Group Calls for Overhaul of Federal Student Aid System

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by Jamaal Abdul-Alim

Student Aid

Tiffany Dena Loftin, president of the U.S. Student Association, said many students don’t take advantage of income-based repayment of loans because they don’t know that the option exists.

Washington — A college access organization called for a “thorough overhaul” of the federal student aid system Wednesday with a new paper that recommends a series of reforms that would steer more resources toward students with the greatest need.

An overarching objective of the reforms is to help more students actually complete college, not just get into college, said Kim Cook, executive director of the National College Access Network, or NCAN, which released a paper titled “Increasing Return on Investment from Federal Student Aid.”

“The student aid system serving our students, especially first-generation and low-income students, is designed to provide access but it has been challenging to achieve higher completion at high enough rates,” Cook said, citing what she described as a “disappointingly low” statistic of 54 percent of students who begin a four-year college program finishing within six years.

To help turn things around, the paper released by NCAN during an event Wednesday at the U.S. Capitol Visitor Center makes a series of recommendations that range from further simplification of the FASFA to redirecting tax credits to the Pell Grant program, which faces a $6 billion deficit in the 2014-15 school year, according to the paper.

The paper says low-income students are being “shortchanged” under the current structure that in 2010 allowed 23 percent of savings from tax credits to go to households with incomes between $100,000 and $180,000, and 60 percent of tuition tax deduction benefits to go to households where the income is between $100,000 and $160,000.

“A portion of these tax benefits should be reallocated to cover the shortfall in the Pell Grant program by adjusting the income limits to $50,000 for single filers and $100,000 for married filers, which more closely targets low- and middle-income students,” the paper states.

The paper concedes that Congress could face “logistical complications” in seeking such a change. However, the paper maintains that: “Even though tax benefits and federal student aid are administered by different agencies and authorized by separate congressional committees, supporting tax-payer subsidies for more affluent families while cutting Pell Grants and other benefits for low-income students is inefficient at best and morally questionable at worst.”

Panelist Michael Dannenberg, Director of Higher Education and Education Finance Policy for the Education Trust, a national education reform group that focuses on issues of equity, commended NCAN for its “bold” recommendation for how to meet the Pell shortfall, which he said is a prerequisite for financial aid redesign.

Dannenberg and a panel of higher education experts mostly embraced the paper and its three guiding principles. They are:

n      To prioritize federal dollars for first-generation and low-income students while reshaping aid for those repaying their student loans.

n      To continue to streamline the student aid application process and provide “transparent, relevant information on student outcomes.”

n      To ensure that states and institutions “share responsibility” with the federal government to support the graduation of low-income students, financially and by other means.

 

Dannenberg, of the Education Trust, said the paper essentially puts “needy students first” and represents “the correct federal priority.”

Tiffany Dena Loftin, President of the U.S. Student Association, said she supported the paper’s recommendation that Income-Based Repayment, known as IBR, become the default repayment mode for students with an opt-out choice.

She said many students don’t take advantage of IBR because they don’t know that the option exists or assume they won’t be asked to pay more than they can afford in the first place.

“You always think it’s already applied to you because there’s no reason I would be able to pay more,” Loftin said, explaining her initial outlook as a recent graduate. She eventually found out she was being expected to make close to $500 a month in student loan repayments on a salary that she says didn’t justify such high payments.

Currently, only 1.1 million borrowers utilize IBR, with another 474,000 using a similar program, compared to the 37 million borrowers with outstanding student loan balances, the paper states.

Deborah Santiago, Vice President for Policy and Research at Excelencia in Education, a national organization that focuses on increasing the number of Latinos in postsecondary education, reiterated the paper’s call for relevant information on student outcomes.

“You have to focus on appropriate metrics,” Santiago said, criticizing metrics that focus on access instead of completion.

Pranav Kothari, President of the NCAN Board of Directors, cautioned for the need to be vigilant for unintended consequences associated with the various reforms suggested in the paper.

For instance, he said, before IBR becomes automatic, “let’s play that out a few more chess moves and see what it looks like.”

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