1. 1 Federal Financial Aid Simplification: A National Imperative Sara Martinez Tucker Under Secretary U.S. Department of Education

2. 2 “The entire financial aid system—including federal, state, institutional, and private programs—is confusing, complex, inefficient, duplicative, and frequently does not direct aid to students who truly need it.” - The Secretary of Education’s Commission on the Future of Higher Education

3. 3 PreparingPreparing ChoosingChoosing ApplyingApplying FundingFunding AttendingAttending StudentAwardPackage SubsidizedSubsidizedUn-subsidizedUn-subsidizedPLUSPLUS Loans FFELFFELPerkinsPerkinsDirectLoansDirectLoans State and InstitutionalAid PrivateLoansPrivateLoans Schools Lenders GuarantyAgencies SecondaryMarkets Grants Federal Work Study PellGrantsPellGrants LEAP/ SLEAP SLEAPLEAP/ FSEOGFSEOG Student U.S. Department of Education AdmissionApplication FAFSA Student Eligibility Student Aid Report EmploymentEmployment GrantsGrants LoansLoans ScholarshipsScholarships MultipleAwardPackages Schools States PrivateFoundations Delivery Process/Student View – FY2007 10 Million Recipients 14.5 Million Aid Applications 2,400 35 42 6,000 $83 Billion Federal Aid $1.2 Billion $51.3 Billion $ 13 Billion $1.1 Billion $976 Million $165 Million $14.4 Billion ISIR ACG/SMARTACG/SMART $580 Million

4. 4 STUDENT Delivery Process/Student View Simplified FAFSA Admission Applications Scholarships Institution 1 Institution 2 Institution 3 Student Award Package 1 Student Award Package 2 Student Award Package 3 State and Institutional Aid Option 1 Option 2 Option 3 Student Aid Report Contains: Expected Family Contribution Federal Aid: Grant Loan Work-study U.S. Department of Education

5. 5 Growth of Cost Outpaces Family Income Percent increase (constant dollars) 46.02% Priv. 2-Yr 56.86% Pub. 4-Yr 41.34% Priv. 4-Yr 31.09% Pub. 2-Yr 13.34% Median Income Source: Digest of Education Statistics Table 320 Average undergraduate tuition and fees and room and board rates charged for full-time students in degree-granting institutions by type and control of institutions: 1964-65 through 2006-07, NCES; Consumer Price Index – All Urban Consumers, Bureau of Labor Statistics available at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.

6. 6 Among Traditional Students at 4-Year Public Schools, About 40% Need a Quarter to a Third of Income to Complement Aid Package Full-Time, Full-Year Dependents at 4-Year Public Source: NPSAS 1993 and NPSAS 2004 Full-Time, Full-Year Undergraduates. The percentages represent the out of pocket amount families must contribute as a share of median family income for each quintile. Income is in quintiles based on ranges for all students. Tax Benefits Non-Fed Loans Federal Parent Loans (PLUS) Fed Student Loans Non-Fed Non-Need-Based Aid Non-Fed Need-Based Aid Work Study Other Fed Grants Pell Grants Family Contribution Income Quintiles 10%14%15%18%33% 10%13%17% 22%36% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 <$25k$25k to $42k $42k to $55k $55k to $70k >$70k<$29k$29k to $51k $51k to $73k $73k to $103k >$103k NPSAS 1993NPSAS 2004

7. 7 Triple the Investment in Higher Education, but Enrollment and Attainment are Virtually Flat Federal Grants Federal Student Loans Non-Federal Student Aid Sources: Trends in Student Aid 2007, College Board; Current Population Survey Table A-1. Years of School Completed by People 25 Years and Over, by Age and Sex: Selected Years 1940 to 2006, US Census Bureau; Digest of Education Statistics 2007, Chapter 1 Table 7 % population age 20-21 enrolled in college % population age 25-29 with B.A. or higher $0 $20B $40B $60B $80B $100B $120B $140B $160B 92- 93 93- 94 94- 95 95- 96 96- 97 97- 98 98- 99 99- 00 00- 01 01- 02 02- 03 03- 04 04- 05 05- 06 06- 07 0% 10% 20% 30% 40% 50% 60%

8. 8 Principles for Reform Eligibility should be determined by Adjusted Gross Income and size of family Level of federal aid should be pegged to an index The federal dollar should serve as the foundation Federal relationship should be with the student

9. 9 Reform Recommendations Develop a rational approach to aid for all American families Simplify access to aid Pool program funds so that students have portable portfolios of federal aid with single grant, work study, and loan components Track return to students and taxpayers on the federal investment

10. 10 Rational Approach to Aid % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5%

11. 11 Rational Approach to Aid % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5% 0% 20% 40% 60% 80% 100% 250% 300% Cost of Attendance at a Public 4-year Institution as % of Average Income

12. 12 Rational Approach to Aid Grants % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5% 0% 20% 40% 60% 80% 100% 250% 300% Cost of Attendance at a Public 4-year Institution as % of Average Income

13. 13 Rational Approach to Aid GrantsSubsidized Loans % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5% 0% 20% 40% 60% 80% 100% 250% 300% Cost of Attendance at a Public 4-year Institution as % of Average Income

14. 14 Rational Approach to Aid GrantsSubsidized Loans % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5% Unsubsidized Loans 0% 20% 40% 60% 80% 100% 250% 300% Cost of Attendance at a Public 4-year Institution as % of Average Income

15. 15 Rational Approach to Aid GrantsSubsidized Loans % of Households within income range $0 to $10k $10k to $22.5k $22.5k to $40k $40k to $70k $70k to $110k $110k to $175k $175k and above 7%15%19%25%19%11%5% Unsubsidized Loans Tax Savings & Credits 0% 20% 40% 60% 80% 100% 250% 300% Cost of Attendance at a Public 4-year Institution as % of Average Income

16. 16 Simplifying Access Ten Pages / Nearly 100 Questions Simplified FAFSA Student:Name SSN Address Date of Birth Dependency Status Parent:Name SSN Household Income (AGI) Household Dependents Nine Questions

17. 17 Increasing Pell’s Purchasing Power Full-Time IndependentsFull-Time Dependents Effects of $1.7B by Income Category $309$292$237$172$232$209$267$271 $262.3M $333.3M$122.0M$20.0M $174.6M $283.8M $226.2M$147.6M Programs consolidated into Pell Grants include SEOG, Perkins loan cancellation, LEAP, ACG/SMART, TEACH, Byrd, Javits Fellowships, Graduate Assistance in Areas of Need, Thurgood Marshall legal educational opportunity program, BJ Stupak Olympic scholarships, and Child Care access means parents in school grants.

18. 18 Long-term Views for FFELP

19. 19 Population Possible Students % Population Can Be Students Potentially Eligible Students Aware of Aid % Possible Aware of Aid Students Aware of Aid Who Apply for Aid % Possible Applying for Aid Students Starting With Aid % Eligible Starting School College Graduates % Students That Graduate + + Rigor of Eligibility Requirements _ Aid Review Work Load + % of Population With Degree _ + + + % Eligible Continuing School Possible Students Potentially Eligible for Aid % Possible Can Be Eligible For Aid Students in School With Aid + _ ++++++ +++++++ Avg Family Income Avg Family $ For College + Avg Family $ Gap _ + + + Avg % Interest Savings + Avg % Savings + _ Avg % Interest Debt Monetarized Debt + Non-Federal Grant Aid Avg Savings + + Actual Debt _ + _ + + Avg Cost of Attendance + $ Available For Aid + _ Total Family Gap + Ratio of Available / Total Gap + _ Imposed Limits on Tuition Increases _ _ + Avg % Interest Loan + Avg Aid Per Student + Loan Debt + Aid Admin & Mgt Work Load + % Aid That Are Loans _ Private Lender Market + Private Lender Aid + _ Federal Appropriations + + _ _ _ _ + + _ + _ _ ++ _ ++++ + + + Full Simulation Tool

20. 20 STUDENT Delivery Process/Student View Simplified FAFSA Admission Applications Scholarships Institution 1 Institution 2 Institution 3 Student Award Package 1 Student Award Package 2 Student Award Package 3 State and Institutional Aid Option 1 Option 2 Option 3 Student Aid Report Contains: Expected Family Contribution Federal Aid: Grant Loan Work-study U.S. Department of Education

21. 21 Next Steps Convene experts to develop policy recommendations –Role of the federal dollar (index) –Rational approach Develop legislative proposals –Simplify FAFSA –Revamp aid formulas –Consolidate programs Targeted funding through budgeting and appropriations