COMMITTEE ON EDUCATION AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES

August 31, 2005

 Target Student Financial Aid to Students with the Greatest Financial Need

TREAT ALL STUDENTS FAIRLY BY SUPPORTING H.R. 609, THE COLLEGE ACCESS & OPPORTUNITY ACT 

Dear Colleague:

Fall is just around the corner, and that means a new academic year is just beginning.  Across the country, millions of college students are moving into dorms, enrolling in classes, and coming face to face with the sticker shock of another round of tuition increases.  For low- and middle-income students and families, access to federal student aid can mean the difference between enrolling in college or not.  That’s why federal student aid is awarded to students based on their financial need; by targeting funds to meet individual needs, we can ensure fairness for all students.

Unfortunately, there is one glaring exception to the policy of purely need-based student aid.  The so-called campus based aid programs – Federal Work Study (FWS), Supplemental Educational Opportunity Grants (SEOG), and the Perkins loan program – allocate funds to colleges and universities, which leverage the federal dollars with their own resources to provide additional assistance to their students.  The concept makes sense, but in practice the funding structure for the campus based aid programs is shortchanging many colleges and universities and the low- and middle-income students they serve.

Here’s the problem: through a “base guarantee,” colleges and universities are guaranteed to receive at least the amount of funding they have received in a previous year regardless of the financial need of their students.  After decades of “base guarantee” buildups, the vast majority of campus based funding is consumed in this manner, and little money is left to assist colleges and universities based on the number of low- and middle-income students they serve, also known as the “fair share” funding structure.

The New York Times highlighted the problem in a November 2003 story, when it reported “The federal government typically gives the wealthiest private universities, which often serve the smallest percentage of low-income students, significantly more financial aid money than their struggling counterparts with much greater shares of poor students.” (“Rich Colleges Receiving Richest Share of U.S. Aid,” Greg Winter, New York Times, November 9, 2003)

To restore fairness to the campus based student aid programs, we introduced legislation – the College Access & Opportunity Act (H.R. 609) – to phase in a full “fair share” allocation for FWS, SEOG, and the Perkins loan program.  Our plan phases down the so-called “base guarantee” over an 11-year period and replaces it with a phase-in of the “fair share” distribution formula.  By providing a slow phase down of the base guarantee and a slow phase-in of the fairness formula, the bill will ensure that colleges and universities can plan for their financial aid based on the number of needy students they serve.

Defenders of the status quo are trying to pit states and even individual colleges and universities against one another by claiming that a “fair share” formula will cut their portion of student aid.  This argument misses the point entirely.  When it comes to federal student aid, it’s not about one state versus another or one college versus another: it’s about how we can best assist individual needy students.  The solution is one of basic fairness.  Federal student aid should be awarded based on the financial need of students.

Opponents of the fairness formula have also proposed alternatives to a simple “fair share” phase-in.  Unfortunately, those proposals would only exacerbate the inequities in current law by establishing new funding guarantees on top of the old through a complex new formula that, in reality, would never allow funds to be redistributed based on student financial need.

The National Association of Student Financial Aid Administrators (NASFAA) has led efforts to reform the campus based aid funding formula and target student aid to students with the greatest financial need.

“The campus-based allocation formula has been at the center of policy discussions over the past 25 years.  People’s views on whether the current formula should be modified depend in large part on when an institution began participating in one of the campus-based programs and in which state the institution is located.  While we [NAFSAA] recognize that institutions across the country have different—and strongly-held—views on whether the current formula should be modified, the approach contained in this bill will help ensure that the monies allocated under the three campus-based programs will be equitably distributed to the neediest students at all participating institutions across the nation,” testified NASFAA President Dr. Dallas Martin during a 2004 hearing before the Education & the Workforce Committee.

The California State University (CSU) system – which, with 23 campuses, 400,000 students, and 42,000 faculty and staff, is the largest educational system in the nation – also strongly supports the fairness formula.

“[O]ne of the highest priorities of the CSU is to correct inequities in the funding formula for the Campus-Based programs.  Specifically, the CSU urges the elimination of the use of a "base guarantee" in allocating Campus-Based funding to institutions … We are especially aware of the inequity of the current formula, and especially concerned for the students who will go underserved if the Campus-Based formulas are not changed,” testified CSU Chancellor Dr. Charles Reed during the same 2004 hearing.

The federal campus based aid programs play a critical role in providing college access for low- and middle-income students.  Please help us ensure these funds are targeted to the students who need them most.  For more information on our efforts to expand college access for low- and middle-income students, or to sign on as a cosponsor of the College Access & Opportunity Act, please contact the Education & the Workforce Committee majority staff at x5-4527.

Sincerely,