Improving Accessibility Through Simplifying Financial Aid
Strategic Insights Blog | November 14, 2014
There has been a lot of debate around the direction public institutions should take to keep college affordable for middle and low socioeconomic status populations. Given the current state of funding for public institutions, however, maybe we’re asking the wrong questions. Instead of forcing these institutions to adopt increasingly untenable models in the face of sustained state disinvestment, perhaps we should focus on making Net Price Calculators and the financial aid process itself more simple and accessible for low-income students. Maybe then, middle and low SES applicants might discover that in a surprising number of cases, private institutions will be more affordable than publics.
1. The regressive low-tuition subsidy
Currently, many state institutions are trying to keep in-state tuition low with a corresponding low aid policy, but as Fred Hiatt’s recent editorial in the Washington Post, “In-State College Tuition: A Handout to the Rich,” argues, this results in states subsidizing higher education for their residents by paying the difference between in-state tuition rates and what a college education really costs. In essence, public support for in-state students is regressive:
“And flagship colleges are where the subsidy is largest. Wallace Loh, the thoughtful president at College Park, said during a recent visit to The Post that in-state tuition plus fees at College Park (now $9,400) are well below the median of peer research universities. Meanwhile, the state appropriates $19,000 for each Maryland student to help pay for their education, he said. Does this represent sound policy?
'I think that is the million-dollar question,' Loh responded. 'Maryland has the highest median income in all the nation, and we give proportionately the least amount of financial aid. We have a model of low tuition and low aid. So the state is subsidizing those who can easily pay higher.'"
Hiatt’s point touches on something that is often unspoken in discussions regarding public higher education tuition. In most states, funding for a state’s public universities comes out of tax revenues paid by all citizens, many of whom do not enroll in higher education. As a result, it only seems fair that when you are taxing low SES populations who are less likely to enter a state’s higher education system, you should make if affordable for those who actually enroll from that group.
The bottom line, however, is that when a state de-funds higher education, poor students suffer the most: A Center for American Progress study revealed that between 2008-2012, low and middle income students were paying the most to go to college in states that made the deepest cuts. What’s particularly worrisome is that during this modest economic recovery, states that have increased funding for higher education often have attached conditions that state institutions should keep tuition low. But without generous financial aid, this low tuition is mostly beneficial to affluent students. As a result, middle and low SES families are continually in a disadvantaged position, not benefiting much from either disinvestment or reinvestment.
2. Competition through improved Net Price Calculators
In the end, what might ultimately motivate public institutions to become more accessible is the proliferation of high-usability Net Price Calculators and improvements in the financial aid application and award process. A large number of students (nearly half) still rule out institutions based on sticker price, and resources intended to inform students about net prices, like the government’s College Navigator, often present misleading numbers. For example, a recent Washington Post article showed that Wellesley’s net price had tripled for low income students over the last last few years according to College Navigator, when in fact the numbers were skewed by “unusual situations,” such as students who had retired parents with no reported income but substantial assets, who were thus able of paying the full freight.
It’s these limited resources that reinforce the cultural idea — explored in the Washington Post article — that in-state public institutions are always the cheaper option, when in fact reputable private institutions might be more affordable for the high-performing, low SES student. Fortunately, Wellesley has created its own internal NPC that simplifies the process to nine questions, with a much higher completion rate than average. A few forward thinking states are also working to address the issue of confounding financial aid calculators, Delaware being one of them. The Delaware Initiative is a comprehensive effort to get more college-ready low-income students to apply, and one major component of this effort is bringing “experts” to help high school counselors understand FAFSA (the federal financial aid form) and the complicated financial aid process itself. This need for outside experts underscores just how confusing the process is, and how much of the existing financial aid application process is peppered with language specifically targeting the upper-middle class (i.e. sections on “equities”).
This confusion regarding pricing often appears in our own work. It’s surprising how often we’ll find that an institution’s enrollment and yield could potentially improve by simply communicating price and aid better. Ultimately, private institutions and progressive-minded publics have a major opportunity: by simplifying the financial aid process and getting a higher participation rate from middle-and-low-SES populations, these colleges could potentially improve their competitive positions. Maybe at that point, many public institutions will finally have the leverage to demand greater investment from state legislatures, or face the potentially embarrassing reality of being less accessible than their supposedly elitist, private counterparts.