"Loan"-Star Higher Ed Reform

Governor Rick Perry (R-TX) has introduced an ambitious plan that would overhaul the way in which higher education is financed in the State of Texas. Perry's proposal is to reward colleges for graduating students on time and for improving the academic performance of their students. The plan would provide more financial aid directly to public college students, rather than through their institutions.

Perry deserves applause for thinking outside the box and proposing sweeping changes to the state's higher education financing system. For too long, states have provided operational support to public colleges based on the number of students they enroll without taking into consideration their success in educating low-income students.

The Governor's plan would provide the largest monetary rewards to state universities that graduate the largest number of "at risk" students; and it would reward community colleges that have the greatest success in graduating students and transferring them to four-year colleges. Currently, fewer than half of all students who enroll in community colleges with the intention of eventually transferring ever do.

The Governor's proposal would also massively expand -- from $20.7 million today to $405 million by the 2008-09 academic year -- Texas' zero-interest B-on-Time Loan program. Under the program, low-income students have their loans forgiven if they graduate from college in four years with a 3.0 GPA.

Higher Ed Watch staff also has put forward a proposal that would use loan forgiveness serve as a tool to incentivize low-income students to work hard in high school and college and graduate. The plan our staff put forward is a little different from Perry's, and we have concerns about some of the changes that the Governor has proposed.

First, the Governor's plan would combine the state's three grant programs into a new one, but it appears would provide less money overall for student awards. As it is, Texas is not exactly the most generous provider of need-based grant aid. In fact, in 2004-05, Texas ranked 25th among states in grant aid per capita, spending only $16 per capita, compared to $58 in South Carolina, $52 in Georgia, and $47 in New York. We think increased loan forgiveness makes sense when it is in addition to existing levels of grant aid.

Second, under the Governor's plan, students would have to achieve a high school GPA of 3.0 of higher to obtain the grants. We don't reject out of hand the idea of putting conditions on the receipt of grant aid. Too many students who obtain financial aid now who are inadequately prepared for college level work and more should be asked of high school and college students in exchange for increased aid.

But using a student's high school grade point average (GPA) as the decisive factor in awarding aid is a questionable policy choice. The quality of high schools in this country is so disparate that earning a 3.0 at one school is very different from earning one at another. And what's to happen to students who have a slightly lower GPA, but still exhibit signs of academic promise? Should the doors of college be closed to them? The Governor should focus on incentivizing high school students to enroll in and graduate from rigorous academic programs that prepare them adequately for college-level work. What good is a 3.0 in Driver Education when it comes time for college level mathematics?

Finally, we at Higher Ed Watch are concerned that under the Governor's plan students who don't graduate from college within five years have to repay their grant aid. Students would benefit from the loan forgiveness program, but only if they graduate within four years.

These time requirements run counter to prevailing trends among needy students. Low-income students often have to work part-time or need to take a leave of absence because of financial strain. Grants with a punitive timeline attached might not do much to expand access. Yes, students should be given incentives to remain on task in college and graduate in four years. But attaching strict and rapid graduation time limits to grants or loan forgiveness would disproportionately hurt low-income students, and potentially discourage college enrollment.

Perry's innovative proposals could be a success, as long as the doors to high education remain as wide open and welcoming as possible. We look forward to watching the plan's further development.