Journalism in the Public Interest

New Report Calls for More Grants to Low-Income Students, End to Federal Parent Loan Program

The federal government must make a more substantial investment in direct aid to students and dramatically simplify the system of student loans, says a report by the New America Foundation.

The federal government must double down on grants to low-income students and dramatically simplify the system of student loans, says a new report by the non-partisan New America Foundation.

The report, released on Tuesday, lays out more than 30 recommendations for fixing the nation’s increasingly strained system of paying for college, chief among them a more substantial and permanent investment in direct aid to students through Pell grants. The government should make the funding for the Pell program an entitlement in the federal budget, shielding it from annual wrangling, and should boost the maximum amount of individual grants, the report says.

It also proposes that the government create a system of incentives aimed at realigning how college use institutional aid dollars: Those with few low-income students and high tuition after discounts would be required to match a portion of Pell dollars with institutional aid; schools with many low-income students that meet a required graduation rate would get bonuses.

The New America Foundation’s report was funded by the Bill & Melinda Gates Foundation as part of a larger initiative to explore policy recommendations on ways to restructure and reform the financial aid system.

Beyond its recommendations on grants, the report suggests a wholesale overhaul of programs for student loans.

We’ve reported on the federal Parent Plus loan program, and how the lack of loan limits allows families to borrow more than they can reasonably afford to cover ever-increasing college costs. The government should end the Plus program, the report argues, as it “can encourage families to over-borrow and provides colleges with a convenient source of funds if they wish to raise their prices.”

The federal government should stick to one loan program – the main federal loan program known as the Stafford loan, the report suggests. It also suggests that the many different repayment plans currently available be replaced with one that bases monthly payments on a percentage of income – a modified version of some existing plans. 

The report also offers ideas to reform day-to-day handling of student loan payments. Errors in the servicing of student loans often frustrate borrowers and exacerbate the difficulties of repayment, especially for those whose loans were shuffled to a group of new nonprofit servicing companies.

As we’ve noted, these companies won a carve-out from Congress in 2010 that guaranteed them an opportunity to get in on servicing federal student loans. The report advocates ending this carve-out, arguing it “has made the federal student loan program more complicated and costly than it should be,” and that all servicing contracts should be awarded through competitive bidding.

See the full report for more details.

Yes, the college loan programs need to revamped. I know a number of students who may never be able to repay their student loans with what they are earning. For one thing No one really knows the real cost of a college education per student with all the athletic scholarships and honors scholarships…. All scholarships provided by ANY college should be capped at 50% of the cost, so every student pays something and more students can benefit! We ahev so many going for free…all teh other students must pay more!  Also, you think we have problems now with the cost of college and college loans…Wait 10 to 15 years until all that money (BILLIONS and BILLIONS) now being saved in 529 plans starts to hit the higher education system. There will be a wider gap every year from those who can afford college and those who cannot…and inflation will hit college cost like we have never seen before! All that money will be like a 10 lane highway of cash coming into the college education system. Everyone loves those plans now, Look down the road.

Mary Ellen Smith

Jan. 31, 2013, 7:21 a.m.

I disagree totally.  Rather than another welfare program, student aid should be based on merit and targeted to the disiplines the country needs.
Monies should be targeted to nursing, primary physicians, science, technology,engineering, etc. and should be distributed based on achievements of the students.

If you also wish to support low income students, I would support a work-study program, because we have high unemployment in the low/non skilled areas.

Mary, keep in mind that what you’re suggesting is giving more opportunities to kids who grew up with better opportunities and asking a bunch of lawyers who wouldn’t know a public good if it ripped their toupees off to centrally plan the economy.  I can’t think of a better way to drive the economy into the ground.

Me, I say build a better educational system that doesn’t require nearly so much money.  So-called “Open Source” technologies allow people to learn to write software, perform genetic experiments, design mechanical parts, and so forth, for a hundreds of dollars rather than tens of thousands of dollars.  Integrate those with some sort of apprenticeship or entrepreneurial venture, and all you’re lacking is the motivation to round out the coarse edges.

(That’s a real problem to be solved, keep in mind.  Learning to design electric vehicles on your own is great, but if you can’t speak coherent English and file sensible progress reports, there still isn’t anybody who’s going to hire you.  People should also learn other fields to be able to understand what they need.)

Schools historically excel at two things.  First, they make networking easy by putting like-minded people together with professors and industry leaders.  Second, they provide motivation through deadlines and competition with other students.  Not only are they not (alone) worth the price of a degree, but schools are largely abandoning those strengths with Pass/Fail grading, extended terms, and online courses.  So if you’re not going to get that anyway, and can replace it somewhat with the Internet, why have the expensive campus buildings and filthy-rich boards of directors at all?  Scrap it all and decentralize.

As to whether the government is likely to make the educational system better, this just came across my inbox, suggesting the answer is “no”:

Short version, a state school scanned relevant pages of course textbooks for students to check out, which is Fair Use by any sane person’s definition.  The publishers, including two foreign companies, are suing.  The Justice Department, on behalf of the Copyright Office, has decided it wants to intervene on the side of the companies.


Mary Ellen Smith

Feb. 1, 2013, 7:01 a.m.

I agree with virtually every thing you wrote.  Our only disagreement is I’m trying to spend money for the areas,e.g.,nursing, engineering,etc., needed by society, not give opportunities to those that have advantages.
The real problem is 0-18 years, that’s where our educational systems have failed, especially for our most disadvantaged students.  We need to break the monopoly of public schools and teacher unions.
Would vouchers be a form of open sourcing? Could we entice our best/most creative organizations to adopt ghetto communities and flood the area with folks who think outside the box.

Well, speaking purely about college for a moment (since that’s what the article focuses on by necessity), I actually think that’s a problem that will solve itself.  By providing less value at higher tuition, while failing to capitalize on their strengths and going into debt building nicer facilities, I’d be surprised if half of today’s colleges will still be in business at all in ten years.

So, I’m thinking more in terms of replacement than repair.  I don’t think repairs are possible to any school that isn’t terrific across the board.  The top tiers, with academics, revenue-generating sports, massive alumni outreach, a community, and a brand, they’ll weather it, but everybody else is going to take a beating.

Feeding into high school, I actually think even more radically.  Mandatory schooling is an artifact (and centerpiece) of the Industrial Revolution, and is basically a “sieve” to catch the people with white-collar inclinations and push them (through isolation in “advanced” classes) to college.

But that model is horribly broken.  We don’t have vast factory stations to fill, anymore, where we need every student who isn’t “destined for greater things” to be pushed into vocational jobs.  We know that many (not all) “slow” kids are merely bad with authority, and would make great entrepreneurs.  We know that fixed curricula are always archaic and watered down to where nobody can answer, “where are we going to use this.”

Voucher programs pretend that schools are good and we want great.  I think, with some exceptions (every teacher who scrapped the book regardless of the consequences), schools are misapplied and unfixable for modern times, and we’re better off replacing them than trying to “evolve” a slightly better school through some vague competition.

(I also think that voucher programs are an attempt to sell entire generations of children to companies to give them better future consumers.  For example, I’m sure Disney would love to get its mitts on the educational process.  But that’s another argument for another day.  However, do look at insurance companies as the potential future of privatized education.  An entire industry predicated on lip service to helping people without doing so, and plenty of fake competition that makes nothing better.)

My “vision” for mandatory education is a more organized approach to what I described above.  What I’d want is community integration and sort of…let’s call it “serial mass apprenticeship.”  A school year might, for example, be to attach the class for let’s say a month at a time to local soup kitchens, community theaters, beautification projects, and public gardens, where they’re put to work and learn the “business.”

Between “gigs,” spend a week or two with the kids discussing and consolidating the lessons learned and having them share their experiences with other groups of kids.  I picked the example gigs off the top of my head primarily as places where you can apply arithmetic, statistics, economics, scale, geometry, literature, writing, music, art, biology, and even a little engineering, and both small and large problems need to be solved.

(I’m being horribly subversive, here, by the way.  The goal isn’t just to educate, though it’s a major goal.  It’s to integrate them into the community and get them in the habit of dealing with adults and helping their neighbors.)

And as with the college, expose them to all these things they can build and use themselves.  Have the make and use 3D printers, CNC routers, PCR machines, drones, and…oh, here’s just a start:

For elementary school age, especially, take a look at what sorts of results Sugata Mitra got out of his “Hole in the Wall” experiments.  He talks about how kids from slums who didn’t even know English were basically given a computer and a little direction with very little supervision, and they taught themselves college-level genetics.  We need to bring out that potential, not hold it back because they’ll see it in college.

That’s my other problem with vouchers:  They’re just throwing the same old piles of money at a problem that can be solved better for…I think if you add up everything I’ve mentioned, you’re talking about something on the order of five thousand bucks per kid for his entire academic career.

I don’t mind spending money where there’s a benefit, mind you.  For example, the technologies created trying to land on the Moon revolutionized the economy and were worth every penny.  But I don’t support going back, because we already know how to do it (I could do it, if someone gave me a decent budget), whereas we’d get huge benefits (energy, propulsion, medicine, environmental control, materials, etc.) landing on Venus or one of Jupiter’s moons.

But that’s all long and rambling…

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