The Political Attractiveness of “Last-Dollar” Scholarships

The old adage about there being no such thing as a free lunch may hold true regarding a turkey sandwich on rye bread, but free lunches can happen in the world of higher education. An example of this is the growing number of “last-dollar” scholarships, in which private entities or state/local governments agree to cover students’ remaining tuition and fees after all federal grants have been provided. (Note that it does not cover room and board or living expenses—an important component of the total cost of attendance.)

Consider this hypothetical example of a last-dollar scholarship. A student with a zero expected family contribution (EFC) qualifies for a maximum Pell Grant ($5,730 for the 2014-15 academic year) and a Supplemental Educational Opportunity Grant of $1,500. If she enrolls at a public university with tuition and fees of $9,000 per year, the last-dollar scholarship would then cover the remaining $1,270. But if she goes to a community college with tuition and fees of $5,000 per year, the last-dollar scholarship does not pay a dime.

Bryce McKibben of the Association of Community College Trustees (ACCT) analyzed the implications of the new Tennessee Promise scholarship, which promises students free community college tuition and fees if they meet a relatively restrictive set of eligibility criteria. The program is estimated to cost about $34 million per year, suggesting that not many students will benefit. McKibben’s piece mentioned that 35% of Tennessee community college students have a zero EFC, meaning these students will get no additional funds from the program as the maximum Pell Grant of $5,730 far exceeds full-time tuition and fees of under $4,000 per year. Indeed, an analysis by the Tennessee Higher Education Commission showed that the median student with an EFC of under $2,100 would not see a dime from the Tennessee Promise:


This doesn’t mean that last-dollar scholarships don’t have value. They do benefit community college students who barely miss qualifying for the federal Pell Grant, as well as students attending four-year institutions (such as under Indiana’s 21st Century Scholarship program). Another important benefit of last-dollar scholarship programs is informational. Students may be induced to attend college simply by having better knowledge of what college costs, even if they do not receive any additional money. The literature on college promise programs, as I summarized in this paper, suggests that informational campaigns can increase college enrollment rates by several percentage points.

Last-dollar scholarships are politically attractive due to their clear message about college costs (even if they’re excluding any housing or living expenses) and relatively low cost. If the goal is to help the neediest students afford college, however, states may want to consider adding stipends to students whose tuition is already covered by funds from other sources.

Should There Be Gainful Employment for College Athletes?

College athletics, particularly the big-revenue sports of NCAA Division I football and basketball, have been in the news lately for less-than-athletic reasons. The recent push by the Northwestern football team to unionize has led to further discussion of whether college athletes* should be compensated beyond their athletic scholarships. And the University of Connecticut’s national championship team in men’s basketball comes a year after they were banned from the tournament due to woeful academic performance and an eight percent graduation rate. (Big congrats to the UConn women’s team, who won another national championship while graduating 92% of students!)

Now things may not be quite as bad as they look. The NCAA’s preferred measure of academic progress is the Academic Progress Rate (APR), which is scored from 0 to 1000 based on retention and eligibility of athletes. Colleges aren’t penalized for athletes who leave without a degree, as long as they stay eligible while competing. This measure is likely more reasonable for athletes who leave for the professional ranks, but this excludes students who exhaust their eligibility and do not become professionals. The APR doesn’t take graduation into account—a significant limitation in this case.

I can’t help think of what could happen if the general principles of gainful employment—a hot political topic in the vocational portions of higher education—would apply to students with athletic scholarships. While the primary metrics of the current gainful employment proposal (debt to income ratios) may not apply to students with full scholarships, some sort of earning and employment measure could be used to track the future success of former athletes. If former players on college teams were unable to obtain professional athletic or academic major-related employment, the team could be subject to sanctions.

I’d love to hear your thoughts on gainful employment for college athletes in the comment section. I’m not taking an actual stand in favor or against this idea, but it’s something potentially worth additional discussion.

* I’m sure the NCAA would rather that I call them “student-athletes,” but I use “athletes” and “students” where appropriate.

Come See Me at AERA!

I’m involved in two presentations at this weekend’s gigantic American Educational Research Association conference in Philadelphia. (And I’m not kidding about the gigantic part. There are often more than 100 sessions going on at any particular time!)

“Making Sense of Loan Aversion: Evidence from Wisconsin.” (Friday, 2:15-3:45, Marriott, 407) I’ve worked on this paper with Sara Goldrick-Rab of the University of Wisconsin-Madison (this year’s recipient of an early career award from AERA), who will be giving the presentation. In this presentation, she will talk about our work looking at loantaking patterns among a sample of Pell recipients from the state of Wisconsin.

“Financial Need and Income Volatility among Students with Zero Expected Family Contribution.” (Sunday, 10:35-12:05, Marriott, Fourth Level, Franklin 11) In this paper, I look at students with zero EFC using both nationally representative data and student-level FAFSA data from nine colleges and universities. I examine trends in zero EFC receipt, as well as breaking down zero EFC students into groups based on how the EFC was calculated (full FAFSA, simplified FAFSA excluding assets, and automatic zero EFC). Here are the slides from this presentation.

I hope to see you at AERA, and please send along any sessions that I should attend between Friday and Sunday!

The Black Hole of PLUS Loan Outcomes

Much of the debate about improving federal higher education data quality has focused on whether a student unit record dataset is necessary in order to give students, their families, and policymakers the information they need in order to make better decisions. Last month’s release of College Blackout: How the Higher Education Lobby Fought to Keep Students in the Dark by Amy Laitinen and Clare McCann of the New America Foundation highlighted the potential role of the higher education lobby in opposing unit record data. However, privacy advocates note the concerns with these types of datasets—and these are concerns that policymakers must always keep in mind.

Colleges are already required as a condition of the Higher Education Act to report institutional-level data on some outcomes to the federal government, which are then typically made publicly available through the Integrated Postsecondary Education Data System (IPEDS). In what is an annoying quirk of the federal government’s data reporting systems, the best source for data on the amount of certain types of aid received (such as work-study or the Supplemental Educational Opportunity Grant) is the Office of Postsecondary Education’s website and is not available through IPEDS. Student loan default rates (for Stafford loans) are available on Federal Student Aid’s website, which is also not tied to IPEDS. The lack of a central database for all of these data sources is a pain for analysts (consider the technical appendix to my paper on campus-based aid programs), but it typically can be overcome with a mix of elbow grease and knowledge of the difference between UnitIDs and OPEIDs.

Yet, until last week, we knew absolutely nothing about the outcomes for students and families who took out federal PLUS loans. These loans, which require a credit check for the parents of undergraduate students, have gained attention recently due to the federal government’s 2011 decision to tighten eligibility criteria in order to reduce default rates. This disproportionately affected enrollment at historically black colleges and universities, many of which are private and do not have large endowments that provide institutional aid funds. Some analysts, such as Rachel Fishman at New America, have called for PLUS loans to be severely curtailed or even eliminated.

The Department of Education provided a negotiated rulemaking committee with data on PLUS denial rates and default rates by institutional sector (public, private nonprofit, and for-profit) last week, marking the first time these data had even been made public. These data were only provided after members of the committee complained about a lack of data on the proposals they were discussing. (The data are available here, under the pre-session 2 materials header.) The data on loan balances suggests that the average parent PLUS loan balance among borrowers at four-year private colleges is $27,443, compared to $19,491 at four-year publics and $18,133 at four-year for-profit institutions. Three-year default rates at for-profit colleges were 13.3% in fiscal year 2010, compared to 3.4% at private nonprofits and 3.1% at public institutions. And the total amount of outstanding PLUS loans (undergraduate and graduate students combined) is just over $100 billion, or roughly 10% of all student loan debt.

A piece in Thursday’s Inside Higher Ed quoted a HBCU president who noted that there was no reason to tighten loan criteria given the low default rates in the data. But the public has no idea what any college’s default rate is on PLUS loans, given the release of broad sector-level data. The piece goes on to note that the Department of Education says institutional-level data are not available for PLUS loans, in part because there is no appeal process in place for colleges. This has the effect of insulating programs that take in large amounts of PLUS funds, do not graduate those students, and as a result they default. Right now, there is no accountability whatsoever.

The Department of Education needs to release institutional-level PLUS loan data to improve transparency and accountability. However, they claim that these measures do not exist—an assumption which borders on the absurd given the existence of the data in the National Student Loan Data System and their ability to calculate sector-level measures. ED’s response has been that colleges do not have the ability to appeal the data, but this can be easily remedied. In the meantime, I hope that the higher education community uses the Freedom of Information Act to request these data—and that advocates are willing to go to court when ED says the data do not exist.