All Bases Covered?

All Bases Covered?

Changes are on the horizon for campus-based student aid programs and the base guarantee.

As Congress continues to work toward completing the renewal, or "reauthorization," of the Higher Education Act of 1965 (HEA), as amended in recent years, discussion has centered primarily on the nation's flagship postsecondary grant program--the Federal Pell Grant program--and the student loan programs, which together deliver more than $61 billion in assistance each year to America's college students.

However, there are other programs that also stand to be affected by changes to the HEA.

In particular, the Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and Federal Perkins Loan programs make up a set of student assistance programs called "campus-based aid programs," so named because federal funds are distributed to colleges and universities--not directly to students--and then administered to students by the financial aid office at each participating school. Collectively, these programs provide more than $3 billion annually to financially needy college students.

How much aid students receive from each of these programs depends on their level of financial need, on the amount of other aid they receive, and on the availability of funds at their institution.

Unlike the Pell Grant program, which provides funds to every eligible student, the campus-based programs provide a certain, limited amount of funds for each participating school to administer each year. Not all schools participate in all three programs.

Generally, when the money for a program is gone, no more awards can be made from the program for that year. Each school sets its own application deadlines for campus-based funds, based on the level of funding it receives and the anticipated financial needs of their students. Generally, the necessity for campus-based funds far exceeds the amounts available to the institution.

Base guarantee critics say it shortchanges
students who attend schools
newer to the programs and unfairly
benefits those at long-standing schools.

As lawmakers continue to work on reauthorizing the HEA, some debate has revolved around the way in which aid dollars are allocated to different schools. There have been numerous proposals to reform the current process for distributing campus-based aid funds.

The current allocation formula has two major parts:

Base guarantee. Funds are awarded using a flat annual allocation to each institution. Under current HEA law, institutions receive a base guarantee equal to the amount of campus-based program funds received by the institution in 1999. Institutions that did not participate in the programs in 1999 receive a base guarantee of either $5,000 or 90 percent of the institution's campus-based aid allocation in the previous year, whichever is greater.

The historical nature of the base guarantee formula means that long-time participants--often larger, more established public and private institutions--receive a larger share of the campus-based aid funds than institutions new to the programs. Critics of the base guarantee argue that it unfairly benefits long-standing program participants and shortchanges students who attend schools that are newer to the programs.

Fair share. Any remaining funds are distributed via this methodology. Essentially, fair share is an institution's unmet need, as a proportion of the total amount of unmet need among all participating institutions nationwide. An institution's unmet need is defined as tuition revenues minus students' Expected Family Contributions (EFCs), less any funds received under the base guarantee portion of the formula and other federal grant aid, such as Pell funds.

Therefore--apart from a small share of campus-based aid provided to schools based on reallocations of unused funds--the total allocation to each institution equals the base guarantee amount plus the fair share amount.

On June 13, U.S. Secretary of Education Margaret Spellings transmitted a report on proposed legislation called the Higher Education Act Reform Amendments of 2005 to the Senate Committee on Health, Education, Labor, and Pensions.

According to an accompanying letter outlining the proposed bill--which mostly aligns with the proposals laid out in President Bush's budget proposal for fiscal year 2006, unveiled in early 2005--the measure would revise the base guarantee for Federal Work-Study and the Federal Supplemental Educational Opportunity Grant, in an effort to direct campus-based funds to the neediest students.

The National Association of Student Financial Aid Administrators has set goals for reforming the way campus-based aid programs are allocated. In a list of HEA reauthorization recommendations originally transmitted to Congress in 2003, NASFAA advocated the phase-out of the base guarantee over time, moving toward a funds allocation model that uses only the fair share methodology.

NASFAA's recommendations for the base guarantee phase-out are:

FY 2006 - 100% of base guarantee

FY 2007 - 80% of base guarantee

FY 2008 - 60% of base guarantee

FY 2009 - 40% of base guarantee

FY 2010 - 20% of base guarantee

FY 2011 and thereafter - 0% of base guarantee

NASFAA also recommends that Congress modify the fair share portion of the process by:

Increasing the allowance for books and supplies in the average cost of attendance determination from $450 to $800 for 2006 and adjusting it by the change in CPI each succeeding year.

Extending the income categories to reflect the distribution of EFCs relative to average attendance cost.

Finally, NASFAA recommends that the reauthorized HEA direct the Secretary of Education to conduct a study of alternative measurements of institutional need for campus-based funds considering factors such as distribution of EFCs, state grants, institutional grants (need and non-need based), the distribution of full-time and part-time students, and tuition discounts.

"The current campus-based allotment formulas do not reasonably reflect the proportions of needy students at many institutions," says NASFAA President Dallas Martin. "A gradual phase-out of the base guarantee would permit a redistribution of funds to reflect more accurately the distribution of student need among institutions, and to better serve low-income students who attend community colleges and other institutions that serve a large share of poor students."

The concept of a phase-out to ensure that needy institutions are awarded campus-based aid funds, regardless of length of program participation, is one many lawmakers and higher ed officials are considering.

In April, House Republicans introduced a bill, the College Access and Opportunity Act (H.R. 609), which calls for a phase-out of the base guarantee, starting with 80 percent for FY 2008 and 2009, and moving to 60 percent for FY 2010 and 2011; 40 percent for FY 2012 and 2013; 20 percent for FY 2014 and 2015; and zero base guarantee for FY 2016 and thereafter.

Supporters of the base guarantee fear certain schools could experience a decrease in campus-based aid funds with a phase-out. It remains to be seen whether Congress will approve a reauthorization bill that includes reform of the base guarantee, but one thing is clear: If the base guarantee is eliminated, many schools of all sizes, control, and institutional type will see changes in their campus-based aid allocation, some for the better and some for the worse.

Elizabeth B. Guerard is the assistant director for communications at the National Association of Student Financial Aid Administrators (www.nasfaa.org).


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