NEW YORK (MainStreet) — The reauthorization of the Higher Education Act is an event that will have a big impact on aid to higher ed in 2014. First passed in 1965, it was designed to increase federal aid to universities and provide low-interest loans for students. It has been instrumental in distributing financial aid funds for people attending the nation's colleges.
One of the most enduring programs authorized by the Act is the Pell grant—an award for low-income students, first rolled out in 1972 and the largest single grant for post-secondary education from the federal government. Pell grants don't have to be repaid. But Pell is facing a shortfall and, potentially, a reduction.
A May 2013 report called "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind" describes how colleges are turning their backs on disadvantaged students in favor of their well-to-do counterparts and are doing this through the way financial aid is managed. The report, written by Stephen Burd, was funded by the New American Foundation, headed by Google executive chairman Eric Schmidt.
The report found that four-year colleges--private and public--are "in danger of shutting down what has long been a pathway to the middle class for low-income and working-class students" by making financial aid less available to them. Burd attributes this to "a relentless pursuit of prestige and revenue" on the part of colleges.
The biggest change over the past 20 years, Burd told ABC News last spring, has been the cut from need-based to merit-based aid. That's been driven, he says, by a variety of factors, including colleges' quest to score high in U.S. News & World Report annual ranking of the nation's best colleges, which is calculated in part on academic performance.
Burd focused on the "net price" students pay for college: the amount paid after the grant money runs out. Hundreds of colleges, he writes, "now expect the neediest students to pay an amount that is equal to or even more than their families' yearly earnings." These students take on large amounts of debt and are often forced to take part-time or even full-time jobs, increasing the likelihood that they won't graduate on time—or at all.
When ranked by "net price," the colleges most generous to poor students are Amherst, Vassar, Grinnell and Williams--all taking a relatively high percentage of Pell students, some 20% or more. Burd concluded that Amherst is in a class by itself. The net price paid by Pell students at Amherst is $448--the lowest in the study's ranking. Amherst's net price compares, for example, with more than $46,000 paid by students at Santa Clara University.
If you're broke but have good a GPA and test scores, you're probably good to go. If you're an average student with below average cash flow, you're probably scuffling. Burd's analysis finds that well-to-do students with poor grades and scores--the "dumb rich"--are laughing all the way to the bursar's office and have benefited the most under current circumstances.
"There's a premium, now, on being wealthy," Burd said, "because a student's being able to pay full tuition is good for the bottom line of schools."
--Written by John Sandman for MainStreet