Wanted: More Transparency from Colleges

Now that Congress has approved a substantial increase in need-based, federal financial aid, it is important that students, families, and policymakers learn more about how colleges are spending their own institutional financial aid dollars. It would be disappointing if the new infusion of need-based, federal financial aid had the unintended consequence of encouraging colleges to either cut their own institutional financial aid budgets, reduce their rate of growth, or shift dollar-for-dollar their own institutional financial aid resources toward non-need based, “merit” aid programs.

Currently, the federal government collects very little information from colleges about institutional aid practices. College leaders have been resistant to efforts secure greater sunshine in the area. They warn against unnecessary government intrusion in their affairs. Of course, they tend not to mention all the benefits the government, make that the public, provides them — not the least of which are the very valuable benefits they receive as a result of their tax-exempt status.

We at Higher Ed Watch think that government and the public has an interest in knowing the degree to which institutions of higher education may be acting in ways that counter public policy goals. For example, to what extent are schools engaging in financial aid leveraging that is, taking money that would normally go to admitted, but financially needy students, and instead giving it to admitted, high achieving high school students who overwhelmingly come from wealthy families. Such practices may thwart the federal government’s public policy goal to increase access to college for those who need the most financial help.

To their credit, lawmakers say they want to get to the bottom of institution financial aid practices. Both the House and the Senate have approved bills that call for colleges to report more detailed information about their aid policies. But both measures could be improved.

For example, both bills would have colleges report to the Department of Education on the average amount of grant aid that the institutions provide their students and the proportion of students who receive these awards. But “average” grant aid doesnt tell us much if the aid is skewed toward non-needy students. It would be more useful to break down the numbers by looking at the average amount and proportion of institutional aid that goes to Pell Grant recipients, and the average amount and proportion of aid that goes to non-Pell-eligible students each year. That way we would know which colleges tend to reward wealthier students.

The Senate bill appears to leave it up to colleges to decide whether they want to provide the consumer information that has been requested. Under the measure, participation in the new “University and College Accountability Network” would be voluntary. In contrast, the House bill would require colleges to disclose the information. But it contains an odd provision that would effectively prohibit the Education Department from challenging erroneous information provided by colleges. We would like to see these provisions stripped out of their respective bills. It makes no sense to add reporting requirements and then allow colleges to skip out or provide faulty data.

Finally, it would be very useful for students and their families, as well as policymakers, to know how much private loan debt a college’s students are shouldering. While both bills require colleges to report on their federal student loan debt, we’d like to see more information on the private loans that colleges package. And it would be helpful to know what types of policies college financial aid offices are pursuing to insure that their students are exhausting their federal loan eligiblity before taking out higher cost private loans. Nothing about private education borrowing concerns us more than the fact one out of five students taking out a private loan has not exhausted their eligibility for federal student loans first.

Hopefully as Congress moves forward with legislation to renew the Higher Education Act, lawmakers will redouble their efforts to make colleges financial aid policies more transparent. A little sunshine almost never hurts.

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