Projections show House work-study proposal would benefit for-profits, community colleges

House Republicans’ rewrite of the Higher Education Act was a dud in almost all respects for student aid advocates and higher education associations. But in its proposal for the Federal Work-Study formula, the bill appeared to deliver on calls to make the program’s funding allocation more equitable.

The work-study formula has long been criticized for unfairly favoring elite private colleges in the Northeast.

Under the PROSPER Act — as House Republicans have deemed their bill — those are the institutions that would lose out the most on funding, according to an analysis by the American Council on Education.

The new formula would distribute funding in some surprising ways, however. Community colleges would see a big boost in work-study funding. But for-profit colleges would, too.

The bottom line, ACE says, is that the formula change would benefit institutions that primarily serve undergraduates over those that have a serious research mission and support graduate students. That’s true because the legislation makes graduate students ineligible for work-study, but also because four-year institutions have traditionally been favored under program allocations.

As a result, for-profits would see the most new funding as a sector (a $71.8 million increase in the sector’s annual allocation six years after the new formula takes effect) and the largest average increase in awards per college ($188,000).

However, the biggest losers under the new formula would include some large public institutions that enroll large numbers of low-income students. The City University of New York, for example, would see the largest drop-off in funding of any campus or system in the projections from ACE. After getting more than $9 million in work-study funds in the 2015-16 academic year, CUNY would get just over $136,000 in the sixth year after the proposed formula took effect.

More than half of students enrolled at CUNY are eligible for Pell Grants, compared to closer to a fifth at nearby private institutions like Columbia University and New York University. But all three still see large drop-offs in work-study, according to ACE.

The analysis comes with some important caveats — ACE assumed appropriations for Federal Work-Study would remain flat, while the PROSPER Act proposes nearly doubling overall funding to $1.7 billion. (Total spending on the program would ultimately be settled by House appropriators, which is true for many provisions of the proposed HEA reauthorization.) And institutions could conceivably change their enrollment mix as well.

Still, the data highlights the potential winners and losers under the proposed formula and points to where battle lines could be drawn in a formula fight between different sectors of higher ed.

CUNY chancellor James Milliken said low- and middle-income students would be the biggest losers in the PROSPER Act.

“Gutting programs that benefit hardworking, financially struggling students is damaging for the individuals and inexplicable as a matter of public policy,” he said. “I strongly encourage the House of Representatives to rethink this poorly designed and destructive plan.”

The list of colleges potentially losing the most under the new formula does include some large public institutions with high proportions of Pell recipients, like University of California, Los Angeles, and the University of Washington Seattle. But they also include elite private colleges like Harvard, Northwestern and Cornell Universities.

The formula in the PROSPER Act was designed to move the distribution of work-study funds away from a system that awards traditional participants in the program like those institutions. It phases out existing base allocations over several years, instead rewarding institutions that serve a high proportion of Pell students. A separate formula for any program funding above $700 million would reward colleges that have success working with Pell students.

According to ACE’s projections, big winners in terms of total new work-study funds under PROSPER’s formula, meanwhile, include public four-year institution Georgia State University, the for-profit Florida Career College and the private American Baptist Theological Seminary.

House Republicans say that’s because those campuses are the ones serving the students with the most need. A GOP committee spokesman said the PROSPER Act is the biggest expansion of the work-study program ever.

“Through the much [needed] formula reform, work-study dollars would flow to those institutions serving the neediest students rather than those charging students the highest tuition,” the spokesman said.

But ACE said the work-study formula shouldn’t be discussed without acknowledging the elimination of the Supplemental Educational Opportunity Grant, the other major remaining campus-based aid program. While critics of work-study have said it is not distributed equitably, SEOG was weighted toward campuses with the most Pell recipients. And while the bill proposes doubling the size of the work-study program, it eliminates the $732 million in campus-based aid from SEOG.

The group also says the exclusion of graduate students from work-study fits within a larger framework in the PROSPER Act that disadvantages those students.

In 2016-17, more than 13,000 students in the University of California system received work-study aid, said Claire Doan, a spokeswoman for the system. That figure included about 800 graduate students, who would be ineligible for the program under the House legislation.

The University of California, Berkeley, and UCLA, the two biggest recipients in the California system, would lose about $2.2 million in work-study funding in year six of ACE’s projections.

“By reducing the funding to Federal Work-Study and similar campus-based financial aid programs, students will have to find alternative funding sources, such as loans,” Doan said. “Further, if these students do not have access to federal loans because they are capped, they would be forced to seek out private loans, which do not offer the same consumer protections.”

But community colleges see the bill as an important step in reflecting the higher proportion of low-income students their campuses serve — after private colleges have for years received a disproportionate share of work-study funds.

The existing funding formula rewards a number of campuses based on traditional funding allocations and distributes whatever is left over based on need — skewing those funds toward already-participating institutions. The House proposal would phase out that traditional “fair share” allocation entirely.

“We think there’s just no reason whatsoever for using historical distribution of funds for allocating any of the campus-based funds today,” said David Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges. “It just doesn’t make sense.”

Big Losers*

CUNY: $8.8 million
NYU: $7 million
Columbia: $5.9 million
University of Southern California: $5.1 million
Nova Southeastern University: $4.1 million

Big Winners

American Baptist Theological Seminary: $7.1 million
Keiser University: $2.5 million
Southern New Hampshire University: $2.5 million
Ashford University: $2.4 million
Cerritos Community College: $1.7 million

*Based on ACE projections for difference in work-study funding between Year 6 of proposed formula and 2015-16 funding levels

The for-profit sector, too, argues that the proposed formula would take better account of how many low-income students are served by its colleges. Steve Gunderson, president and CEO of Career Education Colleges and Universities, said that reflects how the PROSPER Act targets those funds toward the institutions that serve the most needy students.

“Our sector has and will continue to serve working parents, minorities and other students looking for a credential to enter the work force immediately upon graduating,” he said. “Under the ACE analysis, the top institutions that would see an increase in the Federal Work-Study award, regardless of sector, are institutions that are serving students that often don’t have a lot of financial resources beyond federal aid.”

Iris Palmer, a senior policy analyst at New America’s education policy program, said it appears that the House proposal aims to give a bump in work-study funding to institutions that serve Pell recipients well. Whether the House formula is designed correctly is unclear, but she said that goal is appropriate.

“Right now the formula misallocates funding to institutions that don’t need it and graduate students,” she said. “The research we have on work-study shows that it actually has the biggest impact for students who are low-income.”

Higher ed lobby groups see challenges ahead — even for institutions getting more work-study funds — if the House proposal is adopted. In a letter to the House education committee in December, Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, warned lawmakers that a larger window for phasing out the existing formula may be needed. And he said some institutions may struggle with requirements to match federal funding.

Karen McCarthy, the group’s director of policy analysis, said that NASFAA is concerned about colleges being able to adjust to the new formula, partly because setting up a work program is more complicated than distributing grant funding to low-income students.

“Sharp increases are just as big a problem as decreases,” McCarthy said. “Primarily because if an institution does not use all the funds it receives, there is a penalty associated with work-study.”

Supporters of expanding the program, however, say community colleges already have a strong focus on connecting students with employers.

The White House budget last year, the first from the Trump administration, proposed halving the funding for work-study while pushing to “reform the program to ensure funds go to undergraduate students who would benefit the most.” That proposal stirred some reflection by advocates but also led some to take a renewed look at the value of the program.

Judith Scott-Clayton, associate professor of economics and education at Teachers College at Columbia University, concluded in a report last year that the program remains relevant as a result of growing recognition of social barriers to completing a degree and the importance of internships to landing a job after college. The program would be better served, Scott-Clayton argued, if Congress re-evaluated how the awards are distributed rather than sharply reducing overall funding.

Forming a stronger connection between education and a career has been a theme shared — at least rhetorically — by Republican and Democratic members of Congress, as well as work-force development groups.

Jobs for the Future, a nonprofit that promotes education and economic opportunity programs, endorsed the proposed House overhaul of work-study.

Maria Flynn, the group’s president and CEO, said in a letter to House education leaders that the bill reforms work-study by “increasing funding for the program, focusing on outcomes, and reducing constraints on student placements with extramural employers — changes that can help link FWS to meaningful work-based learning opportunities for more students.”

But advocates for graduate students say work-study is one more example of how those students see a loss of benefits in the PROSPER Act.

“It’s removing an available source of support for low-income graduate students that allows them to utilize their learning in a meaningful way and connect it to potential careers,” said Beth Buehlmann, vice president for public policy and government affairs at the Council of Graduate Schools.

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