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Since the close of World War II, educational benefits have been an important part of military compensation. Over that period, their chief purpose has evolved from one of assisting veterans whose educational plans were interrupted by the draft to one of attracting better-qualified recruits under a peacetime volunteer system. A desire to improve recruit quality further, and dissatisfaction with the program, has led to strong interest by the Congress and the defense community in more generous educational benefits. Indeed, 13 bills proposing more generous military educational benefits have already been introduced in the 97th Congress. At the same time, concern has arisen over potentially high costs of these plans and uncertainty as to their effects on recruiting and retention of military personnel. At the request of the House Committee on Armed Services, this study examines the key effects of alternative plans to improve military educational benefits. In accordance with the mandate of the Congressional Budget Office (CBO) to provide objective and impartial analysis, the paper offers no recommendations.

This study was prepared by Daniel Huck, Lorin Kusmin, and Edward Shephard under the general supervision of Robert Hale of CBO's National Security and International Affairs Division. Jerry Allen and Kathleen Loftus of the General Research Corporation designed the computer model used to prepare cost estimates. Edgar Peden, a CBO consultant, assisted in the design. The authors gratefully acknowledge the support provided by Lou Palos of the DoD's Defense Manpower Data Center and Joanne Crowe of the VA's Department of Veterans Benefits who prepared the Vietnam-era GI Bill utilization data base. The study benefited from helpful criticism of earlier drafts by David Grissmer and Richard Fernandez of the Rand Corporation and by CBO staff including John Enns, Neil Singer, Joel Slackman, Robert Vogel, Eileen Maguire, Michael Sullivan, Dorothy Amey, Nina Shepherd, and Maureen McLaughlin. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.) Francis Pierce edited the manuscript; Janet Stafford prepared it for publication.
 

Alice M. Rivlin
Director
March 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION: THE NEED FOR ADDITIONAL INCENTIVES TO SUPPORT THE ALL-VOLUNTEER FORCE

• Recent Recruiting History
• Future Recruiting Prospects: A Projection
• Alternative Projections With Less Favorable Assumptions
• Added Recruiting Incentives As a Hedge

CHAPTER II. ISSUES SURROUNDING THE CURRENT POST-SERVICE MILITARY EDUCATIONAL BENEFIT PROGRAM

• Problems With VEAP As Originally Implemented in 1977
• Changes in the VEAP Design and Its Implementation in 1979 and 1980
• Strengths and Weaknesses of the Current VEAP

CHAPTER III. PROPOSALS FOR A NEW PROGRAM: ISSUES AND OPTIONS TO CONSIDER

• Main Features of Proposed Legislation
• Purposes of Proposed Legislation
• Program Design Considerations
• Illustrative Educational Benefit Options

CHAPTER IV. EFFECTS OF THE EDUCATIONAL BENEFIT OPTIONS ON RECRUITING, RETENTION, AND COSTS

• Method Used to Make Estimates
• Indexing the Benefit to Keep Pace With Inflation
• Evaluating the Options
• Other Methods to Reduce Separations
• Adopting an Accrual Cost Accounting Approach for Educational Benefits

CHAPTER V. OTHER RELATED BUDGET ISSUES

• Cost-Effectiveness of Educational Benefit Proposals Compared With That of Other Recruiting Incentives
• Reducing Educational Benefit Costs Through Better Targeting
• Inclusion of the Reserves in Any New Educational Benefit Option
• The Effect of Introducing a New Proposal on Those Already Vested in the Vietnam-Era GI Bill or VEAP

APPENDIX A. SUMMARY OF MILITARY EDUCATIONAL ASSISTANCE PROPOSALS

APPENDIX B. THE ENLISTMENT APPEAL OF MILITARY EDUCATIONAL BENEFITS WITHIN THE CONTEXT OF FEDERAL POLICY TOWARD POSTSECONDARY STUDENT AID
 

TABLES
1.	CBO'S BASELINE PROJECTION OF NEW MALE RECRUITS HOLDING HIGH SCHOOL DIPLOMAS, 1983-1987
2.	ALTERNATIVE PROJECTIONS OF NEW MALE ARMY RECRUITS HOLDING HIGH SCHOOL DIPLOMAS, 1983-1987
3.	EDUCATIONAL BENEFIT OPTIONS
4.	DISCOUNTED VALUATIONS OF FOUR EDUCATIONAL BENEFIT OPTIONS
5.	ESTIMATED EFFECTS OF FOUR EDUCATIONAL BENEFIT OPTIONS ON ARMY RECRUITING AND RETENTION RELATIVE TO LEVELS UNDER 1981 PROGRAMS
6.	ESTIMATED POST-SERVICE VETERAN COST OF FOUR EDUCATIONAL BENEFIT OPTIONS WHEN FULLY INDEXED TO INFLATION
7.	ESTIMATED MANPOWER AND COST EFFECTS OF FOUR EDUCATIONAL BENEFIT OPTIONS
8.	COST-EFFECTIVENESS OF THE EDUCATIONAL BENEFIT OPTIONS COMPARED TO THAT OF OTHER RECRUITING METHODS
A-1.	SUMMARY OF MILITARY EDUCATIONAL ASSISTANCE PROPOSALS
B-1.	DISTRIBUTION OF FEDERAL STUDENT AID FUNDS
B-2.	PROPORTION OF POSTSECONDARY FULL-TIME EDUCATION COSTS SUBSIDIZED THROUGH FEDERAL, STATE, AND LOCAL GRANTS AND LOANS, BY PARENTAL INCOME OF STUDENTS, 1979-1980
B-3.	FULL-TIME SCHOOL ATTENDANCE PATTERNS AMONG STUDENTS WITH HEAVY-TO-MODERATE AND MODERATE-TO-LOW SUBSIDY LEVELS
B-4.	PERCENTAGE OF 17- TO 22-YEAR-OLD MALE HIGH SCHOOL GRADUATES ENROLLED IN SCHOOL AS MAJOR ACTIVITY
B-5.	PERCENTAGE OF 1972 MALE HIGH SCHOOL SENIORS WHO FULFILLED ORIGINAL CAREER PLANS IMMEDIATELY AFTER GRADUATION AND WERE STILL IN THAT STATUS ONE YEAR LATER
B-6.	COMPARISON OF CAREER PLANS AND ACTUAL ENLISTMENTS FOR MALE HIGH SCHOOL SENIORS TAKING THE ASVAB TEST DURING THE 1967-1977 SCHOOL YEAR
B-7.	PROJECTED POPULATION OF NINETEEN-YEAR-OLD MALES, BY FAMILY INCOME
FIGURES
1.	ENLISTMENTS OF MALE HIGH SCHOOL GRADUATES IN ABOVE-AVERAGE TEST CATEGORIES (I-IIIA)

 

Proposals have been made in recent years to offer more generous educational benefits as a means of improving military recruiting. Thirteen bills have been introduced so far in the 97th Congress proposing new educational benefit plans.

Interest in a new program stems from concern over declining recruit quality and also from dissatisfaction with the Veterans' Educational Assistance Program (VEAP), a less generous substitute for the Vietnam-era GI Bill. Advocates of a more generous educational benefit contend that its appeal to better-educated, higher-aptitude youth would significantly improve recruiting of high-quality personnel. Since interest in a new program began, recruiting has improved and VEAP has been strengthened. Nonetheless, the services--especially the Army--could still encounter problems attracting sufficient numbers of qualified youths in the 1980s, especially if personnel strengths are increased further to meet expanding defense requirements.

More generous educational benefits might improve recruiting and provide a hedge against future problems. This study finds that improved benefits would increase the enlistment of better-qualified recruits in the Army--the service likely to experience the most difficulties--by up to 15 percent, depending on the option considered. But earned educational benefits also provide servicemembers an incentive to leave in order to use their benefits. Ultimately such separations might offset, in part or in whole, the gains in recruiting. This should be a key concern in evaluating educational benefits.

While they might improve recruiting, additional benefits would, of course, result eventually in higher budgetary outlays--by up to $1.4 billion a year, depending on the option. (Costs are in constant 1983 dollars and assume the benefits are indexed to keep pace with inflation.) Lower costs generally result when these plans "target" or direct their benefits primarily to groups of recruits that are in short supply. Thus the degree of targeting is another key issue.

Improved educational incentives are, of course, not the only way to enhance recruiting. Pay raises for all military personnel can be used, though such raises are generally more costly per added high-quality recruit than improved educational incentives. On the other hand, increasing the number of recruiters and offering more enlistment bonuses might cost less per added recruit than would many types of improved educational incentives. Thus the design of any new educational benefits may be the key in determining whether such benefits are a cost-effective way to improve recruiting.

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