How the Office Got Financial Aid Policy Right

December 7th, 2009 | Category: Undergraduate Education

In its continued quest for topicality this season, The Office turned to the issue of college tuition for its episode last Thursday. In a sequence so awkward that even Larry David would cringe, Michael Scott (Steve Carell) had to explain to a room full of high school seniors that he would not be able to fulfill the promise he had made nine years earlier to pay the college tuition and fees for any of the school’s third graders that made it through to graduation.

Scott’s behavior is certainly odious and others have already pointed out the unlikelihood that no one from the school would have tried to secure a more detailed pledge, but the general theory behind the program is not half bad.

For the past few years, the trend among wealthy institutions (public and private) has been to enact access policies focused on heavily discounting or eliminating tuition and fee costs for students who come from low-income families. The result is policies like Princeton’s, where tuition is free for students whose family income falls below $120,000. But while these initiatives can succeed in improving an institution’s socioeconomic diversity, they have a minimal effect on wider behaviors or incentives. Recent research presented at a College Board conference shows that there are already an estimated 30,000 high-achieving low-income students who each year fail to attend an institution that matches their academic qualifications (page 11). These policies also do nothing to tackle the problem that many families significantly overestimate the cost of college—a belief that could cause students to avoid enrolling since they assume they cannot pay for it. Even if they correctly guess costs, parents and students may still have trouble understanding just how much grant money they will receive thanks to a complex aid form and opaque institutional policies.

Instead, what Scott’s promise did is cut through the confusion and complexity with a straightforward pledge—graduate on time and your college will be covered. Students do not understand “your award will be your cost of attendance less expected family contribution”—the formula for a Pell Grant—but they do understand free, or even a specific dollar amount. By removing the guesswork and beginning at a young age, the promise created an incentive for students to work hard at their elementary and secondary schooling with the understanding that a payoff awaited at the end.

Sure the Office’s program is fictional, but it does bear some similarity to a number of initiatives taken out in several states. Indiana has a Twenty-First Century Scholars Program that promises free in-state tuition for low-income students that starting agree to meet certain academic and social requirements beginning in middle school. It has served upwards of 15,000 students since its first high school class graduated in 1995. Even more closely related is the I Have a Dream Foundation, which finds patrons to sponsor entire grade levels at low-resource institutions for anywhere from 10 to 15 years. A study of that program found that program participants’ graduation rates were 30 percentage points higher than other students.

To be sure, such programs are expensive, though not as costly as you might think.Almost all of these programs are for “last dollar,” which means that they cover any gap remaining after other grant aid is received. To use the Office hypothetical, this means that if a student Scott sponsored chose to attend Pennsylvania State University–Worthington Scranton, the closest public four-year, then he would likely shell out around $6,110 of the $11,660 total in-state tuition and fee price tag after deducting a maximum Pell Grant award. Add in the $5,892 that the average financial aid recipient receives in state/local and institutional support and you are only talking about $218 per kid—or $3,270 a year.*

While this program certainly is too expensive to emulate on a grand scale, there are ways it could be modified to reduce its cost and still send the important message about thinking about college at a young age. If parents and students overestimate the cost of college, why not instead offer a pledge that students who commit to a college-ready core curriculum and graduate from high school will pay no more than $5,000 a year at an in-state institution of higher education? If the aid figures are to be believed then you aren’t talking about a particularly expensive program, since federal dollars will bridge some of that gap. And it’s entirely likely that the poorest students will not even pay that much. The dollar amount could be even higher—the important point is that eliminates pricing uncertainty, gets students thinking about college much earlier, and does not significantly increase costs since those students will be getting that aid money anyway.

A combination of promises and better information could go a long way toward reducing the application and aspirational barriers that block many students from applying or going to college. It could also save us from incredibly awkward nights of television.

*This does exclude room and board, which may be covered by the average grants. If you factor that in then obviously the program becomes much more expensive.

Posted by Ben Miller at 6:36 pm | Tags: , , , , , | 2 Comments

2 Responses to “How the Office Got Financial Aid Policy Right”

  1. | says:

    [...] waaay smarter than me, it was a perfect illustration of appropriate incentivizing.  And he makes a heck of an argument in a post on the best-named blog in my world, The Quick and the Ed. Says Ben Miller: “What Scott’s [...]

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