Sunday, February 03, 2013


What If...

This is a “think out loud” piece, rather than an actual proposal.

What if financial aid went directly from the federal (or state) government to the student, rather than running through individual campuses?  The students could use the aid to attend any accredited institution.

It’s not an entirely new model.  When I graduated high school in western New York back in the 1980’s, New York State awarded “Regents scholarships” to students who met certain academic criteria.  (I don’t remember what they were.)  At the time, the scholarships were a hefty $250 a year -- inflation-proof since the 1950’s, according to local legend -- so they didn’t mean much.  (Even then, private college tuition was well into the five figures.)  But they were applicable to any accredited college or university in the state.  The idea, we were told, was to keep bright minds around.  Which might have worked, had the dollar figures adjusted to reality.

Private scholarship funds sometimes work that way, too.  A local Rotary club might award some scholarships to promising local high school graduates, which they can take with them wherever they go.  Even national merit scholarships used to work that way, and I assume they still do.  A student who received a national merit award could take it with her anywhere in the country.

The models I’m aware of tend to be merit-based, rather than need-based, but it’s not entirely clear to me that they have to be that way.  

As I understand it, one reason to run financial aid through individual campuses is to be able to adjust for differing total costs of attendance.  A student who chooses a private four-year residential college will probably need more aid than a student who lives at home and attends a community college.

If most aid came in the form of grants, that might be an argument for keeping the current system.  But even a “full” Pell grant comes nowhere near covering the full cost of a year at a typical private college, or even state university.  At the more expensive places, “aid” is typically a combination of discounts, grants, and (increasingly) loans.  There’s nothing stopping colleges from discounting on their own, if they choose; students would then knit together packages of grants and/or loans and shop around.

One might object that this would put too much power in the hands of the student.  But if we have a public good to be served by underwriting higher education more than individual students would -- and I strongly agree that we do -- then we should underwrite it directly.  It’s far more transparent and less labor intensive to simply increase appropriations to public colleges and universities than to run everything through a complicated set of hurdles.

Even better, shifting the resources from the colleges to the students would free up colleges to experiment with competency-based learning, different definitions of seat time, and other innovations that are either explicitly or effectively barred under the current system.  As long as the caliber of outcomes was the same or better -- that’s where accreditation comes in -- then I don’t see why we shouldn’t be able to try to find new and potentially more appealing ways to get there.

The politics of the shift are a little tricky.  Right now direct operating support for public colleges and universities tends to come from the states, while the bulk of financial aid comes from the feds.  (I’m ignoring research grants for present purposes.)  There’s a pretty good argument to be made that the shift, over the last ten years, from state support to student support has amounted to a shift from state to federal aid.   What if we ratified that shift and addressed it directly?

I’m sure there’s a host of issues I haven’t considered, both positive and negative.  Wise and worldly readers, what do you think?  Would the efficiency gains of a single system be worth it?

Have you considered financial accountability?

As far as I can tell, the feds use us as both bookkeepers and investigators to verify that students are actually attending college as they spend their book and lodging money (grant or loan) as they see fit.

I assume you have something in mind where everyone gets one free shot at money for college and have to show a productive transcript to justify getting the next semester's money?
Some of the scholarships my niece has are like that--she can use them at any school. Unfortunately they lock her into a particular major and she's finding that she'll finish that major because she wouldn't be able to go to school without that money, but wishes she could explore other options.

Given how many students I've had that disappear or never come to class but are getting aid, I'd worry about even more people taking and running. I've had students ask me to lie to financial aid about their attendance so they would get the money they needed to pay for cars, rent, etc. I'm not sure everyone looks at that money as education expenses.
The Uk system is a hybrid of this - the funding follows the student, but is paid through the institution - I remember collecting my living expenses grant from the university finance office.

That does't stop students signing up and running away, but does make them sign up first - and as my grant was paid termly that limited the damage.

A similar approach was applied in
K12. We had Educational Maintenance Allowances - paid directly in to the students' bank account on a weekly basis, but only paid if the school confirmed (weekly) that the student was still attending. This wasn't particularly burdensome.
When I was looking at schools Michigan had both the merit and need-based options. A certain ACT score (later replaced by the state proficiency test I think) could net you the merit scholarship regardless of need. A certain income level could net you the need based scholarship. 15 years ago the amounts were around $2000/academic year.

The one weird thing was that if you qualified for both (as I did) you received the merit scholarship - which was lower than the need based scholarship by a couple hundred bucks.
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I'll always remember the day that I went to the track (Belmont) with a few of my friends who just got their Regents scholarships. Granted, some of them managed to increase their net worth, but others left their Regents scholarships on a horse who did not meet 'expectations'.

I always think of that, whenever someone proposes giving scholarship money directly to a student. I don't have a problem with giving a student funding that they can use wherever they choose to go, but I'd still like to see the money only available to that institution.
That sounds very similar to the Scandinavian school voucher system. The Economist's current issue is running a section on Scandinavia. For more insights, this article is interesting:

I think a university/college voucher system is fantastic idea in principle. I'm skeptical it will work because of the power of geography in determining which institution will get a student's money. This point, often acknowledged by you in previous posts, has also shown up in Britain's recent tuition ceiling increases. Most of the universities increased their tuition to L9000, and have had no drop in admissions. Even applications seem to have picked up again after a drop the first. year.

Having said that, with online institutions, a voucher system could make a big difference, so I'm all for it.
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