A Rapid Analysis of New Ed Department Data
Blog Post
Aug. 20, 2013
1. High Borrowing Rates among Pell Grant Students
These latest data from the Department of Education show that students receiving Pell Grants last year still had to employ student loans to pay for their college educations. In particular, more and more students at community colleges and private nonprofit universities had to borrow to pay for school. Students at for-profit colleges who receive Pell Grants still borrowed at the highest rate of any institution type, however, at 87.5 percent:
2. Growing Parent PLUS Loan Borrowing Rates at Some Institution Types… Many institutions use Parent PLUS loans as an additional revenue source, as well as a way to avoid accountability rules like the student loan default rate measure. Last year, borrowing of federal Parent PLUS loans increased across parents at all types of schools except community colleges, while for-profit Parent PLUS borrowing increased to nearly one-quarter of all parents of dependent students.
3. …and Excessive Parent PLUS Debt at Some Colleges
The rate at Historically Black Colleges and Universities (HBCUs), at nearly 20 percent, outpaced the 9 percent overall rate at non-HBCU schools. HBCUs were some of the strongest advocates behind the Department of Education’s recent move to rescind regulations limiting availability of Parent PLUS loans.
Parent PLUS loans allow institutions to skirt accountability and avoid quality metrics. They can also saddle low- and moderate-income families with debt they can't afford and that isn't dischargeable in bankruptcy. The growth in PLUS borrowing rates offers evidence that institutions are using them to make their education appear more affordable and accessible to students and families. The growth in borrowing, particularly at for-profit institutions and HBCUs, is a disconcerting trend.
4. Campus-Based Aid Increasingly Missing the Target
Federal campus-based aid (including Perkins loans, work-study, and Supplemental Educational Opportunity Grants) relies on an outdated formula that disproportionately distributes funds to elite public and private colleges. The new data show that the percentage of higher-income dependent students receiving any campus-based aid has increased over time, especially at private nonprofit four-year institutions. Moreover, the fact that such a larger share of students at private nonprofit institutions are able to receive this support compared to those at public four-year schools should call into question the way these dollars are allocated to institutions.
Campus-based aid has earned its reputation as a blunt, inequitable tool for delivering federal student aid. The new Department of Education data tell the story of campus-based aid as a program incapable of consistently reaching the lowest-income students while avoiding providing federal dollars to students from families with six-figure incomes.
5. Average Grant Size Raises Questions about Use of Institutional Dollars
Institutions are increasingly spreading their own funds so thin that they are now providing significant amounts of aid even to those families in the highest income bracket. This chart shows the average amount of grant aid given to all dependent students (including those who did not receive any grant aid) by parental income over time. It is also adjusted for inflation to provide a better comparison across years.
Grant aid is a precious resource for federal and state governments. That’s why they by and large award it to those with the lowest incomes and the most need. But the explosive growth in institutional grant aid, particularly for wealthier students at private nonprofit colleges, raises real questions about whether they are using their aid budgets to promote colleges’ access or as part of prestige-driven recruitment efforts.
We will continue to publish analysis of the Department of Education data over the coming weeks.