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Another Financial Aid Program Targets Middle-Class Students

An expert weighs in on Brown University's new no-loan program and other ways schools can cut costs for middle- and low-income families.
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Brown University.

Brown University.

Brown University added to a year of splashy tuition experiments when it announced last week its plans to eliminate student loans from financial aid packages.

Brown is hardly the first to offer such a plan. In fact, every Ivy League school and dozens of others have at least attempted no-loan policies to reduce students' post-graduation debt. But Brown is taking a unique route toward its no-loan policy: The school is raising $30 million by December to fund grants it hopes to swap in for loans starting with the 2018–19 school year.

Brown's announcement closely follows the launch of New York state's free tuition program for middle-class, in-state students at two- and four-year schools, along with California lawmakers' proposal for debt-free college. Like many such initiatives, Brown's policy will target what the official press release calls "families with moderate incomes." But it can be difficult to parse who needs such plans the most, or whom the plans will actually benefit. For insight, Pacific Standard spoke with Matthew Fuller, an associate professor of higher education leadership at Sam Houston State University, who has tracked the history of financial aid.


What kind of students and families are most likely to benefit from a shift in financial aid like the one Brown has proposed?

The extension of that question is, which families and students take out loans? And we see students at the lower end of the salary spectrum, whose families have lower incomes, benefitting. Students whose families are at the lower end of the middle-class, and even lower, below the poverty line, would benefit the most.

One interesting thing about this announcement—and those in California and New York from earlier this year—is that it was framed as helping students from middle-income families who get lost in current financial aid packages. Is a plan like this more for middle- or lower-income families?

I think it would help middle-income and below. The contemporary thought is that students below the poverty line, or with very low family income, benefit from a variety of scholarships that happen to coincide with a low-income background, or are directly focused on low-income students.

I do think the running narrative is that middle-income students are left out of our current financial aid practices. I don't know that there's hard data to suggest that, mostly because [it's unclear] what defines middle income. I've seen projections that define middle income as someone who has a salary from $60,000 a year to anyone under $260,000–$275,000; $275,000 doesn't exactly feel like middle income to me.

The sheer fact of the matter is, college is a big expense no matter where your family comes from on the salary scale. I don't like the assumption that certain people are or are not served by our current financial aid, and that, if they are served, that means someone else isn't served. The running narrative is that middle-class students are left behind, and we do so much for low-income students that they ought to have no problem paying for college, and I don't believe that.

Another thing I would keep in mind about Brown's promise is that it's in direct response to other Ivy League schools that already have a no-loan package [for middle-income students].

Matthew Fuller.

Matthew Fuller.

Right, so the plan is not the first of its kind.

Unless there's something unknown or maybe that Brown is improving upon, then I don't believe "first of its kind" is accurate. One thing that could make it first of its kind is the fact that they're using active fundraising to accomplish this. Other schools like Harvard and Yale have such reserves and foundation money; they can probably pull from a lot of that to make a no-loan package to offer to an incoming group. Brown has said, "We're going to raise $120 million to go toward this, as part of a larger billion-dollar fundraising effort."

I don't know if this kind of package is an option for your standard, run-of-the-mill university. It certainly works for an Ivy League school that has that kind of backing, but I don't know that standard institutions are capable of raising this kind of capital. For that reason, I don't see this as a national response that would break out.

So what are some of the shortcomings of a proposal like this?

First of all, I commend Brown and other institutions for recognizing that loans are indeed a real detriment to our alumni. But I would also encourage all institutions to sit down and think about how this promise could fit into a multi-pronged approach to financial aid. To say that, "Hey, we're going to make sure you don't have loans by fundraising your loan away," but not doing anything to draw down the cost of education, is not a holistic approach. Institutions have to sit down and think, "What do we have to do to keep our budget thin, to trim the fat?" I don't know if Brown has or has not done that, but simply to say we're going to pay for loans while the loans remain pretty daggone expensive is not helpful.

What are some things schools could be doing right now to drive down the costs of attending college?

First thing I tell colleges to do is look at what is ballooning. I ask them to at least make the minimal commitment to examine fees and tuition. In most funding models, those are two separate kinds of costs. What I've seen through much of the research is that fees are the ballooning costs. But it's a double-edged sword. If the colleges and universities don't offer the best rec center, counseling, amazing dining options, then that student who applied to Brown might get there and see that the dining hall is not up to their standard, so they're going to Harvard or Yale. So it's created an arms race where we need to have the nice rock wall in our rec center, and we've got to have the most amazing football field, but students don't realize that that money has to come from somewhere. And it's coming from them in fees. We've seen a very large increase in the number and the size of fees. I'd encourage college and university leaders to really examine if we need some of these services.

Second, looking at tuition—which has increased, [in part] because we're offering disciplines and program areas that didn't even exist a couple decades ago. To keep up to date with that is expensive. One thing I tell everybody to keep in mind about these costs is, higher education is the nexus of many different costs in society. We have to teach people, so there's the cost of that, but we also give them a place to sleep, food, counseling services, and we entertain them a little bit with some sports and different venues. On top of that you have the standard cost of living that goes into operating a business, the increased cost of gas and oil and keeping buildings electrified and heated, so it's just the nexus of a lot of really expensive things that happen on a college campus.

Are there some areas that we already know would be easiest to start with? For example, some folks say we have too many administrative positions.

Certainly we should be reviewing whether certain administrative categories are needed. One example from a while back is I once worked at a university in Illinois and there was a person paid by the institution to go around and check to make sure that the textbooks were printed on recycled paper. I don't necessarily know that we need an administrator to do that job—that's just me. I think administration is one area to start. A second area is in the services, and I'm gonna be wildly unpopular with some of my colleagues when I say this, but I do see this as the truth. We don't need to be offering some of the services that we offer today's college and university freshmen. An example of this is a dorm in Arizona that has a wave pool. It's college—you don't need to live so large.

What about the role of state investment in higher education?

A number of scholars have said that state institutions have gone from state-supported to being state-housed to being state-acknowledged and, most lately, state-molested. The states are typically funding higher education at a rate lower than they have in the past. Legislators always say the proportion has actually increased, so that higher education is getting a bigger piece of the pie. I would respond and say higher education is serving way more people than it was in the '80s. So that larger piece of the pie, when it gets divvied up, everyone gets a smaller piece. I hope legislators will address this by talking about the funding philosophy in their state.

As someone who's looking at the financial aid world all the time, what sort of proposals do you think we'll see piloted in the next few years?

I think some actual agenda items that you'd see are continued discussion about loan forgiveness and what criteria would trigger loan forgiveness. I do think there should be some sort of criteria for loan forgiveness. We will see continued government involvement of federal lending and rates. I do see more and more people talking about the federal government getting out of the student loan business. I don't see that happening.

You can't deny that financial aid is going to be a political issue for the coming years. I think we'll come to see it become more iconic on both sides of the political spectrum, so the Republicans will have their way to do it, and Democrats will have their way to do it, and progressives. Get ready, because it's going to become political and vicious and divisive.

This interview has been edited for length and clarity.