Higher Education Cost and Financial Aid: Unraveling the Pieces Larry Warder Acting Chief Operating Officer Federal Student Aid

2 Lagging performance internationally The United States ranks 18 th among OECD nations in college graduation rates, a drop from 12 th The U.S. ranks 1 st among OECD nations in college dropout rates The U.S. ranks 21 st among OECD nations in high school graduations rates While the U.S. leads the world in the percentage of its population aged 55 to 64 with college degrees, we drop to 10 th among those aged 25 to 34 The U.S. ranks first among OECD nations in total expenditure on higher education as a percentage of GDP

3 % of students that benefit from public aid Tuition and fees Source: OECD, Education at a Glance 2007

4 Rising Higher ED Costs in Every Sector Cost of attendance in constant (2005) dollars $27,317 $21,170 $12,108 $6,492 Public 2-Yr Public 4-Yr Private 2-Yr Private 4-Yr

5 Growth of Cost Outpaces Family Income Percent increase (constant dollars) 53.28% Priv. 2-Yr 48.33% Pub. 4-Yr 33.61% Priv. 4-Yr 24.96% Pub. 2-Yr 9.04% Med Inc.

6 Triple the Investment, but Enrollment and Attainment are Virtually Flat Constant 2005 dollars % pop age Enrolled in College % of pop age with B.A. or Higher 25% 20% 30% 35% 40% 45% 50% 55% 60% Federal Grants Federal Loans Non-Federal Aid

Everyone is Doing More… Estimated student aid by source for and in current dollars (in billions)

8 …Burden is Shifting Percentage of student aid by source for and in current dollars (in billions) % 10% 16% 41% 5% 7% 51% 9% 6% % 5% 4% Education Tax Benefits Private & Employer Grants Institutional Grants State Grants Other Federal Programs Federal Loans Pell Grants

9 Buying Power of Pell Varies Least power in states with fastest growing youth population In thousands Source: Award Year Pell Grant Sample File. Unmet need is average cost of attendance, as defined in statute and reported by institutions, minus the average Pell Grant.

10 Income Quintile Key Current Dollars (2005) Income QuintileIncome Range I< $30k II$30k - $50k III$50k - $75k IV$75k - $100k V> $100k

% 1% Full-Time, Full-Year Dependent Undergraduates at Public 4-Year Institutions Full Aid Covers Cost of Attendance for Increasing Number of Students Income Quintiles 1993 Income Quintiles 2004

12 Aid Plus EFC Does Not Cover Tuition for Increasing Number of Students Full-Time, Full-Year Dependent Undergraduates at Public 4-Year Institutions 16.3% 1% Income Quintiles 1993 Income Quintiles 2004

13 Aid Available from Multiple Programs… Pell Grants Other Fed Grants Work Study Non-Fed Need-Based Aid Non-Fed Non-Need- Based Aid Fed Student Loans Federal Parent Loans (PLUS) Non-Fed Loans Tax Benefits Aid Amounts per Student Income Quintiles 2004

14 Unmet Need, an Undue Burden on Low and Moderate-Income Families Additional Family Contribution EFC Full-Time, Full-Year Dependent Undergraduates at Public 4-Year Institutions Income Quintiles 2004 COA minus Aid per Student

15 Among Traditional Students at 4-Year Public Schools, About 40% Need a Quarter to a Third of Income to Complement AID Package 36% 22% 17% 13% 10% 33% 18% 14% 15% 10% Unmet need as % of family income Income Quintiles 1993 Income Quintiles 2004

Under Secretary’s Listening Tours Real stories from students

17 What is needed Access to student financial aid needs to be simplified Student financial aid needs fewer programs better targeting recipients Student financial aid should facilitate attainment of a postsecondary credential

18 The Department of Education’s Focus Areas: Refocus the Federal investment toward simplified access and increased attainment Enable more student access to a rigorous and aligned curriculum Help more adults attain their first postsecondary credential Engage families and students before high school to prepare for postsecondary education Increase transparency and information available to students and families

19 Almost half of 17-year-olds are not proficient enough in math for factory floor jobs Two-thirds of college-bound high school graduates are not ready for college-level math and one-third for college-level English Only 4% of low-income high school students complete a rigorous college preparatory curriculum Enable more student access to a rigorous and aligned curriculum

20 Help more adults attain their first postsecondary credential Greater numbers of adults are looking for ways to upgrade or expand their skills Nearly 40% of today's postsecondary students are self- supporting adults age 24 and up, almost half attend part- time, more than 1/3 work full-time and 27% have children 44% of Americans don’t believe they have the education they need for the jobs they want 32 states do not have enough young adults in the pipeline to replace college-educated, retiring Baby Boomers There are 32 million adults who started, but did not complete, a college education

21 Engage families and students before high school to prepare for and participate in postsecondary education Research shows that most students have some post- high school educational or job plans by the ninth grade Nearly 2 million low and moderate-income students a year do not apply for federal financial aid Financial obstacles will prevent over 400,000 college- qualified students from attending a four-year college and nearly 170,000 will attend no college at all By age 24, 75% of students from the top-income bracket have earned a degree, while less than 9% of low-income students have earned one

22 What has to happen outside the Federal government? Aligning high school, college, and work expectations Serving adults and other nontraditional students Increasing need-based aid Improving affordability, reducing costs, and increasing productivity Supporting and emphasizing student learning outcomes

23 Access –Redesign services to improve pathways to and within postsecondary education for all students Affordability –Increase need-based aid –Develop strategies that reduce overall institutional cost TO DO: Institutional Leadership

24 Accountability –Create ownership at the institutional level for designing measures of student learning and achievement that are linked to mission and publicly communicate the results TO DO: Institutional Leadership

25 We've spent a year ensuring "buy-in" for the problem We've identified the areas that can have the greatest impacts We know what has to be done – by the Federal government and others We're turning the spotlight towards solutions And we're holding ourselves and the others who must act accountable Conclusion