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Should More Student Aid Be Based on Need, Not Merit?

This is a tougher issue from the Wall Street Journal’s June 25 report than the “tenure vs. nontenure” debate. The opponents here were Mark Kantrowitz and Greg Forster. Kantrowitz is publisher of Fastweb.com and FinAid.org, Web sites about scholarships and financial aid. He is a board member of the National Scholarship Providers Association and the Center for Excellence in Education, who favors need-based financial aid. Forster is a senior fellow at the Friedman Foundation for Educational Choice in Indianapolis.

There’s a broader narrative into which Kantrowitz’s and Forster’s arguments fit. It works like this: Conservatives argue that increasing financial-aid opportunities gives universities no incentive to contain the increase in tuition. That is, if colleges and universities can always count on making more and more money available to students in the form of grants and loans, then why not keep raising tuition, since students will always have access to more money?

Kantrowitz has a serious counterargument: “There is no credible evidence that student aid is driving up college tuition rates. Such claims confuse cause and effect. From 1992 to 2006, there were no increases in federal student-loan limits, yet tuition steadily climbed. There were no increases in the maximum Pell Grant for four years during the Bush administration, yet tuition continued to increase.” Moreover, he cites debilitating cuts in state support for public higher education—universities that have no endowments, and so have no recourse but to react to those cuts by raising tuition: “Inflation in public college tuition is driven primarily by cuts in state appropriations. More than 40 states cut their support of postsecondary education last year, by an average 7.6%.”

The facts are clear: Increases in financial aid have not led to the skyrocketing increase in tuition, but rather have failed to keep pace with it. One exception: To the extent that financial aid has allowed students to afford college, it’s come in the form of student loans rather than grants, and the student-loan burden is quickly reaching crisis proportions. If student loans are contributing to increased tuition, that’s a bubble that’s soon to burst.

But in this debate, Forster makes some extremely valid points as well. All too often, we in higher education, when we consider need-based financial aid and access to college for the underprivileged, often fail to connect college with the education that comes before it. Forster zeroes in on that connection. He observes, “The problem for low-income students isn’t a lack of aid—it’s a lack of quality education at the K-12 level. Almost the only way to expand educational opportunity to the truly needy is through academic, not financial, reform. Too many kids at the K-12 level never have a chance to become college-ready.”

He’s absolutely right. The U.S. has a K-12 education funding system that is bizarrely regressive. It’s based on local property taxes, which means that the poorest communities will always have the poorest schools and that arrangement will stay in place into perpetuity. Why don’t we have a national or at the very least a statewide system of funding K-12 education, so that the lack of preparation that Forster points out would ultimately disappear? Why is it that, in 1990, one of my students, from a poor rural Ohio county, confessed that her senior-year high-school science textbook proclaimed, “Someday, man may walk on the moon.” The quality of K-12 education in our richest school districts is the best in the world; the quality of K-12 in our poorest district is beyond appalling. If we could level the playing field, then one of Forster’s major worries would be assuaged, and need-based financial aid would be a no-brainer, because we’d have more assurance that the aid would be going to the best qualified students.

One topic I was surprised to find missing in Kantrowitz’s and Forster’s debate was the rise of for-profits. They currently educate 13 percent of American college students but they account for 37 percent of federally guaranteed student-loan debt and a considerable amount of Pell Grant funds as well. These institutions, currently under intense scrutiny by the federal government, face allegations of sketchy recruiting policies. The for-profits claim that they reach out to at-risk students, but in reality they seem to be willing to admit almost anyone—so long as the need-based financial aid comes with them. And these schools have astonishing attrition rates, often more than 90 percent. The grants for the dropouts are, of course, wasted, and the loans are by law unbankruptable.

If there is an argument to be made in favor of need-based financial aid, it has to be connected to our broken K-12 education system and to the basic question of who is prepared to go to college. If there is an argument to be made against need-based financial aid, it has to start with the for-profits which are systematically corrupting the current financial-aid system.

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