Thursday, April 23, 2009

More on Financial Aid

by Andrew Gillen

The lead story in today’s Inside Higher Education reports that the National Association of Student Financial Aid Administrators (NASFAA) has released a new proposal for reforming financial aid. I haven’t had a chance to read through the 72 pages yet, so unlike some others, I’ll hold off on commenting on the report itself until I have read it.

However, at the bottom of the Inside Higher Education story is a fantastic table showing the proposals of the NASFAA along with the recent proposals of a College Board panel, and I can’t resist highlighting some specific ideas that I have recently written on.

The first concerns campus work programs. Both the CB and NASFAA appear to want to simplify and consolidate these (so far so good), but the CB wants to replace them with block grants to schools. Unless this is structured so that the money is given to individual students, like the Pell, I think this is a mistake. Block grants to institutions are not a good way to increase affordability (see figure 17 here).

The second issue concerns loans limits. The NASFAA wants to limit loans to the amount of the maximum Pell, up to the cost of attendance. The second part worries me. If they get their way, the Pell would increase to about 9k, making the student eligible for another 9k in loans. Something tells me that if this were the case, we wouldn’t see too many schools charging less than 18k for long. One of the most important things I tried to show in this report is that tying aid to cost at an institutional level is a bad idea, since aid can help determine cost. As I argued in the report, a better idea is to determine what a student can pay, determine what an education should cost in general, and provide aid to fill in any gap.

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