In a recent white paper underwitten by the Bill and Melinda Gates Foundation, one of today’s biggest players in modern education policy opinion, modern financial aid is described as “a system that’s designed to fail” by Kevin Carey. Carey is the director of New America’s Education Policy, which wrote and published the paper.
The financial aid system’s intertwining complexities can be frightening for students and parents, alike. Many live in dread of the annual slog through paperwork gathering, pay stub shuffling and hoping your data saves before the screen changes so you don’t have to input it all over again. According to the report, this complexity can be enough to shatter many students’ college dreams, and in some cases, their american dreams. Carey believes that better policy can fix some of these problems and keep such students on their path to higher education.
Much of the problem is that students — even good students — who may be prepared for the academic rigors of college, may be far less prepared to deal with the often-crippling bureaucracy in which financial aid is hidden. After negotiating all the red tape, students are often left shell shocked and buried beneath a pile of debt, which under today’s financial aid structure, they will spend much of their lives working just to pay off. In the 60s and 70s, a similarly strong student could have reasonably expected to attend college and graduate debt free, walking into their adult lives to pursue the American dream. SO what has gone so terribly wrong over the last decades?
Out of Control Tuition
It seems like this is a dead horse that’s flogged with the frequency of the birthday gong at Benihana on this site. Yet, the problem is that the increased cost of attending college today seeps into the cracks of almost every conversation about paying for school — from getting an extra part time job to cover your cost of books to when to tap the 529 account to financial aid policy. When a discussion about college emerges, there is simply no way to avoid the discussion of the ridiculous price of attending.
In the context of this piece, soaring college costs have led to the need for greater amounts of financial aid. Because the price tag of a degree had far outpaced inflation, income and savings rates, many students who would not be considered “needy” in other aspects of their lives show up on campus with their hats in their hands, hoping for an aid package to cover the difference between what they and their parents can afford and what the college is shaking them down for.
Because of this gap between college costs and the ability to pay, more and more students require aid to attend. The problem with this is that most such “aid” comes in the form of student loans. Many students today would be otherwise unable to attend college without borrowing tens of thousands of dollars to do so. Factor in depressed wages and compounding interest far above the rates that banks charge for home or auto loans, and you have an entire generation of college graduates struggling to stay afloat in a sea of loan debt.
Financial Aid Policy
The Bill and Melinda Gates Foundation has been at the forefront of pointing out the shortcomings of today’s financial aid system. The New America Foundation paper, “Rebalancing Resources and Incentives in Federal Student Aid”, is yet another in the fusillade of shots in the Gates siege against the stagnant financial aid system. The apparent urgency in attempting to rethink financial aid is because the Higher Education Act, the cornerstone of federal student aid is up for reauthorization this year. Although it will likely be renewed with little change, experts are hoping for a major overhaul in the near future. This latest report is interesting because it reimagines the aid system within the confines of the existing budget (although that, too, could change if Congress doesn’t avert the new fiscal cliff by March 1).
The Gates paper pushes for strengthening the Pell Grant program. It also advocates reducing student and family borrowing limits and using federal aid as a stick to encourage colleges to keep their tuition rates and other costs of attendance at acceptable levels. In particular, the paper pushes for better service of the needs of low-income students. Of course, if the federal government revamps its financial aid policies in such a way that colleges sit up and listen, the beneficiaries will be more than just the neediest of students.