Top Public Universities Said to Lose in Aid Plan

Fact file: View a database showing how the proposed formula for student-aid programs would affect colleges, searchable by institution name, state, institution type, and type of aid Related tables: View a list of institutions that would gain or lose the most under the proposed formula for student-aid programs, and the potential impact in each state Related map: Showing a snapshot of states that would gain or lose under proposed changes in campus-based aid Colloquy: Join an online discussion about institutions that would win and lose under proposed changes in the formula that allocates federal money to campus-based student-aid programs, about whether the plan is fair, and about whether its critics are just seeking to hang on to money they now get. Printer friendly E-mail article Subscribe Order reprints

A change in three key student-aid programs, now under consideration by Congress, would cost public four-year colleges $27.8-million in federal money, while community colleges and for-profit institutions would gain $17.9-million, according to an analysis by the American Council on Education.

For private colleges, the picture would be mixed. Over all, they would gain $9.3-million, but many private colleges would be among the biggest losers. Even so, the calculations are something of a surprise since private colleges were expected to lose out under the proposed change.

Historically black colleges would also be hit hard by the proposed change.

The analysis, a copy of which was obtained by The Chronicle, includes estimates of how much each college in the United States stands to gain or lose in the three campus-based programs: Federal Work-Study, Perkins Loans, and Supplemental Educational Opportunity Grants.

It found that public four-year institutions could lose 3.3 percent of their Work-Study dollars, 4.3 percent of their funds for Perkins Loans, and 5.9 percent of their supplemental-grants funds if Congress phased out a portion of the formula that distributes student aid based on historical allocations.

That part of the formula, known as "base guarantees," essentially promises colleges the same share of money that they have received since the 1970s. The guarantees have primarily benefited public flagship campuses and private colleges that joined the federal programs at their inception.

Two higher-education sectors hurt by the base guarantees -- for-profit institutions and community colleges -- are in a position to gain the most from the proposed formula change. According to the ACE analysis, for-profit institutions could see an increase of 8.8 percent in their supplemental-grants funds and an increase of nearly 14 percent in Work-Study funds, while community colleges could gain 3.8 percent and 0.4 percent, respectively, for those two programs.

The campus-based aid programs are designed to supplement Pell Grants for financially needy students and to provide aid for middle-class students who just miss the cutoff for the grants. Unlike Pell Grants, which are awarded directly to students, campus-based aid is distributed to colleges, which add their own dollars to the programs and then award the money to students.

The formula change -- proposed last month by John A. Boehner, the Ohio Republican who chairs the House Committee on Education and the Workforce -- is being considered as part of the reauthorization of the Higher Education Act, the law that governs most federal student-aid programs. The ACE report is likely to influence the debate over the formula since these are the first figures lawmakers and college officials have seen to back up their assumptions about how the change would affect different institutions.

Even so, the numbers themselves are likely to come under attack. First, although ACE has not taken an official position on the formula change, the group privately supports keeping the status quo. Second, its analysis is based on several assumptions that may be wrong.

It assumed that the base guarantee would be eliminated in the 2003-4 academic year, although under the proposal the change would not be completely phased in until 2015-16. Its estimates also do not include other factors that could affect how much money colleges get, such as projected growth in appropriations, changes in tuition, or changes in student need.

"Numbers always complicate formula debates," said Terry W. Hartle, senior vice president for government and public affairs at ACE. "Winners and losers react differently when people have a more accurate idea of what is at stake. These numbers, like any estimates, depend on assumptions. Change the assumptions, you change the results. We made conservative assumptions."

But David S. Baime, vice president for government relations at the American Association of Community Colleges, said that the impact of the formula change had been exaggerated. He cited the Pell Grant program as a much larger issue facing lawmakers. Community colleges, which receive more money in Pell Grants than in campus-based aid, have called for raising the maximum amount of the Pell Grant and are asking Congress to eliminate a provision in current law that prevents students at the lowest-cost colleges from receiving the maximum grant.

"We do think this is a bit of a tempest in a teapot, with the amounts of funds involved," said Mr. Baime, adding that his group supports the formula change.

The proposal to adjust the formula, which is being pushed by the Republican leadership in the House, has been welcomed by community colleges and for-profit institutions, which now enroll the largest proportion of the neediest students. Those colleges say the change would bring equity to the campus-based programs.

"If the money travels with students, then we're on the right track," said Sharon Thomas Parrott, vice president for external relations and regulatory assurance at DeVry University, a for-profit institution with more than 20 campuses nationwide that would gain $1.4-million in supplemental grants -- the most of any college -- under the proposed formula change.

The majority of DeVry students are first-generation American citizens, and 50 percent are minority students, Ms. Parrott said.

James McMillan, college director of financial aid at Miami Dade College, said the change would enable his institution to award financial aid to a much larger percentage of its students. The college, which serves 160,000 students, would see a 20-percent increase in supplemental grants, a 12-percent increase in Work-Study, and a 277 percent increase in Perkins Loans.

Steering the Poor?

Four-year colleges say they need the money to attract more financially needy students to their campuses. They fear the proposed redistribution would nudge even more needy students into programs at two-year and for-profit institutions.

"Are we as a nation saying, Let's put the poor people in two-year programs?" asked Steven Van Ess, director of the office of student financial services at the University of Wisconsin at Madison, which could lose $1.5-million in Supplemental Educational Opportunity Grants, the second most of any institution. "If we shift the funds in that direction, we're going to make the trend even bigger and faster."

Among the hardest hit by the formula change would be the nation's historically black institutions. Of the 50 institutions that stand to lose the most in supplemental-grants money, 15 are historically black colleges and universities. In the Work-Study program, 14 of the 50 biggest losers would be historically black institutions.

Ja Vida L. Jones, assistant director of financial services at Jackson State University, a historically black college in Mississippi, said her institution could not withstand the $1.2-million cut in Work-Study aid that is predicted by the analysis.

"It's not going to be a pinch; it's going to hurt," said Ms. Jones. "This is going to mean a serious cut in enrollment and what we can do for students."

Under existing law, campus-based aid is distributed in two phases. First, it goes to institutions that have participated in the programs before the cutoff point established by Congress, known as the base year. Colleges that enrolled prior to the cutoff are guaranteed at least the amount they received in the cutoff year. Those guaranteed funds accounted for $460-million of the $770-million in supplemental grants, and $91-million of the $99-million in Perkins loans last year, said Alexa Marrero, press secretary of the Education and the Workforce Committee. Two-thirds of Work-Study funds went to those colleges, she said.

The base year has been adjusted several times since the 1970s and is now set at 1999. Schools that enrolled after 1999 are not entitled to the base guarantee.

Once the base guarantees are met, the remaining funds are distributed based on institutions' share of the nation's financially needy students. This so-called fair-share portion is designed to ensure that colleges with the neediest students get some federal funds regardless of when they enrolled in the programs.

The proposed formula change would phase out the base guarantees so that all campus-based aid would be distributed based on fair share.

Supporters say the change is needed to align the program with today's enrollment realities. "The money should be available to needy students irrespective of what institution that student chooses to go to," said Nancy B. Broff, general counsel of the Career College Association, which represents for-profit institutions.

Opponents say the solution lies not in redistributing the federal money but in increasing it across the board. They say more-established colleges should not lose federal money whenever a new institution opens up.

"This would be robbing Peter to pay Paul," said Sang Han, assistant director for federal relations at the National Association of State Universities and Land-Grant Colleges. "The fundamental issue is that these three programs are not funded at the appropriate amounts."

The formula change could also make it harder for institutions to craft student-aid packages, said Melanie E. Corrigan, assistant director of the Center for Policy Analysis at ACE. That is because the amount of a college's federal dollars could fluctuate year to year based on its changing share of the nation's needy students. As other colleges gained or lost needy students, a college could lose or gain money even if its own proportion of needy students remained constant.

"The funding becomes volatile year to year," said Ms. Corrigan. "That makes it difficult from an institutional-planning perspective."

Misleading Results?

On the surface, the formula change looks to be an unexpected boon for private four-year colleges, which would gain $9.3-million in total campus-based aid. New York University would be the biggest beneficiary, gaining 18 percent in supplemental grants and 11 percent in Work-Study, and almost doubling its Perkins allocation.

But lobbyists say such gains mask significant losses at some institutions. Private colleges account for 15 of the 50 institutions that would lose the most in supplemental-grants allocations, 16 of those losing the most in Work-Study funds, and 17 of the biggest losers in Perkins Loans.

"Many of the gains are more modest, and the losses are quite significant," Ms. Corrigan said.

M. Seamus Harreys, dean of student financial services at Northeastern University, said that students at his institution would lose between $1,000 and $2,000 each in aid if the changes are enacted. Northeastern would lose the most money of any college in the supplemental-grant and work-study programs, though some of the loss is attributable to a drop in enrollment, Mr. Harreys said. In the 1980s, Northeastern was a commuter school with 45,000 students; today it has an enrollment of 24,000.

The loss of funds would also make it harder for colleges to maintain the infrastructure that supports the aid programs, said Sarah A. Flanagan, vice president for government relations at the National Association of Independent Colleges and Universities. Flanagan also fears that the formula change would draw even more colleges into the aid programs, further sapping federal resources.

"You can expect the money to be spread even thinner," Ms. Flanagan said.

But private colleges would benefit from a $3.6-million increase in Perkins dollars, according to the analysis. Ms. Corrigan attributed that rise to the smaller number of colleges over all that participate in the Perkins program. Most of the participating institutions are private.