Feb. 9, 2007

On the Offensive

Education Department officials are going on the offensive to defend President Bush’s proposal to raise the maximum Pell Grant in part by eliminating several other student aid programs, challenging numbers circulated by higher education groups to criticize the plan and insisting that it would most efficiently get more financial aid in the hands of more needy students.

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College leaders embraced the idea of bolstering spending on the federal government’s primary source of need-based financial aid. But they have attacked the proposal for planning to pay for the Pell increase, in part, by ending the Supplemental Educational Opportunity Grant Program, which provides about 1.3 million students a year with grants that average $770 but can rise to as much as $4,000. In addition to ending funds for SEOG and two other smaller student-aid programs (the Leveraging Educational Assistance Partnerships and Perkins Loan Programs), the administration would pour new funds into the Pell Grant Program

Critics of the president’s proposal have widely cited numbers provided by the American Council on Education suggesting that of the 1.3 million students who receive the supplemental education grants each year, about a million of them would lose money in the program’s first year. The council’s analysis assumes that any student who received SEOG funds of $300 or more would lose out, because the administration’s Pell Grant increase would amount to $290 over and above the $260 Pell Grant increase that Congress is poised to enact in its soon-to-be-passed spending bill for 2007.

The catch phrase floating around Washington higher education circles is that the administration is “robbing Peter to pay Pell.” Terry W. Hartle, the council’s senior vice president for government and public affairs, said: “Every presidential budget, regardless of party, contains at least one bad idea. For 2008, it’s eliminating SEOG.”

In a telephone call initiated by department officials Thursday, Sara Martinez Tucker, the under secretary of education, directly challenged both the ACE numbers and the premise that the administration is strengthening Pell at the expense of other programs. She argued forcefully that the administration’s plan — which would derive significant new revenue for student aid by cutting lenders’ profits — is very much in the best interests of students from low-income families, while still being prudent for taxpayers as well.

“This budget would advantage need-based aid in a huge way,” Tucker said. “The Bush administration is adding $2 billion in need-based aid over last year, and $1.3 million over” Congress’s budget plan for 2007. Not only would the administration’s plan add significant new funds for Pell Grants, Tucker said, but it would also ratchet up spending on the Academic Competitiveness Grants Program that Congress created in 2005, which provides funds to Pell-eligible freshmen and sophomores who took a “rigorous” high school curriculum and maintain a 3.0 grade point average in college.

Tucker said that the department’s own analysis — in contrast to that of the American Council on Education — takes into account the new funds that would flow to students through the Academic Competitiveness Grants as well as through Pell. Through that prism, she said, 45 percent of students who receive Supplemental Educational Opportunity Grants would see an average increase of $310 in need-based aid in 2008 (through a combination of larger Pell and Academic Competitiveness Grants).

Despite those larger grants, 36 percent of SEOG recipients would still lose as much as $500 in 2008 (though they would gain that back through the $200-a-year Pell increases the administration has proposed for 2009-12). And the remaining 9 percent of SEOG recipients, Tucker said, would lose significantly under the Bush plan — but those, she said, are the small minority of SEOG recipients who do not qualify for Pell Grants because they are above the income threshold, and who tend to be at high-priced colleges.

The under secretary said that the latter statistic underscored the Education Department’s other major point: that the supplemental grants program is not the most effective use of federal student aid funds. Although college financial aid directors like the program because they say it gives them flexibility to craft awards that best meet the diverse financial needs of their students, the SEOG program has been criticized in the past because its funds go disproportionately to colleges that have been in the federal financial aid programs the longest, favoring private institutions and often shortchanging community colleges and other newer institutions, which Tucker described as more likely to educate needy students.

“When we looked at the numbers, we found that campuses that enroll 70 percent of low-income students only got 40 percent of the SEOG money,” Tucker said. In addition, department officials complained that the SEOG program, for every dollar awarded, costs significantly more to operate than the Pell program does, by a margin of 250 to 1.

Taken together, Tucker said, those factors — that more needy students would benefit than be hurt by the shift, and that the SEOG program is costly to run and isn’t well-targeted to the needs of needy students — make the Bush proposal a wise one. “To the extent that we’re trying to focus on increasing need-based aid for students, we’re going with the proven winner, Pell.” Instead of trying to fix SEOG to make it more fair, she said, “why shouldn’t we just go straight to advantaging students through Pell?”

Officials at the American Council on Education said they stood by their numbers, which were drawn from the department’s own data, and questioned whether department officials really needed to kill the supplemental grants program to reach their goal of bolstering Pell.

“The administration is basically asking two questions: First, is SEOG effectively targeted and efficiently administered, and second, can you eliminate SEOG without hurting low-income students?,” said Hartle of ACE. “They’ve answered first question ‘No,’ and the second question ‘Yes.’ They might be right on the first question, but they’re dead wrong on the second.”

Hartle cited numbers in the department’s own budget documents showing that the number of financial aid awards to students would shrink from about 6.5 million in 2006 (for Pell and SEOG, or 7 million including the other two programs the administration would kill, LEAP and Perkins) to 5.5 million (just for Pell) in 2008. If one includes the Academic Competitiveness Grants in that calculation, the total would shrink from 7.5 million to 6.1 million. (The number of Pell recipients, department officials counter, would grow by about 300,000.)

“I just don’t see how you can take away 1.3 million SEOG awards, the vast majority of which go to low-income students, and claim that somehow that only 10 percent will be affected — it just fails any kind of face validity,” Hartle said. “The idea that the answer to the problem of SEOG is to kill it is a little like junking a perfectly good car because it needs good tires.”

Although college lobbyists and many student-aid officials are lining up against the administration’s proposal, at least one prominent financial aid expert thinks the Education Department may be on to something. Mark Kantrowitz, publisher of FinAid.org and director of advanced projects at FastWeb.com, said that both sides can legitimately cite numbers to back up their views, but that to the extent the administration hopes to eliminate duplication, the proposal makes sense, since the Pell and SEOG programs serve roughly the same income bands.

“If this were a business,” he said, the supplemental grant program “would have been consolidated a long time ago.”

— Doug Lederman

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Comments

While scrapping any federal grant program will invariably put some students out, the President’s proposal does raise the most wide-ranging program’s funding (thus benefiting the most people) and, importantly, consolidates/simplifies the federal grants scheme in the process — something that has received considerable attention in Washington as of late. To be honest, based on the article I find ACE’s claims to be rather unconvincing. If we want to fiddle with numbers then talking about a Pell rise of $290 versus a $300 or even $600 SEOG is silly. I’m quite sure that the marginal loss of $10 or even $310 is not going to discourage students from higher education and, hey, THAT is what federal grant aid is for in the first place. Even if a student is forced to substitute a $1,000 (or $600) SEOG with a $290 Pell, the loss translates into about $14 ($5) per week. Plus, such comparisons ignore the proposed annual increases in Pell over the next five years — which will further reduce the differential — and it ignores the possibility that some students will be more apt to embrace the SMART grants in the process. I mean, just because Education has to put enrollment numbers in as the basis for a cost estimate doesn’t necessarily mean they’ll actually come to pass. THEY ARE ESTIMATES!! Really, the logic here is puzzling. In the end, it is hard to disagree that SEOG funds are allocated in a curiously distorted fashion that favors expensive private schools. My hunch is that the concerns have much less to do with students and encouraging access as they have to do with taking financial autonomy away from colleges and universities and putting it back in the hands of Education and government formulae.

DC Observer, at 8:00 am EST on February 9, 2007

Language

Advantaging????

tom mims, at 8:05 am EST on February 9, 2007

Every thing you read today (and always) states how difficult it is to understand financial aid, it is not simple. We have PELL grants, FSEOG grants,SMART Grants, ACG Grants, PERKIN loans, Subsidized Stafford Loans, Unsubsidized Stafford loans, Parent plus loans, etc,etc,Each with its own limits and criteria, that people (congressmen, college administrators, high school guidance counselors, parents and students) are supposed to understand.

There is a phrase: “Keep it simple stupid (KISS)” If we move all of the money (entitlement?) into one “pot” and distribute it based on a set of criteria...what could be better? More “poor” people would be helped. What would happen is that your “special” interest groups would suffer, but should we as a nation be worried about special interest, or should we try to do the most good for the most people?

As an administrator, I vote for the “kiss” principle. Do away with all the other categories of aid, do away with all the federal regulations on that aid (that alone will be a cost savings for all involved in both in time of compliance and cost of compliance) and deliver the federal aid in a direct cost effective way to benefit who financial aid is supposed to benefit.

JIm, at 8:30 am EST on February 9, 2007

“…campuses that enroll 70 percent of low-income students only got 40 percent of the SEOG money,” Tucker said. In addition, department officials complained that the SEOG program, for every dollar awarded, costs significantly more to operate than the Pell program does, by a margin of 250 to 1.” In other words community colleges, which cost less in many cases by state law, get less money than other institutions that enroll fewer low-income students – four-year public and private colleges that cost more so there’s more of a gap between what low-income students qualify for and what they need to be able to afford college. Touting ACG as a solution to that is ridiculous. How long will it be before students are in high school long enough to know they have to take rigorous courses in order to qualify for financial aid? And isn’t that the point of providing access – that low income students often don’t have access to the encouragement and mentorship necessary for them to have real access to the rigorous curriculum required by ACG and SMART grants?

Anne, at 9:05 am EST on February 9, 2007

Yes, Tom Mims

Advantaging’s a word. Check your dictionary.

Bob, at 9:05 am EST on February 9, 2007

ACG

Anne, I don’t think you’re giving the ACG its due. What makes you think that school districts won’t be priming teachers and counselors at both middle and high schools to inform students early on about what opportunities ACG offers if they work hard and take the right courses? We simply don’t know the impact yet since ACG is so new, but shouldn’t we at least give the program the benefit of the doubt before slamming down its usefulness in both broadening access and better preparing students for a collegiate education?

DC Observer, at 9:30 am EST on February 9, 2007

Simple and Easy

Although there may be issues with “robbing peter to pay pell,” I think this is at least a great first step. For years, higher education associations have been advocating for a simpler system and, when the federal government finally responds, we see the usual reaction: complain while offering few, if any, creative solutions.

We can criticize the current administration for not raising Pell and largely ignoring need-based aid. It makes one wonder what their priorities are. But can’t they, at a minimum, receive mild praise for trying to do something right for once?

PS, at 9:35 am EST on February 9, 2007

Number of Unduplicated Award Recipients

The article indicates that the number of financial aid awards will be shrinking. That’s a given in any move that consolidates programs. A more important question is whether the number of unduplicated recipients will be shrinking, growing, or remaining unchanged.

The number of financial aid award figures reported in the article do not take overlap among recipients into account. In other words, they are counting the same students twice. For example, 90% of SEOG recipients are also Pell Grant recipients, so the combined number of recipients of either grant program in 2006 is about 5.3 million, not the 6.5 million figure cited. So there would be a net increase in the number of recipients, to 5.5 million in 2008.

However, that increase is consistent with the normal annual growth in the number of recipients of the Pell Grant program. During the past four years, when the maximum Pell Grant has been kept flat at $4,050, the number of recipients has grown by 100,000 to 200,000 per year.

An increase in the maximum Pell Grant of $550 would normally result in 750,000 additional recipients, since the implicit EFC eligibility cutoff floats at 200 below the maximum Pell Grant. The lack of such growth suggests that the Bush Administration will be decoupling the Pell Grant eligibility cutoff from the maximum Pell Grant, keeping it at $3,850 while the maximum Pell Grant increases to $4,600. This move contains costs by preventing the pool of eligible recipients from growing with increases in the maximum Pell Grant. This means that the number of Pell Grant recipients will not change by much.

I agree in part with both sides of this debate. Specifically, I believe that we should have just one grant and just one loan program. The grant program should be modeled after the Pell Grant program, but incorporate elements of the SEOG program (e.g., higher awards for zero EFC students, taking into account that the current need analysis methodology does not allow the EFC figure to go negative). However, I also think that the Bush Administration has not and still is not doing enough to make college more affordable. For example, the proposed $550 increase in the maximum Pell Grant, while the largest in 30 years, only appears large because of the failure to adequately increase the Pell Grant for the last five years. From 1995-96 through 2002-03, the average annual increase in the Pell Grant was $237. If the Bush Administration had been increasing the Pell Grant at that rate all along, we’d be at a $4,950 maximum Pell Grant by now and $5,400 by 2008-09. Even increases at the Consumer Price Index, which averaged 3%, would put us at $4,500 by now and $4,800 by 2008-09.

While the Democratic proposal to increase the maximum Pell Grant to $5,100 in 2007-08 and by $300 a year thereafter — a greater increase and a year earlier than President Bush’s proposal — is to be applauded, it doesn’t go far enough. Even with such an increase, I estimate that Pell Grant recipients will graduate with $5,000 more cumulative debt than nonrecipients. To level the playing field, the maximum Pell Grant needs to be increased to $6,250. To eliminate loans entirely from the aid packages of low income students, the maximum Pell Grant needs to be increased to $8,250.

Mark Kantrowitz, Publisher at FinAid.org, at 10:40 am EST on February 9, 2007

Simplifying Aid

Even though it goes against the grain to agree with the Bush Administration, I think that eliminating the FSEOG and Perkins loan programs to fund a Pell Grant increase is taking a good step in the direction of simplifying financial aid programs. The FSEOG program, especially, is redundant, considering that the Pell Grant is supposed to serve the same low-income population.

Stephny, Student Financial Aid Counselor, at 1:05 pm EST on February 9, 2007

Managing two programs that are designed to help the same students is ridiculous. The Pell and SEOG programs should be consolidated. It will ease administrative burdens and spread the money to a greater number of students.

With the ever-increasing costs of tuition at universities, there should be more than enough institutional aid to spread to their neediest students. Oversight should be extended to tuition costs when schools consistently and excessively increase their rates, often at a rate double that of inflation.

In reference to earlier comments of eliminating the Stafford Loan programs, that won’t help make college affordable. While debt is not ideal, not everything is free in the world. In fact, the most appreciated things are earned and worked for while the underappreciated are taken for granted and squandered. The loan programs should remain, but return to variable rates that are the same for both sub and unsub loans, increase the loan limits, and decrease lender subsidies.

Paul, at 2:55 pm EST on February 9, 2007

What about outcomes?

This administration has employed much rhetoric around outcomes measures. If you look at Pell as purely an access program, then eliminate SEOG and increase Pell. But look at and measure the results of who gets SEOG and persists and continues to a degree, and who gets Pell and does the same, you may want to rethink the structure of these grant programs. I am not suggesting a causal relationship between SEOG and persistence, just that if we put all the eggs in the Pell basket, we need to understand that this is an access program, and the expenditure of funds are not targeted to persistence or degree completion, as we have with the new National SMART grants.

Dr. E., University Financial Aid at Johns Hopkins University, at 11:06 am EST on February 11, 2007

eliminating SEOG

This is not a theoretical argument for my family. My son enters college this fall. He is not going to an elite private school. He hopes to attend a public university. The cost of attendance is $18,000. I am a single parent on a disability income. As a result, our EFC is zero. He obviously qualifies for PELL. The money he will receive in SEOG is critical for us. His institution has awarded the maximum they award in SEOG—still far less than the statuatory maximum. He is still thousands short of having the dollars to attend college. He does have some money put aside for college. Loss of the SEOG would result in him having to borrow more money to attend school. Some financial aid administrators use the SEOG eligibility and actually reduce state awards to the neediest students. In that way, they can spread around limited grant dollars. Work study is fine; however, it does nothing to help pay the bills due at the start of the semester—tuition, fees, books and housing. I recently attended a financial aid session at the institution my son hopes to attend. Although not encouraged to mortgage our homes, the idea was discussed. Parents were told to be ready to take out loans—for me, $13,000 a year. Gee, my disability income is $14,000 a year. Even if I could qualify for a loan, how could I ever repay it. In addition, I have a younger son who will enter college in 4 years. Do I need to be ready to borrow $50,000 grand for him? It may not seem like much to you, but eliminating the SEOG my son is scheduled to receive this fall would mean he could not attend college. We have stretched every possible dollar. THE SEOG amount is the difference in attending college or staying at home. This may impact a small percentage of students; however, they tend to be the students who need the most help to attend college. We want to break the cycles of poverty, and yet we are discussing eliminating a program designed to help the most needy students. This does not make sense. If you really think that $300 would not make the difference in attending school as mentioned by one author, why increase the PELL? Having different programs allows administrators to adjust their programs to the needs of their students.

For those who think it is not fair that SEOG money goes to older institutions, think about the fly by night technical schools. They are tne newer schools who promise students the moon. They stick around for a few years, encourage students to absorb an enormous amount of student loans, and disappear. Before I went on disability, I worked for a federal job training program. I saw several of these newer schools. The dollars should go to institutions with a proven record.

Rhonda Parsley, at 10:10 am EDT on April 3, 2007

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On the Offensive

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Comments

Language

Yes, Tom Mims

ACG

Simple and Easy

Number of Unduplicated Award Recipients

Simplifying Aid

What about outcomes?

eliminating SEOG

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Medical Dermatologist University of Pennsylvania

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