As Congress debates the size and role of government for the 21st century, federal aid for college students has been mostly exempt from the fight—so far. But the growing number of students who receive Pell Grants has already led, in 2012, to restrictions on that program. Congressional hands are wringing over how to pay for Pell in the future, even though this investment in a college-educated citizenry is one of the best ways to ensure continued economic growth in the United States.
Unfortunately, this budget uncertainty has hidden the real problem in U.S. higher education: low graduation rates. The statistic that should truly concern us is that only 54 percent of first-time college students graduate within six years. Just slightly more than half of those who intend to get a degree do so, the National Student Clearinghouse Research Center reports, even when given additional time.
As a country, we pay dearly for a vast higher-education infrastructure through federal and state taxes, tax breaks, tuition, and student loans. Let's not just talk about cutting budgets. What can we do to increase productivity and get a better return on our postsecondary investment? The graduation-rate challenge is complex, but the federal government has tremendous leverage through the $150-billion it spends annually on student financial aid.
As executive director of the National College Access Network, I joined the American Dream 2.0 Coalition, a new alliance of national leaders from higher education, business, civil rights, and nonprofit organizations who are gravely concerned about the challenges of declining affordability and the increasing numbers of students who enter college but don't graduate.
The coalition has recommended several changes in the financial-aid system to overcome those challenges. The recommendations would make financial aid simpler and more open, spurring innovation in higher education, and asking states, students, and colleges to share more responsibility. These themes dovetail with my organization's own reform principles, which could go a long way toward creating a system that is more responsive to students and produces more graduates per dollar:
- Tie federal student aid to institutional graduation rates. Colleges receive federal student aid based primarily on the number of low-income students they enroll, whether or not they graduate. Supporters of this policy defend it by saying that some students are inherently more likely to drop out than others, and that institutions should not be penalized for enrolling those students. Recent research, however, shows that institutions achieve widely different graduation rates, even when you control for the academic credentials of the student body.
- Make low-income students a priority for scarce federal resources. College affordability is worst for the poorest students, and they are the least likely to complete higher education without financial assistance. A low-income family must contribute roughly 72 percent of its annual household income each year to send a student to a four-year college. Middle- and high-income families contribute roughly 27 and 14 percent of yearly earnings, respectively.
- Provide better consumer information. Because colleges have widely varying graduation rates as well as costs for similarly situated students, the choice of where to enroll can make all the difference. By requiring institutions to report the graduation rates of Pell Grant recipients and provide more easily comparable information about their relative costs, the federal government can help students and families choose the college or university that will best serve them. Expansion of low-cost programs like the National College Advising Corps, College Forward, and College Possible can also effectively help students consider their choices and enroll where they are more likely to graduate.
- Continue to simplify the student-aid system. An estimated 2.3 million eligible students did not even apply for federal aid in 2007-8. The key is to streamline the application-and-verification process using data that families have already provided through their federal income-tax returns. Additionally, students need to learn about their initial aid eligibility earlier, so they can make better choices about where to apply and attend.
The reality is that some colleges are achieving much better results for at-risk students than others are. Reorienting student-aid dollars on the basis of the number of recipients who remain enrolled and graduate would encourage colleges to rapidly adopt the kinds of supports that have proven successful.
Inability to pay tuition is one of the most common reasons students either do not enroll in college or drop out. That's why Pell Grants, which typically help students from families making $50,000 or less annually, should remain the centerpiece of federal student aid. In federal budget negotiations, the Pell program must take priority over tax credits, deductions, and loan subsidies that are not focused on low-income students. Broadening the income-based repayment plan can help other students negatively affected by such changes, or those whose borrowing exceeds their eventual ability to pay off their federal loans.
Let's not keep talking about budget limitations without also taking these necessary steps toward most effectively leveraging federal dollars. They represent our best chance to produce the additional college graduates the 21st-century work force demands.