More on Monday’s Financial Aid Chronicle Column

Right now, it is not the case that every student has access to a high quality college education.  Financial distress is the number one reason students drop out of college, and a majority of students that start college never finish.  Both for those student who drop out and for those who complete their programs, student loan debt can be a crushing financial burden preventing students from improving their economic standing.

It would be great if we could offer a free education at any institution that a student wants to attend.  This is not the status quo! 

Our federal financial aid should strive to make sure that every student be able to receive an affordable and high quality education – all our decisions about financial aid should be made with this goal in mind.  If we cling to the idea that this education be available at every single college or university in the United States, we miss out on an opportunity to make education a much better value for students.

In today’s Chronicle I proposed some changes to federal financial aid that I thought would help advance the United States towards the aforementioned goal goal.  Because of space constraints, I could not fully elaborate in the Chronicle, but think it might be helpful for me to more completely explain my proposals.

My overarching goal was to explore ways in which the United States might be able to offer larger and more generous aid packages to low-income students by decreasing the default rate on student loans.  My suggestions did this, in most cases, by decreasing the number of choices available to students.  Choice is, in many circumstances, a good thing.  But, I suggest that we ask ourselves: Which leaves students better off — preserving a wide variety of choices, or having fewer choices but improving the quality of these choices?  The answer might not be obvious, but the question is, I assert, worth exploring.

Limiting the number of colleges and universities eligible for financial aid

Let’s say student X is from state Y.   Right now, student X can use federal financial aid at almost any college and university in the country, including very expensive private colleges, for-profit-colleges, culinary schools, cosmetology schools, as well as public universities and community colleges—basically, you name it.

This is what I propose instead:

  • Student X be able to use federal financial aid at any public college or university in their state
  • Student X be able to use federal financial aid at any community college
  • Student X be able to use federal financial aid at any private (or for-profit college) that is at or superior to the academic caliber of the best public college or university in their state.  If a person went to a state with great public flagship school (like North Carolina, Virginia or Michigan) this would be a smaller list of private colleges than a state without an extensively developed public university system.
  • Student X be able to use federal financial aid for private or for-profit colleges within driving distance — perhaps 40 miles of their home–if there is not a public or community college that is closer (e.g. to consider the needs of commuting students)
  • Student X be able to use federal financial aid for private, out of state public, or for-profit colleges where the tuition is more affordable than the flagship public university in their state (this would include any financial aid or scholarships that the particular college or university was going to provide).  Tuition would be compared for like programs — Bachelor’s Degrees with Bachelor’s Degrees, vocational certificates with vocational certificates.

To the extent that this would decrease default rates on student loans, adopting this proposal would save us money.  As I explained in my article, controlling for the academic caliber of an institution, the more affordable the tuition, the less likely a student is to default on their debt.  The money saved by preventing defaults could be  reinvested in providing more generous packages federal financial aid – expanding the amount of Pell Grants. By doing so, we would further decrease the debt burden on students, and further decrease their likelihood of defaulting on their loans.

Put more simply: if a greater percentage of student loans are repaid, we can give out more financial aid!  We would be decreasing the number of choices, but making the best choices more affordable and accessible.

Some criticisms suggested that this was a “punishment” for poor students. Other readers suggested that instead of “punishing” students I should “punish” colleges instead.  I want to point out that the way in which universities and colleges have so far been sanctioned is by making these schools ineligible for receiving federal financial aid.    There is only a rhetorical difference between saying “Students should not be able to spend their financial aid at University X” and “University X should not be eligible for federal financial aid.”

Controlling for demographics (race, socioeconomic background, and other factors), for-profit colleges have higher rates of unemployment and lower pass rates on licencing examinations that community colleges, private colleges or public universities

Here is further elaboration on my other proposals:

Making sure that students are academically prepared:

The part of my column that people had the most feedback was the suggestion that students with the lowest degree of academic preparation (based on measures of academic achievement) have their federal financial aid contingent on attending community college first.

Let’s say a particular student will need a substantial amount of remediation in college—for example, that their literacy or basic math skills are very low.  Before these basic competencies are addressed, that student will not be able to succeed in college courses.  Some colleges and universities will admit these students (often, to grab their federal financial aid).  Many institutions offer remedial coursework but don’t grant them credit for it, and the student’s Pell Grant eligibility runs out before the remedial coursework is finished. Others, especially for-profit colleges, will accept these students without ever worrying about their academic well-being.   The Government Acccountability Office found that many for-profit colleges were guilty of having incredibly low academic standards for student work, meaning that students can graduate without ever performing college (or perhaps high school level work), an outcome that leaves the student and society both no better off than the student was before entering.

A study by Bettinger and Long found that forcing students to take remediation courses increased the students probability of graduating—this supports the idea that students might be better served by reducing their number of choices and ensuring that they become adequately prepared.  A 2007 study found that a full 70% of students that take one or more remedial courses don’t graduate within eight years.  For these students, the situation couldn’t get much worse, and it could stand to get much better if we craft better policies.   Students who want to continue their education but are not already college ready should be tracked to institutions that are (1) well equipped to deal with these student’s particular challenges, and are (2) affordable, to reduce these student’s debt burden.   In my mind, community colleges best fit this profile.

Some criticisms were based on the premise that this would drive up costs for low-income students.  Many Duke Chronicle readers seemed to mistakenly believe that Associate’s Degree credit doesn’t count towards a Bachelor’s degree. In general, it is much more affordable to spend two years at a community college and then two years at a 4-year college or university than it is to begin at a 4-year college.

Research indicates another important trend — students who don’t graduate from college knew much less about the college admissions process before starting than students who do graduate from college.   For-profit colleges spend oodles on advertisements (The Apollo Group, which owns the University of Phoenix, spends more on advertisement than does Apple) luring in poorly prepared students and leaving them much worse off.  In many cases, these advertisements have been found to be fraudulent at worse, or misleading at best—while the former is illegal, the latter is not.  Pauline Abernathy, vice president at the Institute for College Access and Success says, “Particularly for students who are first-generation college-going, they don’t know the questions to ask.”  This lack of familiarity can lead unpreapred students to for-profit colleges that are advertised on the TV and radio.    Many students would be better off if these institutions were removed from the option set and replaced with community colleges, where serving the needs of students is the priority, instead of making money.

If we know that Option A leaves students much better off than Option B, is it unfair or bad for us to eliminate Option B?

It might be that our country can develop better pathways to educational success than community colleges.  The data on the success of community colleges, while positive, is certainly mixed.  It is apparent to me though that for students who start college very far behind, the system is radically broken.  If we can find one or two pathways that work, we should make sure students pursue these pathways, instead of getting sucked down dead-ends that will leave them debt-ridden.

Which degree programs should be axed–and which should receive more support?

One trend that troubles me greatly is the “dead-end” vocational program or certificate.  I think the humanities can be very valuable, and I am in favorable of liberal arts education in general.  My intention was not to attack the humanities.

If a vocational program purports to teach skills though, and those skills don’t help their students get a job, that is a big problem.

I found anecdotal evidence (but no hard statistics) indicating, for example, that student loan default after culinary school tended to be very high—no saying for sure whether this is true or not.

There is plenty of documentation, though, that certain degree programs, despite having flashy sounding names, might be really harming students.  The NY Times told this story:

Christopher Williams was looking to train for a new career when he walked into a trade school near his home in Murrieta, Calif., two years ago. At Career Colleges of America, he says, a recruiter told him a certificate program in ultrasound technology would prepare him for a job in less than 18 months. Mr. Williams, now 25, signed up and graduated in December 2009, $28,000 in debt. Now he cannot get a job in the ultrasound field.

Nearly 2/3rds of degrees at for-profit colleges are “certificates”—not two or four year degrees.  Some of these programs are industry standards, and have very high employment rates. They give students essential job skills and make them employable in a short amount of time. Others, like those training you to be a receptionist or those training you in interior design are, in almost all cases, huge money sinks.

If a particular vocational program is associated with a very high student loan default rate, either at one institution or nationwide, that vocational program shouldn’t be eligible for federal financial aid, at that institution or nationwide.

Shifting funding towards high-social-value programs:

The Republicans in the North Carolina General Assembly recently ended the Teaching Fellows program, which provided scholarships to North Carolinian students who wished to become K-12 teachers.  This program was a great example of an approach to financial aid that I think we should consider taking—making sure that we are training students well to take on careers of high social value, like teaching.  If we can find ways to cut costs in federal financial aid, I think we would be well-served to reinvest it to give especially generous aid packages to train more teachers, as an example.

Another type of example: Studies have found that part of the increased medical expenses in the United States relative to Europe result from the high debt burdens that doctors face.  Obviously, doctors in the United States make enough money to pay off their loans, however, the need to pay back these loans is part of the reason why healthcare costs are so high. 

Currently, these sorts of considerations play no role in our federal financial aid regime—perhaps they should.    I wanted to avoid making very specific proposals on this, because, like the Chronicle commenters, I agree that it is hard to say exactly which programs are the highest-value.  I disagree though, that all programs are of equal value, and wonder if we should consider using federal financial aid as a way of making sure we have a workforce well equipped to respond to the particular challenges our society faces.

Other suggestions I didn’t touch on

  • Allow part-time students to qualify for financial aid: research by the Bill and Melinda Gates Foundation suggests this would have a strong positive impact in improving graduation rates
  • Put into place the suggestions that Obama outlined in the most recent State of the Union — many of which are targeted at controlling tuition costs.  I agree broadly with most of Obama’s recommendations.  Unlike mine, they have each been careful vetted I’m sure by a good number of academics and wonks.  I hoped to contribute to the discussion by bringing up recommendations that were not already in very wide circulation

To reassert: I believe that the United States should maintain, and, if possible increase federal financial aid.  It would be foolhardy, though, to assume, without the use of research, that current policies  work in low-income student’s best interest. My overarching thesis:  I think the United States can and should consider policies that would allow it to offer larger and more generous aid packages to low-income students by decreasing the default rate on student loans.


A note on author’s background:

To those who found my article to be in poor taste precisely because I am a Duke student, and, ipso facto, I have been privileged enough to receive a high quality education: I am sensitive to these concerns, acknowledge their validity, am aware of the fact that my class background may prevent me from having a complete perspective on issues of socioeconomic mobility.  This having been said, I believe that society is best-served when many different ideas are put forth on challenging issues–we should never discount the validity of a person’s ideas on the basis of that person’s background.

Published by Elena Botella

Elena Botella is a Duke Undergraduate in the Class of 2013, majoring in Economics and Math.

2 thoughts on “More on Monday’s Financial Aid Chronicle Column

  1. Sooo….we can wage trillion dollar wars and bail out risk-taking financial institutions, but the our student’s future is where we suddenly need draw the line? This is so ignorant and blatantly conservative that I’m surprised to see it on the Duke Dem blog.

    In the vast majority of policy dialogue, social and moral considerations should follow only after economic pragmatism is established: war, international trade, healthcare. However, there are a select few areas of our society where economic discussions should only follow social and moral conviction–education is one of these cases. This is a ridiculous statement to be published on a Democratic Blog. Please remove it


    1. Lots of so called “schools” are ripping off students, leaving them in debt — at for profit colleges, the rate of people who complete their intended degree program is smaller than the default rate. That is a huge problem!

      I think we should maintain or increase education funding; I feel strongly that education is a right. In the same way that the Consumer Financial Protection Bureau has helped to make sure that people are choosing credit cards or other products that rip them off, we need to make sure that our government isn’t financing “colleges” that make their students much worse off.


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