The current college financial aid system is like our dads’ old 1974 Chevrolet Caprice Classic: big, gas-guzzling and always in the shop for repairs. As much as we like the old Caprice, its moment has passed. We need a new car and a new approach to financial aid.
As Congress contemplates changes to the Higher Education Act with hearings before House and Senate committees this week, we suggest the need for a long-term view built on the premise that access to a high-quality, affordable higher education is both a public and private good. We thus believe that all students — regardless of income or socio-economic background — should have the opportunity to attend an institution of higher education.
To make this vision a reality, Congress should re-engineer the entire financial aid platform and “start from scratch,” to quote Sen. Lamar Alexander, R-Tenn. The assumption should be that there are no sacred cows. We’ve done our own analysis of the various ideas on the Washington policy circuit and we particularly like the HCM Strategists’ technical paper, “Doing Better for More Students: Putting Student Outcomes at the Center of Financial Aid.”
A student’s financial aid journey should be simple and transparent from beginning to end. The financial aid application process should require the student to input basic personal information that triggers a pre-filled application using data that the federal government already possesses. Further, aid eligibility can be made using key data from the IRS or other government agencies. Common sense should prevail here.
Existing financial aid grant programs should be consolidated into one federal grant program: a new and improved Pell grant. Financial aid should be tied to clear expectations for academic progress. This grant program should provide aid based on the intensity of the students’ enrollment. The neediest students taking 15 credit hours per semester or more could qualify for as much as $7,000 under this new Pell program. Students receiving federal aid should complete academic programs within acceptable time limits.
Federal student loan programs should be consolidated into a single loan program with no distinctions between borrowers. We need one set of rules that includes clearly defined annual and overall maximum borrower limits. Current limits need a second look with an eye toward ensuring that the federal government is a responsible lender.
We have a debt problem and a repayment crisis. Today’s loan system turns reasonable levels of debt into crippling payment burdens. In any repayment scenario students should be required to pay a minimum monthly payment, regardless of employment status. This isn’t without precedent; public housing requires minimum rent payments, regardless of employment status. Loan forgiveness should be a benefit of last resort.
The four major tuition-related tax benefit programs should be consolidated into a single Lifetime Learning tax credit. As great as it is to have an above-the-line, refundable education tax deduction like the American Opportunity Tax Credit — the benefits of the deduction are delayed and do not help the target population. If the federal government is writing checks for higher education, then it should do so at the beginning of the semester when the student actually pays tuition.