Higher Education

States offer students an incentive to graduate: money

College freshmen are a self-confident lot, newly freed as they are from high school and, often, home and parents, and on their ways to career-igniting educations.

And few, apparently, are more enthusiastic than the ones in Indiana.

Propelled by hundreds of millions of dollars from one of the nation’s most generous taxpayer-funded state financial-aid programs, Indiana students have no doubt that they’ll graduate on time. Three out of four of those who get aid say they expect to don their caps and gowns and accept their bachelor’s degrees within the traditional four years.

If history is any guide, they’re likely to be disappointed.

Indiana University, Bloomington (Photo by Justin Kern)

In spite of all that taxpayer money, only around 40 percent of Indiana 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.

Things in Indiana are about to change. It’s one of several states starting to demand something in exchange for their investments in financial aid: higher graduation rates.

Starting next year, Indiana students will be required to not only start, but finish 24 credits annually in order for their aid to be renewed, and will be rewarded with up to an additional $600 a year in aid at public and $1,100 more at private universities and colleges if they complete 30 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 for 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.”

The $11.1 billion states collectively provide in grants for college students each year gives them powerful leverage, exceeded only by the $36 billion allocated annually for financial aid by the federal government. Yet many states don’t even track whether recipients of this aid ever actually graduate. As one educational consultant put it, they simply hand over the money and hope for the best.

“Your typical citizen would say, ‘You mean we don’t even know what happens to the students?’” said Darryl Greer, who studies higher education at the William J. Hughes Center for Public Policy at Stockton College of New Jersey. “But we don’t.”

The result is that financial aid has become “a one-sided partnership,” said Stan Jones, president of the advocacy organization Complete College America. “The states provide the funds, but the expectations states have of students are really pretty low.”

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 like the very distant future. 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 often hired by states 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.”

Yet, paradoxically, many state financial-aid programs pay for only a maximum of 24 credit hours annually—12 per semester—which is not enough for a student to reach the typical 120 credits 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.”

By comparison, 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 of students who get state financial aid now are required to take 30 credits annually, said Brian Weingart, senior director of financial aid. The proportion of these aid recipients who graduate within six years has increased to 70 percent, compared to the average for all students in West Virginia of less than 48 percent.

“The pendulum is swinging from access to success, and getting these students a credential, or else there isn’t much to show for the money you’re investing,” Weingart said.

Early results from similar pilot programs in Louisiana, Ohio, and New Mexico show that connecting financial aid with meeting certain benchmarks has increased the number of credits earned and the proportion of students who stay in school. In Louisiana, where the aid was tied, in part, to academic performance, it has also resulted in higher grades. Tennessee gives preference for financial aid to recipients who return from one year to the next. California, Arizona, and Florida are also testing ideas like these. And in Indiana, more than two-thirds of financial-aid recipients say they will take 30 credits per year once it is a condition of getting the money.

“We shouldn’t view financial aid simply as an entitlement,” said Richard Freeland, commissioner of higher education in Massachusetts, which is trying the idea of giving some state grant recipients more money the more courses they take, up to an additional $2,000 a year. “I believe that it is reasonable to think of financial aid to some degree as a social contract between the state and the student. The state is saying we are investing in you because not only is it important to you, but it is important to the state.”

Graduating on time not only produces more degree holders in states that are struggling to find qualified employees for high-skill jobs; it saves students money. Indiana estimates that each additional year in school costs a student $50,000 in lost wages and additional tuition and fees for which financial aid has typically run out.

There have been similar proposals to tie federal financial aid to graduation rates by forgiving federal student loans for low-income students who graduate within four years, rewarding students with larger grant amounts for taking at least 30 credits per year, and requiring students who drop out to pay back the government for any grant money they received, which they now don’t have to do.

Nationally, fewer than 58 percent of students at four-year universities and colleges graduate within six years, and 14.3 percent at two-year colleges within three, according to Complete College America.

Two-thirds of voters surveyed in the fall by Hart Research Associates for HCM said the highest priority for reforming the financial-aid system should be to increase the number of recipients who graduate.

Some critics worry that pushing students in this way could make things worse, not better. They say students already struggling in school could fail if they’re forced to take more credits, or may switch to the easiest possible majors. At many public universities and colleges, which have suffered years of budget cuts, required courses may be full or unavailable when students need them.

“You want them to finish, but there’s also something to be said for having them learn something,” said Rodney Andrews, an assistant economics professor at the University of Texas at Dallas who has studied state financial-aid programs.

The federal Advisory Committee on Student Financial Assistance warned last month that attaching strings to financial aid to increase graduation rates is actually “likely to further undermine the four-year college enrollment, persistence, and completion of qualified low-income high school graduates, particularly minority students.”

If states want to use financial aid to change behavior, they should leverage their collective billions in grant money to make universities and colleges more accountable for graduation rates, not students, said Debbie Cochrane, research director at the Institute for College Access and Success.

“Too often these kinds of programs focus on incentivizing students to take actions they may not even be able to take,” said Cochrane. “If the institution itself doesn’t make it possible for the student to actually succeed, the whole incentive falls apart.”

Two states, California and Colorado, are doing exactly that—using their financial-aid money to make institutions graduate more students.

In California, students can no longer use state financial aid to go to universities or colleges with low graduation and high student-loan default rates. And in Colorado, campuses will get more state financial-aid money for students who stay on track to finish their degrees. Colorado is also considering adding a stick to that carrot, cutting financial-aid allocations to campuses that take too long to graduate their lowest-income students.

The idea is the same, policymakers say: giving taxpayers the best possible return on their investments.

“There’s got to be accountability,” Greer said. “And who should we hold accountable? The institutions.”

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Jon Marcus

Jon Marcus, higher-education editor, has written about higher education for the Washington Post, USA Today, Time, the Boston Globe, Washington Monthly, is North America higher-education… See Archive

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