States tightening rules on college loans, wanting ‘best bang for buck’

By By Jon Marcus

The Hechinger Report (MCT)

Published: Tuesday, July 30 2013 12:00 a.m. MDT

FILE - Prospective students and their parents tour Georgetown University's campus in Washington, in this Wednesday, July 10, 2013, file photo. Grants and scholarships are taking a leading role in paying college bills, surpassing the traditional role parents long have played in helping foot the bills, according to a report from loan giant Sallie Mae.

Jacquelyn Martin, ASSOCIATED PRESS

Enlarge photo»

WASHINGTON — Every year states hand out more than $11 billion in financial aid to college students with no certainty as to whether they’ll ever graduate.

Many states don’t track the money. They simply hand it over and hope for the best, as one educational consultant put it.

It’s a “one-sided partnership,” according to Stan Jones, the president of the advocacy organization Complete College America. “The states provide the funds, but the expectations states have of students are really pretty low.”

In Indiana, for instance, only around 40 percent of aid recipients will earn their four-year degrees in even six years, state figures show. That’s lower than the state average for all students. And while 75 percent may be certain they’re on schedule, only half will end up taking the minimum number of credits they need, per semester, to get through.

But things in the Hoosier State and several others are about to change, as states begin to demand something in exchange for their investments: higher graduation rates.

Starting next year, Indiana students will be required not only to start but also to finish 24 credits annually for their aid to be renewed. They’ll be rewarded with up to an additional $600 a year in aid at public colleges and universities and $1,100 more at private ones if they complete 30 credits or more. The idea is to put them on track to graduate within four years.

“We want to make sure we’re getting the best bang for the buck,” said Mary Jane Michalak, Indiana’s associate commissioner of student financial aid. “Right now our students aren’t succeeding, and we believe this keeps them on target and shows them how to get to the goal.”

Of course, there’s always been one powerful incentive for students to finish school: In most states, their eligibility for financial aid expires after the equivalent of four years of study. But to a typical college student, four years can seem very distant. And when the aid dries up, the experts say, some are forced to resort to loans or other ways to pay, and many more drop out.

“It’s the difference between immediate versus distant incentives,” said Nate Johnson, a senior consultant at HCM Strategists, a Washington firm that states often hire to review their education policies. “The fact that I’m going to run out of aid in four years is a lot less pressing than the fact that I need to pay my rent right now.”

Paradoxically, many state financial-aid programs pay for a maximum of 24 credit hours annually — 12 per semester — which isn’t enough for a student to reach the 120 credits typically needed to earn a bachelor’s degree in four years. Thirty percent of full-time students at four-year universities and 72 percent at community colleges take even fewer than that and quickly fall behind, Complete College America reports.

“It’s absolutely backward,” Johnson said. “We’ve created a system where we cap (financial aid) at 12 credits (per semester), and the result is students taking a really, really long time to graduate, if they graduate at all.”

Early results in the few states that have started to require that financial-aid recipients take 15 credits a semester, or 30 per year, show that these and other new conditions have begun to nudge success rates higher.

That’s been the case in West Virginia, where about half the students who get state financial aid now are required to take 30 credits annually, said Brian Weingart, the senior director of financial aid for the state’s Higher Education Policy Commission. The proportion of these aid recipients who graduate within six years has increased to 70 percent, compared with the average for all students in West Virginia of less than 48 percent.

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