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Facilitating Higher Education Completion

Among Lower-Income Students: A Financial Aid Perspective

Elisa Chen, Fernando Coello, Heather Collins, Mark Harris
University of Pennsylvania
Facilitating Higher Education Completion
Among Lower-Income Students: A Financial Aid Perspective
Across the United States, conversations about higher education have shifted dramatically
toward the inefficiency of its current finance model and achievement gaps across family-
income levels and races . Unsurprisingly, for lower-income students, concerns about
being able to afford higher education remain one of the biggest factors predicting their
educational attainment and degree completion. In terms of attainment, lower-income
students continue to be significantly more likely to forego higher education because of,
among other reasons, confusion about the financial aid process. Lower-income students
rates of degree completion reflect larger structural barriers about financial resource
availability. As such, our strategy to ensure higher rates of higher education completion
among lower-income students is two-pronged. Focusing on the state of Pennsylvania, our
proposal includes short-term and long-term recommendations. In the short run, we
propose immediate partnerships between the state and the private sector aimed at
providing assistance to lower-income students navigating the financial aid process. In the
long run, we elaborate on potential changes to how the state currently distributes
financial aid across family-income levels.
Among the reasons for differences in educational attainment between higher-income and
lower-income students is the availability of resources as students navigate the college
application process until enrollment. While simply applying to postsecondary institutions
can be a challenge even for the most academically qualified students, enrolling in college
also requires that students understand how to apply for financial aid. Their uncertainty,
however, about procedures and real costs continues to be a barrier and an important
determinant of college choice. Of most concern is the fact that a substantial number of
lower-income students, who have the academic qualifications and are accepted to four-
year colleges, do not enroll because of misinformation and confusion about these
processes. Without support, increases in acceptance rates based on academic
improvement will not necessarily lead to increases in college enrollment and,
consequently, degree completion. For lower-income students, most of whom are also
first-generation students, having limited community access to adults with college-going
experiences or knowledge makes them especially dependent upon their teachers and
counselors in successfully navigating this often convoluted process.
Not all students in Pennsylvania immediately transition from high school to college.
Many forego college entirely. Currently, the percentage of adults with only a high school
diploma is 36 percent, which is significantly higher than the national average of 28
percent. The overrepresentation of lower-income individuals in these figures is due in
great part to the higher education financing structure of Pennsylvania that prohibits
access. The cost of college attendance in the state is more expensive on average than all
but a few other states, which means that students generally graduate with more debt in
Pennsylvania than in other states. In the distribution of financing responsibility, the
federal government and individuals are carrying a disproportionately higher-cost burden
than the state and individual institutions.
Another group that represents an unrealized return on investment for the state of
Pennsylvania are adults with some college credits but no degree. An important subgroup
of these adults are those struggling to navigate the college transfer process. Many lower-
income students decide to enroll in two-year institutions after high school, with the goal
of transferring to a four-year institution to lower costs. While there are articulation
agreements intended to facilitate transfers, the completion of baccalaureate degrees for
Pennsylvania students starting at two-year institutions is still below the national
average. In addition, a percentage of those with some college credits reverse transfer,
leaving four-year institutions and enrolling at two-year institutions. For reverse transfers,
the decision to enroll at two-year institutions is largely financial. These students
represent not only personal but also state and federal financial resources expended that
did not result in a postsecondary credential or increased earning potential.
Although Pennsylvania has no authority over federal financial aid requirements, it does
have control over state and individual institutions requirements. Considering this, we
recommend that the state collaborates with College Board to reformulate the College
Scholarship Service (CSS) Profile, which is much longer than the FAFSA and asks more
detailed questions about students finances, and provide it for free as the Pennsylvania
FAFSA Supplement. This new form should ask more narrowly tailored questions
regarding students finances and be modeled after the Common Application, an online
system that allows students to apply to several institutions simultaneously. With these
changes, we expect a prospective University of Pennsylvania student, for example, to file
only the FAFSA and the Pennsylvania FAFSA Supplement, as opposed to the FAFSA, the
CSS Profile, and the Penn Financial Aid Supplement.
Additionally, we recommend that the state collaborates with the Community Corps, a
partner organization of the Pennsylvania Association of Nonprofit Organizations that
provides pro-bono technology support and connects tech volunteers to nonprofits and
schools, to create a customized mobile application that simplifies the financial aid
process. The state should also work with College Board to ensure the maintenance and
upkeep of the app. By using available technology to create a tool that uses existing
databases and is easily accessible to students, parents, mentors, and counselors, all
stakeholders can quickly share information about approximate costs. Moreover, the
mobile application can alert users about upcoming deadlines, required documents, and
more. The program should also build in complexity as students move through high
school and be tailored to students moving through college, specifically accounting for
circumstances like increases in university tuition, changes in students dependency
status, required developmental courses, and transfer processes.
As part of our strategic plan, we recommend that state legislatures amend Pennsylvania
Statute Title 24, Chapter 36 to implement sliding scale tuition plans throughout the
state. Currently, Section 6901.308 only mandates public state institutions participation
in a Tuition Account Guaranteed Savings Program and provides private higher
institutions the option to enter into a similar agreement with the Commonwealth.
However, a Tuition Account Guaranteed Savings Program, which is a 529 prepaid tuition
plan, is mainly tailored to middle-income families who can afford to invest in a college
savings plan. Instead, we recommend that the state implements sliding scale tuition
plans, whereby the amount of tuition a student is required to pay will be dependent on
his familys income, to better serve lower-income students.
For instance, at Brown University, families with income below $60,000 and assets under
$100,000 pay nothing. For those with income below $100,000, the traditional loan
component of financial-aid packages is replaced with extra scholarships. Families with
total income under $150,000 get reduced loans. Only those earning more than $150,000
get a standard financial-aid package of loans, student employment, and some scholarship
money. In the case of Harvard University, most students pay from 0 percent to 20 percent
of their family income toward attendance. Additionally, twenty percent of all families,
those who earn under $65,000, pay nothing at all. Families earning between $65,000
and $150,000 pay 10 percent of income; all others pay proportionately more based on
individual circumstances.
We envision the partnership between the state of Pennsylvania, nonprofit organizations
like College Board, and other relevant institutions tasked with the initial creation of a
new Pennsylvania FAFSA Supplement and its mobile application counterpart to be
funded through philanthropy. Once the initial development of these tools concludes, we
propose that College Board manages both. To ensure these programs sustainability with
little burden to the state budget, we propose that the state reaches out to external
private funders. Possible funders include the Gates Foundation, the Kresge Foundation,
the Horatio Alger Association, and the Heinz Endowment, whose work has traditionally
paid special attention to educational access, persistence, and success. Collectively, these
foundations have the ability to fund these programs and to contribute financially to their
prolonged management, although especially during early stages.
As postsecondary participation of lower-income students increases, the state can expect
an increase in fiscal support needed for higher education. State fiscal support in
Pennsylvania has not returned to pre-Recession levels, though the overall share of the
budget allocated to higher education has increased since the Recession (See Exhibit 1).
When considering the financial impact of increasing lower-income student enrollment
due to our long-term recommended changes, the cost to the state must also consider the
lingering effects of the Recession on the Pennsylvania state budget. To assist in covering
the increase in costs associated with higher lower-income student enrollment, the state
can anticipate increased usage of federal aid programs including the Pell Grant program
and college work-study. In addition, state aid will be expected to marginally increase in
the first years as enrollment shifts to more closely reflect the overall percentage of lower-
income students in each cohort. This increase, however, is expected to subside after the
fourth year.
Exhibit 1. Source: Mortenson, T. (2014). Pennsylvania Higher Education Opportunity Data Book
[Tables]. Retrieved from http://www.postsecondary.org
Given that states are incubators for experimental policy design, Pennsylvania can be the
leader in restructuring the existing financial aid processes for students. Based on
subsequent success, expansion into other states is a real possibility. Regarding our short-
term recommendations, because College Board is a nationally recognized organization
used throughout every state, expanding a new FAFSA supplement and a mobile
application beyond Pennsylvania would be a feasible option. In terms of expanding
sliding scale tuition plans, while each state has different budgets and political climates,
implementing such plans beyond Pennsylvania could be viable if doing so results in
greater economic returns for the respective state.
As the new application program is implemented, participation can be monitored through
the number and level of activity in student accounts. Once implemented, attainment
gaps by family income will decrease. As more lower-income high school students
participate in the program, high school graduation rates and college enrollment are
expected to increase. As time devoted to college planning becomes more focused on
academic preparation and finding appropriate postsecondary fits, and less on
deciphering the financial aid process, the rate of completion at students starting
institution is also expected to rise.
Year Fiscal Support
(in thousands)
Percent Change in
Fiscal Support
Pell Grant Recipients
as Percent of Total
2012-2013 $1,799,540 -17% 38.7%
2011-2012 $2,104,404 -1% 39.7%
2010-2011 $2,128,098 -5% 39%
2009-2010 $2,228,734 2% 34.7%
2008-2009 $2,193,274 2% 28.5%
2007-2008 $2,153,998 5% 28.4%
2006-2007 $2,047,114 2% 27.4%
2005-2006 $2,015,637 3% 27.5%
As state aid is redistributed, Pennsylvania can expect overall costs of aid to initially
increase as more lower-income students begin to enroll in higher education. After four
years, lower-income student enrollment will subside and be proportional to the number
of low-income students in each high school graduating cohort. The number of students
receiving Pell Grants will also incrementally increase in the first four years, as younger
cohorts participate in the program. The trend will then level off. Another indicator of
successful movement through higher education will be seen in a reduction in transfers
from four-year to two-year institutions and an increase in transfer from two-year to four-
year institutions.
According to a 2010-2011 high school student exit survey reported in the Strategic Data
Project, 84 percent of Philadelphia high school seniors who completed the survey
indicated a desire to enroll in college after high school. However, only 47 percent of
students in the District actually enrolled in college that following fall. Even less will be
able to complete their degrees. Given students aspirations, it is not that students do
not want to attend or complete college; rather, many of them, especially lower-income
students, simply cannot afford to. By simplifying financial aid processes, providing
meaningful navigation tools, and redistributing tuition obligations across family-income
levels, the state can alleviate students financial burdens, allowing students to spend
more time focusing on getting into, staying in, and graduating from college.
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