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Financial Aid

A New Student Aid Era

Increasing college access and success a priority for new administration
University Business, Apr 2009

IT DIDN’T TAKE PRESIDENT Obama long to follow through on his campaign promise to make higher education more affordable for students and families. Within his first 50 days in office his administration worked closely with Congress to increase the maximum Pell Grant by $500 as part of the $787 billion economic stimulus package. The American Recovery and Reinvestment Act also included a partially refundable $2,500 tax credit for higher education expenses and $200 million to expand the Federal Work-Study program.

While other countries are getting better at providing higher education, the U.S. has remained stagnant.

The financial aid community has praised the efforts of the Obama administration and Congress to provide this significant boost for financial aid. “We are truly grateful to President Obama and his administration for fighting to get this bill passed with meaningful increases in financial aid for needy students,” says Philip Day, president and CEO of the National Association of Student Financial Aid Administrators.

The student aid funding in the stimulus bill was a welcome surprise, but President Obama was just getting started.

In his speech to Congress on February 24, Obama made it clear that increasing college access and success would continue to be a top priority, pledging that by 2020, “America will once again have the highest proportion of college graduates in the world.”

Accomplishing this would be no small feat. There’s a widening gap between other countries’ college graduation rates and the rate that the United States graduates college students. The U.S. college completion rate is 15th among 29 developed countries, according to “Measuring Up 2008,” a study by the National Center for Public Policy and Higher Education ( The United States, along with the Netherlands and Korea, currently awards 18 certificates and degrees for every 100 students enrolled. Switzerland, Japan, and Australia lead the world, awarding 26 certificates and degrees for every 100 students.

The report suggests that other countries are getting better at providing higher education while the United States has remained stagnant. We have the second highest percentage (39 percent) of 35- to 64-year-olds with at least an associate degree. Canada leads the world with 44 percent. The percentage of 25- to 34-year-olds in the United States with at least an associate degree is also 39 percent, but we are behind nine other countries in this category. Canada also leads this category with 55 percent.

The numbers suggest that the nation will not be able to achieve Obama’s goal by maintaining current practices.

“The time for tweaking the student aid system has come and gone,” Day said. “We now need a drastic overhaul of the system to help today’s student overcome financial barriers that keep them from successfully completing a higher education program after high school.”

Recognizing this fact, the Obama administration issued a budget blueprint for the 2010 fiscal year that proposes some dramatic changes for the nation’s student financial aid programs, including:

— Making the Pell Grant program a mandatory spending program so it is not subject to the annual budget process and automatically increasing the maximum award every year by the Consumer Price Index plus 1 percent.

— Eliminating the Federal Family Education Loan Program (FFELP) and originating all student loans through the federally run Direct Loan program.

— Dramatically increasing funding for Federal Perkins Loans.

— Creating a $2.5 billion Access and Completion Incentive Fund to support innovative federal-state partnerships to help low-income students complete their college education.

“President Obama’s new budget proposal outlines the most dramatic changes to federal student aid since the passage of the Higher Education Act in 1965,” says American Council on Education President Molly Corbett Broad. Referring to the proposed changes to Pell Grants and the student loan program, Broad continued, “In any other budget year, proposing even one of these changes would be considered dramatic. Proposing both of these together is truly extraordinary.”

The combination of student aid funding in the stimulus package, President Obama’s rhetoric in his address to Congress, and the administration’s FY 2010 budget blueprint make it clear that higher education access and successful completion will be a top federal priority in the coming years. This is a welcome sign to higher education, which has suffered stagnating federal support in recent years to make way for other spending priorities.

Reversing persistent disparities in college degree attainment among students with different backgrounds would go a long way toward achieving President Obama’s higher education goals. Currently, income level and race/ethnicity can be a bigger determinant of college access and success than academic preparation. The students that are least served by our higher education system—low-income, black, and Hispanic—are also the fastest growing U.S. populations.

The number of students from all backgrounds who attend college has increased, but significant enrollment gaps for black and Hispanic students and for students from low-income families have not been reduced, according to “Measuring Up 2008.” Nearly three out of four white high school graduates will enroll in college next fall, compared to 56 percent of black high school graduates and 58 percent of Hispanic graduates.

The report shows that the disparity between upper- and lower-income students is even more pronounced. More than 90 percent of high school students from families making more than $100,000 enroll in college, compared to 78 percent of students from families making $50,001 to $100,000, and 52 percent of students from families making $20,000 and less.

Ushering in a new era of financial aid and higher education attainment will not be easy.

Not surprisingly, these gaps also persist when it comes to successful college completion. Nearly 60 percent of white students complete a bachelor’s degree within six years, according to the report. The same is true for only 47 percent of Hispanic students and 41 percent of black students.

Generally, financial barriers are a greater obstacle for the student groups that have historically been underrepresented in higher education. By making student aid and higher education a top funding priority, Obama is taking an important first step toward eliminating the persistent educational disparities in the United States.

Bucking educational trends of the past three to four decades and ushering in a new era of financial aid and higher education attainment will not be easy. It will also require a concerted effort by all parties involved.

At the federal level, the Obama administration must overcome many hurdles to accomplish its student aid goals. Assuming the economy recovers in the near future, the federal government will face historic budget deficits that will require the administration and Congress to choose among spending priorities. While Obama has made it clear that higher education spending will be one of his priorities, he will face stiff opposition from some congressional lawmakers who have different spending priorities. In addition, his proposal to eliminate the Federal Family Education Loan Program is drawing vocal criticism from the student loan industry and industry supporters in Congress. Issuing a budget blueprint with bold changes for student aid was the easy part. Getting it passed by Congress will require a monumental effort.

In his February 24 speech before Congress, Obama emphasized that the federal government is not the only entity responsible for increasing education levels in the country.

“I speak to you not just as a president but as a father when I say that responsibility for our children’s education must begin at home,” Obama said. This followed his earlier comment in the speech that “it is our responsibility as lawmakers and educators to make this system work. But it is the responsibility of every citizen to participate in it. And so tonight, I ask every American to commit to at least one year or more of higher education or career training.”

Like Obama, some in the private sector are also making college access and success a top priority. The Bill and Melinda Gates Foundation recently announced it will work to double the annual number of low-income students under the age of 26 who earn a postsecondary degree or certificate by 2025. The foundation plans to spend $500 million over the next three years to institute the first phase of its plan: encouraging promising initiatives at community colleges.

It remains to be seen if these recent developments will lead us into a new era in student aid and college access and success, but I believe this is the direction in which the country is headed.

Haley Chitty is assistant director of communications at NASFAA,