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Higher Education Cost and Financial Aid: Unraveling the Pieces

Higher Education Cost and Financial Aid: Unraveling the Pieces Larry Warder Acting Chief Operating Officer Federal Student Aid Lagging performance internationally The United States ranks 18 th among OECD nations in college graduation rates, a drop from 12 th

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Higher Education Cost and Financial Aid: Unraveling the Pieces

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  1. 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 18th among OECD nations in college graduation rates, a drop from 12th • The U.S. ranks 1st among OECD nations in college dropout rates • The U.S. ranks 21st 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 10th 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. Tuition and fees % of students that benefit from public aid Source: OECD, Education at a Glance 2007

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

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

  6. 60% 55% 50% % pop age 20-21 Enrolled in College 45% Non-Federal Aid 40% 35% Federal Loans 30% % of pop age 25-34 with B.A. or Higher 25% Federal Grants 20% Triple the Investment, but Enrollment and Attainment are Virtually Flat Constant 2005 dollars

  7. 2005-06 1992-93 Everyone is Doing More…Estimated student aid by source for 1992-93 and 2005-06 in current dollars (in billions)

  8. …Burden is Shifting Percentage of student aid by source for 1992-93 and 2005-06 in current dollars (in billions) 1992-1993 2005-2006 4% 9% 16% 6% 41% 5% 10% 51% 5% 19% 20% 7% 7% Pell Grants Other Federal Programs State Grants Private & Employer Grants Federal Loans Institutional Grants Education Tax Benefits

  9. $30 $25 $20 $15 $10 $5 $0 Utah Ohio Iowa Maine Idaho Texas Hawaii Illinois Florida Alaska Kansas Virginia Indiana Nevada Arizona Oregon Missouri Georgia Montana Michigan Alabama Vermont Wyoming Louisiana Kentucky Maryland Arkansas Nebraska New York Wisconsin Delaware Colorado Minnesota California Oklahoma Mississippi New Hamp Tennessee Puerto Rico New Jersey New Mexico Washington Connecticut West Virginia Pennsylvania Rhode Island North Dakota South Dakota Massachusetts North Carolina South Carolina District of Columbia Average Pell Grant Average Cost of Education Buying Power of Pell VariesLeast power in states with fastest growing youth population In thousands Source: Award Year 2005-06 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 KeyCurrent Dollars (2005)

  11. Full Aid Covers Cost of Attendance for Increasing Number of Students 16.3% 1% Income Quintiles 1993 Income Quintiles 2004 Full-Time, Full-Year Dependent Undergraduates at Public 4-Year Institutions

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

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

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

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

  16. 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. Enable more student access to a rigorous and aligned curriculum • 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

  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. TO DO: Institutional Leadership • 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

  24. TO DO: Institutional Leadership • 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

  25. Conclusion • 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

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