Suggestions for Revamping Federal Student Aid

After two years of work Rethinking Student Aid, an independent team convened by the College Board, released their report of suggestions to make the federal student aid system easier to navigate and more efficient when it comes to distributing funds.

"What we needed was to step back from the day-to-day of federal student aid and really think about the purpose," said Michael McPherson, president of the Spencer Foundation, kicking off the press conference announcing the report. Pointing out more college graduates will be better for the American economy and society, McPherson said a better aid system can help reach that goal, but it is important to address the amounts of money available as well as the delivery system.

Highlights of the plan are:

1. Eliminate the FASFA and obtain all financial information from the IRS.
2. Base the Pell Grant on family size and link increases to the consumer price index (rather than "the whims of congress," pointed out co-director Sandy Baum), and to link eligibility to the federal poverty level.
3. Improve the federal loan process by eliminating the distinction between subsidized and unsubsidized loans and revising repayment plans to be more inline with post graduation pay.
4. Create federally funded savings accounts for children of low income families to be used only to pay for higher education.

Baum said they calculated costs for a few variations of the savings account (which can be seen in the report). "For under $3 billion per year we can provide accounts for eligible children starting at 12 years old at 10 percent of the amount of the Pell Grant," she said.
The presenters said the accounts would help address the gap between low income families who don't have discretionary funds to put into a college savings account, and affluent families who can afford 529 plans. Knowing money is available could be a powerful incentive for people to attend college. The accounts could also aid the effort to get students to start thinking about attending college at a younger age.
There was concern tuition will increase because of extra aid being available, but Baum said the programs were not tuition sensitive.
"These are bold ideas," said Donald Saleh, Vice President Enrollment at Syracuse University (N.Y.) and a presenter on the call. "We will have to be patient in bringing higher education along....We're comfortable with existing programs, but most people will probably admit they don't meet current needs."
The presenters said, in order to gain broad support, it was important to create an aid program that all Americans could feel might benefit them.
"In the short run, we have to change the conversation," said McPherson. "We need partners to do it."