Financial Aid and Affordability of Higher Education - Research Paper Example

?AFFORDABILITY OF HIGHER EDUCATION: Nowadays higher education is considered mandatory for individuals who are willing to grow in terms of their social standings or enhancing their job rankings. It is garnering more and more attention around the world as many believe that the world today has evolved so much and is currently portraying a state where only survival of the fittest is the rule of the day. Therefore the need of higher education has gained more importance today then from the past. Almost every individual at present seek ways to get higher education, however only some get success, because of various important factors out of which affordability is the prime one. Million students around the world who have desire to learn and gain higher education leave their dreams because of the factor of affordability. As at times they have to face a situation where they have no option but to quit studies because their financial standings does not allow them to pursue their degrees, however in order to ameliorate and come out from this catastrophic situations some students rely on loan and grants that are available for them in the shape of public, private and other sectors. Meanwhile the main reasons behind this affordability issue is because of continuous inflation in tuition fees, and also the poor economic conditions of the country which one way or other is directly or indirectly responsible for increasing the cost of running for institutions. As a consequence families, students, taxpayers, lawmakers (and institutions itself) all are affected. Since many American understands the value of degree (higher education) and the possible fruits and outcomes that are likely to come if one is successful in attaining or achieving the degree, or in other words they have clear understandings that higher education is prerequisite for employment these days and is necessary in so many different regards (AASCU, 2011). However in pursuing the degree often students at times have to face a situation where they have to leave or quit a degree because of affordability, some go for financial aid in order to come out from this situation as they believe this is a solution, while others are lost in translation and this financial aid systems and procedures turns out to be a nightmare for them. Moreover Heller & Marin (2002) highlighted very important phenomenon in this regard, they believe that since financial aid is awarded considering merit, competence and ability rather than considering need therefore, majority of students who are not very much blessed with extra ordinary talent or they have some lacking in terms of potential are persistently avoided. As a result their dreams and desires of going into a college is completely wiped off because they cannot afford tuition fees and are not able to acquire financial aid because of merit (Heller & Marin, 2002). Meanwhile this paper is an attempt to explore and highlight the issues and concerns related to affordability factor in order to achieve higher education, furthermore possible remedies and solutions will also be engrave in this paper pertaining the context of ambiance of higher education. Moreover American Association of States Colleges and Universities (AASCU) public policy agenda will also be explored in this paper as this has mainly to deal with ensuring the goals of higher education are met in perpetuity. Similarly role of Federal government and AASCU in terms of ensuring higher education considering the affordability factor will also be scrutinized and the role of Ohio State (Ohio Board of Regents) in making ways and successfully achieving goals and initiating new plans in this regard will also be the part of this paper. HISTORY: Initially higher education institutions in the United States were only focusing on providing services to elites and to those who were willing to join the Christian religious groups (clergy) (Thelin, 2004). However this perception of people has undergone a change because of the continuous evolution in purpose of higher education from that particular point. Similarly a major shift of trend was seen after the end of World War 2 as people were seen applying for universities and colleges more than ever before. As a result sudden and drastic change was seen in terms of enrolment in the universities and colleges (Newman, Couturier & Scurry, 2004). It was soon after then when emphasis on higher education was given by many, which also resulted in making ways of easy accessibility of higher education, as Federal government at that time showed keen interest in covering the tuition fees for students who were willing to go to college. Various initiatives were taken by Federal government in this regard. For instance the impacts created by Pell Grants were phenomenal. Pell Grants has shown enormous increase over the passage of four decades. In 1973 the amount of Pell grant were 122 million dollars which showed dramatic increase over decades and reach up to the value of 11 billion dollars in 2004 (Boehner & McKeon, 2003). Furthermore besides these grants that were offered by the government, federal government also initiated helping students and fulfilling their financial needs in order to help them and provide them with all the necessary solutions in order to achieve higher educations. These solutions or helps were in different regards for instance financial support, providing opportunities for gaining higher education or degrees, study opportunities and supporting families in order to pay tuition fees of the institution (Boehner & McKeon, 2003). Despites all the efforts done (rapid growth and financial assistance) and actions taken in providing ease and comfort to families in order to achieve higher education by the federal government, they were unable to control (in terms of muzzling) the increase of tuition fees. As tuition fees manages to increase under all circumstances, besides the aid, support and actions taken by federal government in this regard. Baum and Ma (2010) highlighted the increase of tuition fees by 24% over last five years as a result the average tuition fees for a public sector college according to them is about 20,339$. However there are various arguments that are put forward by different experts in order to find out the reason about this increase of tuition fees. The first and foremost argument put forward by few is that since higher education services (providers) cost more to the institutions therefore they have no option but just to increase the tuition fees for the students as well. Since these high education provider institutions are likely to compete against each other therefore they require services of elites and well qualified teachers which ultimately comes after spending handsome money. As a result the students also have to bear the burden as in most cases the institution is not well capable of meeting the burden all alone (Archibald & Feldman, 2008a). Moreover another important argument in this regard is, that since higher education colleges and universities are likely to spend each and every dollar they earn, and does not consider maximizing their revenue (sources) therefore as a result the cost of higher education shows increase as these universities and colleges require more money every year (Archibald & Feldman, 2008a). Similarly Archibald & Feldman (2008b) further come up with another important argument; they believe that increases in tuition fees is dependent upon four main factors, which are according to them are enlisted below: 1. Higher education in many ways is a personal service industry therefore it requires handsome amount in backings. 2. another important factor is that it is dependent upon educated labor which most of the times is costly 3. Another prime factor is the reliance of education sector on educated labor, which one way or other is resulting in changing or increasing of tuition fees. 4. Another important factor is the use of technology, or dependency upon technology in terms of providing higher education. However if we simplify the above mentioned factors or in general the cost of higher education is mainly increasing because of the fact that the services associated to providing education is costly. Which directly affects the universities and institutions therefore they further pass this to students who are ultimate source of generating these resources by paying tuition fees etc (Archibald & Feldman, 2008b). Meanwhile another important argument is that since states are decreasing financial assistance to the institutions therefore these institutions are passing these costs towards the student s as a result increases in tuition fees are shown (Finney & Kelly, 2004). Students who are willing to pursue higher education and do not have enough financial backings have no options but to opt for or rely on these financial aids. As can be seen from the past that the number of students using these financial aids (federal loans) have shown increase in the last decade. This increase is from 23% to 35% (Baum & Payea, 2010). Similarly Baum & Payea (2010) further revealed that almost 69% of assistance (financial) is sponsored by Federal loans, institutions are the second major player in terms of providing financial assistance and share 16% financial assistance come from them, 3% comes from Pell Grants and 9% financial assistance comes from private sectors (Baum & Payea, 2010). As a result students who acquired financial assistance undergoes a series of burdens for instance the first and foremost burden is that they have to repay this loan with interest which in many ways possessed great threat to these students and may also result in affecting the ability of the students in some ways. Therefore all necessary measures should be taken in order to cope up with these issues, and affordability factor should be dealt with utmost care and delicate intelligence, if these issues are not resolved or considered, there are possibilities that students are likely to be diverted from these kinds of systems and will seek for alternatives. Furthermore this financial burden is likely to affect the low income families, as they do not have enough resources to pay for higher education, therefore they will be reluctant in terms of going for higher education as a result educational gap will be definite. This in the longer run will further create catastrophic conditions and can result in increasing the poverty cycle in perpetuity (Reed & Szymanski, 2004). Meanwhile American Association of States Colleges and Universities has succinctly highlighted these weaknesses and measures are also taken in order to provide ease to students and also to deal with the affordability issues. MIDDLE CLASS AND AFFORDABILITY: Section 529 in general deals with the tuition program of the states and can be classified into two different types, the first type is somewhat prepaid tuition plans and the other type is saving plans (college or higher education). Keeping in view that this section (529) is very much closely monitored by states. For further understanding one can consider the views and sayings of department of treasury according to which they define prepaid tuition as follows: In the case of prepaid tuition plan, students buy credits prior to the commencement of classes and later attend those classes in the institutions which they bought these credits hours from. However in terms of college saving plans, investment accounts are operated considering gathering of investment earnings which are free from taxes (federal). Furthermore these accounts distributions are also excluded from federal tax or in other words they are tax free provided these saving accounts are used for bearing higher education expenses, however both above mentioned types of 529 sections plans ultimately receive same treatment or in simple words receive same benefits in terms of federal taxation (The Department of treasury, 2009, pg 1). Similarly section 529 serves various different functions and in many ways is helpful for students group (income based) who are seeking higher education. For instance exemption on federal tax is given to those accountholders who are likely to use their savings for attaining higher education. These expenses may include cost of books, tuition fees, equipment used for studies etc (The department of treasury, 2009). Moreover the treasury department further believes that sections 529 plans are very much beneficial for students who are seeking higher education because they offer tax free and other important investment options to opt from, for instance aged based investment option (The department of treasury, 2009). In order to make section 529 plans more attractive and purposeful for middle class families, various recommendations were put forward out of which some important ones are highlighted in this paper, the first recommendation was to increase the volume of age based funding, as at present only half of the different states of US offers funding i.e. aged based besides its successful contribution on the other states as well (The Department of Treasury, 2009). Another important recommendation or suggestion was to avoid bias or favoritism in terms of supporting or giving funds to home state (home state bias). This one way or other will ease and make new ways for bringing more investments in the system and also will enable lowering of fees for students or consumers. Moreover another important recommendation by the department of Treasury was to put limitation, in terms of augmentation per beneficiary, furthermore along with the above mentioned grants, support grants from states to match augmentations and combining or mixing the both types of grants of section 529 plans (The Department of the Treasury, 2009). One final recommendation that in many ways can be considered as the part and parcel of the system is the persuasion of federal and state governments in order to enhance and amend transparency of information regarding the 529 plan, moreover ensuring strengthening of the monitoring system in terms of rules and regulations (compliance) of section 529 plan (The department of treasury, 2009). By considering the above mentioned suggestions and if these suggestions are likely to be implemented in the system, it can give various different benefits in perpetuity. As these suggestions will likely to benefit middle class families in terms of affordability of colleges for e.g. by offering tax free saving plans. LOWER CLASS AND AFFORDABILITY: In order to analyze and address affordability issues in lower class income group, the Advisory Committee on Student Financial Assistance (ACSFA) has taken keen interest and highlighted some of the issues in lower class household, in their researches considering the academic preparation as the key guideline. According to their research which revealed that higher education students are well aware of the options available to them, they have clear knowledge about grants and have clear understanding and access to these grants. However research further revealed that besides the knowledge these students possess regarding the process and availability of grant aids, still there is a continuous declination (in terms of amount of aid to these students) is seen (ACSFA, 2010). Considering the inflation rates these specific grants to lower income groups are not able to provide help and support to these groups as the tuitions fees showed great amount of increase over the past few years because of inflation. Therefore this is one of the major sources of concern which requires loads of efforts; as a result ACSFA offered some recommendations in order to cope up with the issues related to affordability. Among these recommendations some of the important ones are highlighted in this paper. The first and foremost recommendation is for federal and state government, which is to further increase the grants or aids in terms of the basis of need. Another recommendation was to curtail the reliance on these aids and loans (students). And finally credibility and effectiveness of waver of loans on the national levels (forgiveness) programs should be assayed (ACSFA, 2010). POLICY ACTORS AND ACCOUNTABILITY ISSUES: The Role of AASCU as Policy Actor: American association of states colleges and universities (AASCU) represents more than 400 institutions across America and act as a leader or head for more than 3.9 million students who goes to these universities and attend their classes there. The prime focus of AASCU is to ensure that each student who is in need of financial assistance (loans) can be provided help in this regard; furthermore AASCU ensures that those students should not bear undue debt (burden). AASCU devised a model, according to which they have proper and clear understanding of the role played by different groups for instance the federal, state, family and institutions. Furthermore federal support for student which in most cases is significant is the base of AASCU with their prime focus is to meet and cater the need of low income students or individuals (AASCU, 2012)1. AASCU works as a legal advisor (advocacy group) for more than 400 institutions, they help in drafting, creating, endorsing and backing student policy agenda. And are active player since many years. AASCU highlights different issues related to student funding and affordability, for instance in last year AASCU brought core issues up front, which were access and attainment, affordability, competitiveness and accessibility, however these issues are core components of AASCU public policy agenda from past till today (AASCU, 2011, 2012). AASCU in order to cope up with the issue of affordability has come up with the financial model, whose whole and sole purpose is to make ways for students (create opportunity), so that they can attain higher education regardless of the class or status they have or the income group they belong from. Meanwhile main ingredients of this finance model were crafted considering the important factor of responsibility, not only for the families or for the states, federal but also for the institutions as well. In simple words its prime focus was combine responsibility of all the actors in order to reach towards the goal collectively and purposefully (AASCU, 2011). The main ingredients for this plan (financial model) include four key factors, which are Minimize or limited student debts. Flexible loan repayments methods should be put to practice for students regardless of all income categories. Working opportunities should be available (or created) for students; furthermore study opportunities should also be created considering financial feasibility for students. Transparency should be maintained in giving education tax benefits (AASCU, 2011, pg 9). In order to accomplish the mission of AASCU, federal government was requested to increase their contributions in terms of providing with more funding in the Pell grants. According to AASCU PUBLIC POLICY AGENDA OF 2011 the appropriations for Pell Grants should be increased to 4860$ and allotment should be given to low income students up to maximum value possible (AASCU, 2011). Moreover they further requested those students who have low income, their tuition fees should be given (paid) from federal grants, and all necessary measures should be taken to ensure that these grants (tuition fees) should not be asked to pay back from these low income students. Furthermore another important proposition was requested by AASCU to higher education institutions. Asking them for increase support in terms of financial aid for low income students and also to generate and provide work study opportunities for them as well. For doing that so Levering Education Assistance Program (LEAP) (funds) should be put in practice effectively, to ensure that funds are used in terms of fulfilling need of the students (need based usage of funds). Meanwhile limitations should also be imposed for students (undergraduate) who are willing to avail the options of loan for their studies (AASCU, 2011). Higher education one way or other has great importance and states and lawmakers should realize its importance, more efforts should be done in providing grants for students especially on the basis of need. Moreover nontraditional students should also be considered by these law makers and policy makers in order of giving grants and tax credit should be given to employers who are promoting post secondary enrolment (AASCU, 2011). The Role of Federal Government as Policy Actor: After Obama became President of USA in 2008, since then special emphasis was given by President Obama in order to provide an atmosphere where college education is more affordable for the masses (The Department of the Treasury, 2009). For doing that so Obama has created various different committees and tasks forces whose main purpose is to deal with the issues related to higher education and also finding ways and solutions to further bettering these higher education providing institutions across the US. The department of Treasury was made answerable to above mentioned task forces and committees, in order to evaluate the issues and problems of middle class considering the section of 529 plans and further searching for ways how these 529 planning should best work for middle class in terms of providing them benefits. Moreover low income group were also considered in order of giving grants to them, for doing that so Advisory Committee of Student Financial Assistance was assigned this task so that need of low income people should be catered in this regard (The Department of the Treasury, 2009). Role of State as Policy Actor: Finney and Kelly (2004) very succinctly pointed out the reason of increasing tuition fees, according to them one of the main reasons for this increase in tuition fees is because of lack of appointments carried out by states in higher education sector. As a result this one way or other affects the students because these operational costs are transferred towards students from these institutions as they have no other options to rely on. However state one way or other can act as a major contributor in terms of providing ease to students in the matters related to affordability, by offering number of financial assistance to the students and also by providing financial aids and grants. According to Baum & Ma (2010) one fine example in this regard can be state of Ohio, which only give 5.60$ to higher education institutions per 1000$ income (personal). This is a dollar less then national average. Different problems and obstacles were highlighted which were in many ways affecting the policy of states towards gaining higher education by analyst of team of American Association of States Colleges and Universities (AASCU, 2011). According to their analysis one of the main reasons is weak economic recovery as this in many ways affects the overall economic situation of the country and therefore also affects the states policy towards higher education. Weak job markets are another main obstacle in this regard. Moreover besides the improvements which are seen in a recent past, still there are many states that are lacking in terms of fulfilling their financial needs as a result they show reluctant behaviors towards providing funds to institutions. For instance four year institutions for higher education showed decrease (in monitory funds) of 11.2% in the Ohio state (AASCU State Relations and Policy Analysis Team, 2011). SUGGESTIONS AND IMPACT OF POLICIES ON HIGHER EDUCATION: Performance Based Funding: In terms of providing solutions to these above mentioned problems one suggestion is performance based funding as Harnisch (2011) pointed out that “PBF represents a fundamental shift in higher education finance, a shift from state inputs to campus outcomes, and from institutional needs to state priorities” (pg 2). Performance based funding is fruitful in so many ways as it gives luxury to maintain intellectuals within the capacity of the states. As performance based funding is likely to enhance and create competition amongst students, as a result these students are likely to work hard in the high school and will ultimately try to gain these funding through dedication and hard work. As a result overall quality of education system is likely to be improved by adopting this strategy across all states of US (Henry & Rubenstein, 2002). Practically state of Ohio has adopted performance based funding and is reaping fruits from it in perpetuity. Through implementing performance based funding around the state they are in many ways creating a competitive environments for students, as a result talented, intellectual and competitive students are enrolling in the public universities which are likely to play active role for the country and for their families in the future. Need Based Funding: Need based grant (aid) possess both positive and negative affects to the systems as highlighted by The Advisory Committee on Student Financial Assistance (ACSFA). If implemented upon low income families this system is likely to support them in many ways. As increasing Need Based Grant will give low income families a chance to gain higher education by availing the funds or grants. However negative consequence of Need Based Grant is also one of the important considerations, as it directly or indirectly results in creating burden for states, especially for those states that are going through financial turmoil. As these states are less likely to cope up with the issues related to harmonizing their budgets. Meanwhile Bureau of Labor Statistics confirms that government has to get rid of almost 100,000 jobs since 2009, in order to cope up with issues related to reduction of salaries or pay rolls (AASCU State Relations and Policy Analysis Team, 2011). Ohio Enterprise University Plan: Ohio University comes up with very interesting plan (enterprise plan) in order to resolve the issue of performance based funding and need based funding. They adopted this policy and were successful in reaping fruits from it. This policy works both for the university and for the states as well. For instance universities are given long term grants in order to cope up or improve their standards. Without being worried about budgets and finance. In terms of states they are likely to be benefited because this system will ease pressure from the general assembly in terms of funds allocation. Moreover this enterprise plan is very much affective in terms of looking and attracting potential students in the Ohio institutions by offering funds grants on the basis of pure merit. This ultimately results in managing and muzzling the talent and intellectual students within the Ohio reach. Section 529 Plans: There are various number of benefits that come as a results of section 529 plans, the first and foremost is that it provides access of higher education to middle and lower income classes. As the benefits of getting higher education is many. Educated population is more likely to enhance the social climate of the country but also helps in creating a healthy financial environment as well. Unfortunately in my view the people of our country US are too much depending upon the aids and grants. Though they are keen on getting higher degrees but their dependency is far more as per my liking. Moreover these plans are very much important for achieving higher education and in many ways creating accountability in the public especially for lower and middle class income families. They are not beneficial only for families but are beneficial for the government and the institutions as well. The state of Ohio is considered to be the best practitioner of 529 plans in the whole US. CASE STUDY: OHIO UNIVERSITY ENTERPRISE PLAN: The board of governors and general assembly of Ohio University were amongst the pioneers who have very succinctly highlighted the issues and problems related to higher education. And therefore they devised plan accordingly in order to cope up with this issue. The members of board of Regents have crafted and drafted Ohio university enterprise plan which main purpose is to serve as a guidelines in order to take line of action for institutions that are large in size (Ohio Board of Regents, 2011). The main theme of this plan was to give luxury to institutions and to free them from various laws which were restrictive in nature. Moreover it further deals with creating more accountability and productivity. Furthermore this plan was devise to attract high quality students and also ensuring that these students are well retained as well (Ohio Board of Regents, 2011). According to Ohio board of Regents (2011, pg12) the enterprise was consist of two phases. The first phase or phase one is likely to shed burden from all 14 universities of the Ohio states, moreover outdate procedures, patterns, rules and regulations are also to be obsolete and replaced by new ones. Meanwhile phase two deals with giving all the above mentioned universities more autonomy (Ohio Board of Regents, 2011). CONCLUSION: Affording higher education one way or other is a major source of concern for not only people of America but is a major problem around the world. At present almost every educated individual understands the value of higher education and the benefits associated with getting higher education. Besides the understanding of benefits related to higher education, students around the world are finding it hard to afford tuition fees of the universities because of number of reason out of which poor economic condition is prime source of concern. However in order to cope up with the affordability and accountability issues many suggestions and recommendation have been proposed by AASCU, the federal government and the State government. But nevertheless it’s almost impossible to satisfy needs of many. As different suggestions and recommendations have both positive and negative affects for different group of people. Some appreciate it and others criticize it. One possible solution for overcoming this issue is to increase accountability, provided since US is going through financial turmoil in many ways and is not currently capable of fulfilling the needs of many by providing grants and aiding education therefore accountability of the system would be a good thing. Moreover private sectors should also play an affective part in providing ease and helping the needy at this moment of time. Besides this saving plans is another way that is very much capable of handling the situation provided accountability and transparency should be maintained. Favoritism and bias attitudes should also be avoided. References AASCU. (2012). 2012 Public Policy Agenda. Washington, DC: ASSCU. Retrieved October 28, 2012, from http://www.aascu.org/uploadedFiles/AASCU/Content/Root/PolicyAndAdvocacy/PublicPolicyAgenda/2012ppa.pdf AASCU State Relations and Policy Analysis Team. (2011). Dynamics affecting public higher education financing in fiscal year 2012. Washington, DC: AASCU. Advisory Committee on Student Financial Assistance. (2010). The rising price of inequality: How inadequate grant aid limits college access and persistence. Washington, DC: U.S. Department of Education. Archibald, R. B., & Feldman, D. H. (2008a). Explaining increases in higher education costs. Journal of Higher Education, 79(3), 268-295. Archibald, R. B., & Feldman, D. H. (2008b). Why do higher-education costs rise more rapidly than prices in general?. Change, 40(3), 25-31. Baum, S., & Ma, J. (2010). Trends in college pricing: 2010. New York, NY: College Board. Baum, S., & Payea, K. (2010). Trends in student aid: 2010. New York, NY: College Board Boehner, J. A., & McKeon, H. P. (2003). The college cost crisis: A congressional analysis of college costs and implications for America’s higher education system. Retrieved October 28, 2012, from http://cssp.us/pdf/CollegeCostCrisisReport.pdf. Finney, J. E., & Kelly, P. J. (2004). Affordability: Obtaining and making sense of information about how students, families, and states pay for higher education. Change, 36(4), 54-59. Harnisch, T. (2011). Performance-based funding: A re-emerging strategy in public higher education financing. Washington, DC: AASCU. Heller, D. E., & Marin, P. (2002). Who should we help? The negative social consequences of merit scholarships UCLA: The Civil Rights Project. Retrieved October 28, 2012, from http://civilrightsproject.ucla.edu Henry, G. T., & Rubenstein, R. (2002). Paying for grades: Impact of merit-based financial aid on educational quality. Journal of Policy Analysis and Management, 21(1), 93-109. doi: 10.1002/pam.1042 Newman, F., Couturier, L., & Scurry, J. (2004). The future of higher education: Rhetoric, reality, and the risks of the market. San Francisco, CA: Jossey-Bass Ohio Board of Regents. (2011). An enterprise university plan for Ohio. Retrieved October 28, 2012, from http://www.ohiohighered.org/sites/default/files/uploads/enterprise-university-plan/Enterprise-Universities-Plan-WEB.pdf Reed, J., & Szymanski, S. (2004). Free higher education. Academe, 90 (4), 39-43. The Department of the Treasury. (2009). An analysis of section 529 college savings and prepaid tuition plans: A report prepared by The Department of Treasury for the White House Task Force on Middle Class Working Families. Washington, DC: U.S. Department of Treasury. Thelin, J. R. (2004). A history of American higher education. Baltimore, MD: The Johns Hopkins University Press. Read More