardYes- required borrower benefit - origination fee rebate No yes - after 24 months of successful payments Financing BOT Bonds (and ~$100M accum TSAs)HHL bonding Capacity Target $50M/year$100M/year$25M/year *Rates determined by market conditions Red denotes a change or new

TEXAS Full-time enrollment Academic progress and completion Cliff effects – all or nothing awards Role of evidence: Marginal impact of additional dollars less as income / other grant aid increases Impact on beginning vs. upper-division students