Following the rules or making its own?: Pennsylvania is the only state barring online students from its need-based grant program

Blog Post
March 22, 2016
Pennsylvania is the only state barring online students from the state's need-based grant. Called the Pennsylvania State Grant Program, the program is administered by the Pennsylvania Higher Education Assistance Agency (PHEAA). The program provides grants to Pennsylvania residents with demonstrated financial need and who:
  • have obtained a high school diploma or equivalency;
  • are enrolled half-time; and
  • have not yet obtained a bachelor’s degree among other eligibility requirements.
One of the unique eligibility requirements of Pennsylvania's grant program is a policy, in place since 2000, that has made students taking more than 50 percent of their courses online ineligible for the need-based grant. PHEAA requires at least 50 percent of the total credit or clock hours a student is enrolled in be earned through in-person classroom instruction. This same restriction applies to institutions’ programs of study. An approved program of study must require at least 50 percent of the credits needed for completion of the program be earned through instruction within the classroom. If at any time in his or her college career a student’s enrollment pattern changes so that they’re taking more than 50 percent of their courses online, they have to repay the grant money they were given for prior years.

Students, especially nontraditional students who are often older, work while in school, and care for family members, have benefited from the proliferation of online education, taking advantage of the flexibility online and hybrid courses afford them to complete their studies in a timely manner. PHEAA defines a hybrid course as, you guessed it, those with 50 percent of instruction conducted in-class. For the purposes of the need-based grant, it wasn’t until 2013 that hybrid courses stopped counting as distance education. Prior to 2013, hybrid courses were considered online courses, and counted towards the number of distance education courses a student could take and still remain eligible for the state’s need-based grant.

Low-income students rely on grant aid--free money--to help defray the cost of college. For example, the Pell Grant--a need-based federal grant program--has made college accessible to millions of Americans. Unlike Pennsylvania’s grant program, the federal Pell Grant program makes no distinction between online students and students who take all their courses face-to-face. It would be wise for Pennsylvania to follow the federal government’s lead so students with financial need, already struggling with a challenge that can deter them from persisting in their studies, don’t have to be burdened further because they take their courses online.

A Pilot Opens Doors

In 2013, PHEAA--after taking note of the growing demand for online learning--set aside $10 million to fund grants to students who were taking more than 50 percent of their courses at a distance as a part of a 5-year pilot program, the State Grant Distance Education Pilot Program (SGDEPP). Through this pilot, students are able to keep their state grant eligibility while taking approved online courses--for example those in high priority occupations such as accounting and engineering--at participating institutions. As long as the participating student is eligible to receive an award under the current guidelines, then distance education exclusions would not apply for the purposes of the pilot.

While all Pennsylvania-based state grant-eligible schools are able to participate, participation is voluntary and colleges must nominate eligible students for participation. Since the pilot began, PHEAA has collected relevant data on how students in the pilot fare in comparison to those not taking more than 50 percent of their courses online. Results will be used to make recommendations regarding policy changes to the state grant program.

Mirroring the Feds

Why does Pennsylvania treat its online students differently from students who take the majority of their courses face-to-face? This program mimics a similar 1992 federal restriction on students' eligibility for the federal need-based grant, the Pell Grant. And, the way Pennsylvania has opened up the state’s need-based grant program to online students and online programs by implementing the 5-year pilot is similar to how the federal government opened up the the Pell Grant to online students almost 20 years ago.

In 1992, Congress amended the Higher Education Act (HEA) to include a 50 percent rule, which restricted federal financial aid to an institution if it offered more than 50 percent of its courses, or had more than 50 percent of its students enrolled in distance education. The provision was a result of investigations showing that some for-profit colleges were little more than diploma mills that abused Title IV federal financial aid programs.

In the 1998 reauthorization of HEA, Congress piloted a demonstration program for Title IV programs that allowed a few dozen colleges with online programs to request waivers from the 50 percent rule. To participate in the demonstration program and receive a waiver, institutions were required to demonstrate their programs’ accountability and legitimacy by monitoring enrollment growth, student retention, and graduation rates. Demonstration program participants were also required to document “the number and types of students receiving assistance under this title for instruction leading to a recognized certificate … including the progress of such students, and the increase in participation in the certificate or degree programs.” After the demonstration program, Congress did eventually eliminate the 50 percent rule in 2006.

Evidently, PHEAA looked to the federal government as a role model when designing their demonstration program. Pennsylvania, however, is lagging behind the federal government in lifting its restriction of need-based aid to students not enrolled primarily in traditional face-to-face courses and programs of study. This is despite there being other, and possibly more aggressive ways, to crackdown on fraud and abuse than to strip students with financial need of potential grant aid. Equally ironic, PHEAA’s role model--the federal government--has taken the lead on introducing these more vigorous anti-fraud protections. PHEAA’s own state government already has in place stringent state authorization rules for schools operating in the state. For example, Pennsylvania’s Department of Education requires all institutions located in the state be authorized regardless of the delivery mode (see Section 4: Authorization of Distance Education). And, out-of-state distance education providers who want to enroll Pennsylvania students must apply for authorization each year (see Section 6: Application Process). Despite this, PHEAA continues to ban online students and schools from participating in the state’s need-based grant program, even if it may be punishing students as much as it is potentially bad (and good) actors.


A Second Look

Last year alone, over 6,000 students participated in PHEAAs pilot program, and if eligibility requirements are changed, many more students stand to benefit. And results from the pilot already show students taking a majority of their courses online or are enrolled in programs of study that are offered primarily online do just as well as those that don’t and aren’t. Students, who attend colleges of all types (nonprofit, community colleges, and for-profits), may need the flexibility online courses provide and help financing college. The state shouldn’t discourage them from taking the classes they need just to remain eligible for the need-based grant.

Other states too have looked for ways to prohibit colleges who weren’t doing right by their students from participating in their state need-based grant program. However, the approaches they’ve adopted to check abuse haven’t required banning students who take a majority of their courses online from being eligible for state’s need-based grant.

For example, since 2011, worried about the poor student outcomes at for-profit colleges, California limited institutional participation in the state’s primary need-based grant aid program--the Cal Grant--by setting minimum student outcome standards. And in 2014, the state enforced two new measures where colleges that had more than 40 percent of their undergraduates who take out federal student loans were required to maintain a three-year cohort default rate below 15.5 percent and a graduation rate above 30 percent. California relies on the federal government for data on institutions’ three-year cohort default rates.

In 2008, proprietary institutions in Washington were only eligible for the state need-based grant, called the State Need Grant, if they maintained acceptable performance levels. Student completion rates, placement rates, and loan cohort default rates are some factors included in making this determination. California’s and Washington’s policies for checking for-profit abuse closely align--more so than Pennsylvania’s--with efforts at the federal level on this same issue.

Identifying and cracking down on fraud and abuse by for-profits and nonprofit colleges alike has also taken center stage at the federal level. For example, gainful employment measures require most for-profit programs and certificate programs at private nonprofit and public institutions prepare students for gainful employment in a recognized occupation, and were recently upheld in the D.C federal district court. And, the HEA 2008 reauthorization allowed for schools with high three-year cohort default rates to be sanctioned and lose their eligibility to participate in the federal student aid programs.

More recently, proposals for debt relief measures for student borrowers who are victims of predatory practices, can surely be viewed as renewed efforts in the federal government’s full throttle push to ensure students who are victims of abusive practices aren’t left holding the bill.

Further, the Obama Administration's release of a redesigned College Scorecard, a tool that helps students and families compare colleges and universities on important measures such as costs and graduation rates, can be seen as another attempt to identify poor performing schools and provide students with information that help inform their decisions about where to attend. And finally, the recent pressures on regulatory bodies to look closely at colleges’ job placement rates only add to this growing list of efforts by the Department of Education and the Obama Administration to identify schools who are performing poorly and hold them accountable, not students.

If Pennsylvania really wants to mirror what the federal government and even some states are doing to better regulate for-profits, as it says it does, it would eliminate the 50 percent rule and stop--by way of attempting to block institutional fraud and abuse--punishing students. For example, testifying before the Pennsylvania House Appropriations Committee in 2013, James Preston, president and CEO of PHEAA made a statement about their concern about for-profit fraud and abuse stating:

Basically, we're going to follow what the federal government does...So we're watching that carefully and trying to mirror what they're doing...

It isn’t clear whether PHEAA agrees that gainful employment, cohort default rates, and other measures are the best ways to ensure proper uses of federal and state aid. But what is clear is that like the federal government, Pennsylvania wants to know how best to protect students from institutional fraud and abuse. The way to do that would be to take a pointer from those already charting the way, as the federal government has. Pennsylvania just might then be able to discourage institutions from abusive practices and provide access to aid for college to many more students."