Reinventing Financial Aid Sara Goldrick-Rab Eastern Association of Student Financial Aid Administrators May 22, 2016

College Affordability Matters Widespread interest in college Price factors in access, quality, and completion Same approach to financial aid for 50 years Families struggling to make ends meet Legislators concerned about high prices Aid administrators buried under regulations Broad frustration, sense of blocked opportunities

Growing % of Academically-Prepared Students Signs of Trouble Growing % of Academically-Prepared Students Are Forgoing College

Signs of Trouble Declining % of Academically-Prepared Community College Students Are Finishing

Food and Housing Insecurity 2015 survey at 10 community colleges across U.S. 20% had very low levels of food security 13% were homeless 39% were housing insecure but not homeless See Hungry to Learn at wihopelab.com

Food and Housing Insecurity 2015 survey at 8 universities & 2 two-year colleges in Wisconsin-- < 200% of Pell eligibility Low levels of food security 45% of two-year college students 28% of university students 28% of two-year students (4% of university students) had trouble paying rent or utilities See 2015 “Data Update” wihopelab.com

Growing Inequality Fraction of Birth Cohort Completing College, by Family Income

What’s Going On? Spending more money on aid than ever but… Purchasing power of grants is declining Allocation of campus-based aid is inefficient Mix of aid is misaligned with today’s students Mistrust is pervasive

Gut Check What is the average net price of a year of community college for dependent students? Bottom 25% of family income? ($20K) Middle income? ($50-80K) High income? ($140K) How much more/less is it for independent students?

2012-2013 Data Annual Cost of Attending Community College Minus All Grants, By Family Income (Dependents) Family Income Community College   Net Price/Year % of Income Low ($21,000) $8,300 40% Moderate ($52,000) $11,300 22% Middle ($81,000) $13,300 16% High ($142,000) $14,000 10%

2012-13 Data Annual Cost of Attending Community College Minus All Grants, By Family Income (Independents) Family Income Community College   Net Price/Year % of Income Low ($2,039) $11,400 559% Moderate ($13,586) $12,100 89% Middle ($29,311) $12,400 42% High ($73,120) $14,100 19%

Geography Matters

Rethinking Financial Aid Let’s take a step back: What’s the real price of college? Who needs a discount? How can we effectively deliver the discount?

Rethinking Financial Aid What’s the real price of college?

Official Definition of Price Cost of Attendance= Tuition Fees Housing and Food Books and supplies Transportation Medical expenses Personal expenses (e.g. clothing)

Real Price What’s the matter with COA & Net Price? They are estimates PJ is there is assist if errors, but… They don’t account for opportunities to learn Rising use of academic fees They assume family contributions not student assistance to family EFC is truncated at zero Foregone assistance is neglected

Rethinking Financial Aid Who needs a discount?

Percentage Change in Inflation-Adjusted Mean Family Income by Quintile: 1983-1993, 1993-2003, and 2003-2013 Minh- text is tiny, can you fix?

Rationing What’s the matter with the means-testing? FAFSA! And SAP! Rules and regs Lots of heterogeneity among Pell recipients The upside downside of income gains Donut hole over the threshold Divisiveness and politics of resentment Is this efficient and effective?

Rethinking Financial Aid 3. How can we effectively deliver the discount?

Grants Work Experimental Impact of Offering the Wisconsin Scholars Grant to Students Beginning at Public Universities Text is too small Goldrick-Rab, et al. 2016

Grants Work Key attributes of good grants: Simple and straightforward Clearly communicated Consistent and trustworthy Many grants violate these terms!

Loans Sticker price is what is advertised Net price is what remains after grant aid Both can affect students’ decisions Experts think about net price relative to future earnings (investment) Students think of net price relative to current income (ability to pay)

Perspective The investment perspective falls short: The returns to college are too uneven and increasingly uncertain Students make decisions with other people and their financial constraints Scarcity breeds fear, stress Some cultures emphasize present over future

Work Work-study Popular Underfunded and misallocated Misunderstood Subject to abuse Work Hard to find and hard to keep Risky

Rethinking Aid We need a system that takes price seriously Clear and consistent communication from start Dependable Simple on the front-end Aid administrators as students’ supporters rather than gatekeepers and accountants

Incremental Improvements Consider the real EFC. Assess material hardship or at least refer students to social benefits programs that can help. Examine standardized living cost calculations for your area.

What About “Free College” Reduced price Simplified message about price (free) and about commitment to public higher education (universal, no means-testing) Increased resources for institutions (including instructional costs & support services) Greater accountability for institutions & states Political commitment to public higher education

Promising Starts In Tennessee, the Promise appears to have greatly boosted African American enrollment In Texas, tuition reductions at community colleges led to greater access and completion Donations for free college efforts are swamping those for standard grant programs

Isn’t Information the Real Issue? Some students do not complete the FAFSA– simplifying the process, and using PPY will help But the price is too high after the FAFSA Current efforts to kill the FAFSA still retain means-testing – which is politically divisive and ineffective at identifying need

What About Trump’s Kids? Most people in the top 5% attend private colleges But universal programs, which garner more political support & stability and are often better at reducing inequality, require modest giveaways to upper-income families The financially needy still receive the bigger benefits since college pays off more for them

Won’t Students Be Lazy? There is no evidence that American undergraduates work harder when they pay more Effects of “performance-based scholarships” cannot be attributed to work requirements rather than money Differences in outcomes of out-of-state vs. in-state students can’t be attributed to higher tuition Higher college completion rates of students who study more versus less can’t be attributed to effort

But Be Careful Using academic criteria for who gets free college or who keeps the subsidy could hurt. High school students in the “academic middle” are stuck without college & can’t succeed if working while in college GPA criteria or credit thresholds in college can cause students to move slower not faster

Is Free Enough? Price isn’t the only thing affecting the college experience, but it is a substantial part The additional resources, student support, and accountability that flow from this cultural shift to college being free also helps with college enrollment and completion No single policy fixes all problems, but free college fixes more with one single policy reform than any other

Final Notes Financial aid administrators are essential: You see the problems firsthand You know the students need more support You can help push for change– you can lead

For More Information On Amazon now! Release date: September 27, 2016 saragoldrickrab.com @saragoldrickrab