A Brief History of the Battle Over Campus-Based Aid

With his call to revamp campus-based student aid, President Obama has joined what has been an on-again, off-again 30-year battle over the programs’ funding structure. He is the third president in a row (and at least the fourth overall) to call for overhauling the highly-inequitable funding formula that the government uses to allocate the campus-based aid programs. Lobbyists representing the country’s wealthiest colleges have, however, successfully beaten back all prior efforts, and are likely gearing up, as we write, to try and do so again.

As we reported yesterday, the fight to reform the campus-based aid programs –Federal Work Study, Perkins Loans, and Supplemental Educational Opportunity Grants (SEOG) — began in the late 1970s when Jimmy Carter was president and “Billy Beer” was all the rage. At the time, the Carter administration started to put into effect a plan to phase out colleges’ historical share of the funding, or “base guarantees,” and to distribute the funds entirely according to the financial need of the students attending the colleges. But leaders of elite private colleges and public flagship universities that had joined the programs at their inception bristled at the idea of losing the aid.

Powerful senators from the states and regions where the institutions were located came to the rescue of these colleges. As part of legislation renewing the Higher Education Act, Congress in 1980 reversed the administration’s action, guaranteeing that the institutions that had been in the programs the longest would get the same proportion of aid that they had received prior to the change in policy. Only new money appropriated to the programs would be spread among those colleges exhibiting the greatest need.

Bouyed by their success, the elite colleges pressed for a greater advantage in 1986, when the Higher Education Act was up for renewal again. At their urging, Congress agreed to give participating institutions an even larger share of the aid, by allowing them to get, in addition to their base guarantees, one-quarter of all new money spent on the program each year. While the remaining funds were available to all institutions on the basis of the financial need of their students, few new institutions gained much because the programs, as a whole, were not faring particularly well in the annual appropriations battles.

In 1998, President Bill Clinton took up where Carter had left off. As part of his recommendations for reauthorizing the Higher Education Act, Clinton called on Congress to slowly reduce the proportion of funds that were set aside for long-time participants in the program, and to increase money for institutions that enrolled larger shares of low-income students. To prevent immediate wholesale changes, however, the proposal would not have allowed any college’s allocation be reduced by more than 5 percent a year.

But even this cautious approach was too much for the wealthy colleges and their champions in Congress – the New England senators who led the Health, Education, Labor and Pensions (HELP) committee. Because of their resistance, Congress rejected the administration’s proposal to chip away at the base guarantees. It did, however, agree to reverse the change it made in 1986 and once again allow colleges to compete for all new money coming into the programs based on their students’ level of need.

Five years later, the Bush administration and the Republican leaders of the House Committee on Education and the Workforce took another shot at overhauling the funding formula. Leading the charge to phase out the base guarantees was future House Speaker John Boehner, the Ohio Republican who was the chairman of the education committee at the time. “Phasing in a ‘fair share’ formula is a responsible way to restore fairness to these programs by targeting funds based on the financial needs of students,” he stated.

However, Boehner and his colleague Rep. Howard P. (Buck) McKeon (R-CA) were forced to back down after they failed to win the support of other Republicans  on the panel who represented Congressional districts in jeopardy of losing aid. Instead, the two lawmakers added a provision to the bill that would have directed the Government Accountability Office to study how the funds are distributed and suggest changes. But even that provision didn’t make it into the final bill, which the Democratic-led Congress approved in 2008.

Given this history, it’s clear that the Obama administration is facing a major uphill battle. But for a number of reasons, the president’s chances may be at least a little better than his predecessors. We will elaborate on these reasons in our next post on campus-based aid.

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