SUPPORTING ACCESS TO HIGHER EDUCATION: THE COLLEGE PREPARATION AND FINANCIAL ASSISTANCE PROGRAMS OF THE WAR ON POVERTY

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1 SUPPORTING ACCESS TO HIGHER EDUCATION: THE COLLEGE PREPARATION AND FINANCIAL ASSISTANCE PROGRAMS OF THE WAR ON POVERTY Prof. Bridget Terry Long Harvard Graduate School of Education and NBER Forthcoming in The Legacy of the War on Poverty: A 50 year Retrospective Martha Bailey and Sheldon Danziger, Eds. June 2012 The authors address is The author thanks Marc Johnson for his excellent research assistance. All opinions and mistakes are our own.

2 ABSTRACT With the Economic Opportunity Act of 1964 and the Higher Education Act of 1965, President Johnson began an unprecedented period of support to help students pay for higher education. Unlike previous policies, which targeted only specific kinds of students, the War on Poverty introduced and funded broad-based programs meant to help any student prepared academically for college, thus making mass American higher education possible. This period witnessed the introduction of the Educational Opportunity Grants (EOG), a precursor to the Pell Grant, and federally-guaranteed private loans along with the expansion of the National Defense Student Loans (NDSL), later called the Perkins Loan, and federal work study. Moreover, President Johnson aimed to improve opportunities for low-income students by investing in college preparation programs geared towards first-generation and other disadvantaged high school students. As a result, the War on Poverty established an active federal role in supporting college access, one which reverberates today in terms of the financial aid programs that still exist. This chapter will discuss how these programs changed the postsecondary landscape, evolved over time to create the current system, and the consequences of these policies on college student access. The higher education-related programs of the War on Poverty were significant for several reasons. First, they established a significant role of the federal government in higher education, one that has continued to grow over time. Second, the policies put into practice the goal of making higher education available to the population broadly and focused on the needs of individual students in making that happen. Third, the programs establish the basic framework for financial aid that continues today, though there have been changes in the relative balance between programs and which types of students are eligible for aid. Finally, the related legislation acknowledged that financial aid is not enough to support college access. Therefore, several programs were created to address the important roles of academic preparation and information. After introducing the major policies and programs, the chapter will then consider the evidence on the effects of this federal spending on individual outcomes. Have they had the intended effects on improving college access, choice, or persistence? I will begin by tracking the growth of federal spending on higher education and the evolution of enrollment rates generally and by income and race. Then, this review will draw upon the long literature on the effects of financial aid policies. Because it can be difficult to isolate the impact of a federal program, I also draw upon research on smaller programs to infer the likely effects of the national policies. The chapter concludes by discussing the implications of these findings for current policy decisions about how to improve the financial aid system as well as future research. 1

3 I. INTRODUCTION With the Economic Opportunity Act of 1964 (EOA) and the Higher Education Act of 1965 (HEA 1965), President Johnson began an unprecedented period of support to help students pay for higher education. Unlike previous policies, which targeted only a limited set of students, the War on Poverty introduced and funded broad-based postsecondary programs meant to help any student prepared academically for college. With a combination of financial aid and college preparatory programs, the War on Poverty programs were the first major step to making mass higher education possible for Americans. With respect to higher education, the War on Poverty consisted of several financial aid policies. First, there was the introduction of the Educational Opportunity Grants (EOG), a need-based grant program which gave low-income students a form of aid that did not need to be repaid. EOG, as the precursor to the Pell Grant that was created several years later, serves as the foundation of federal financial aid. Additionally, HEA 1965 created the Guaranteed Student Loan Program which consisted of private loans offered to students that were federally-guaranteed. Along with expanding the National Defense Student Loans (NDSL), a direct student loan program later called the Perkins Loan, this time period also marks the birth of widespread student loans. The federal work study program, which was created as part of EOA and later moved to the Office of Education in HEA 1965, rounded out the three major types of financial aid emphasized by the War on Poverty, which still remain a part of the American higher education system. President Johnson also aimed to improve opportunities for low-income students by investing in college preparation programs geared towards first-generation and other disadvantaged high school students. EOA and the Office of Economic Opportunity created Upward Bound, which combined with Talent Search (created in HEA 1965) and Student Support Services (added in 1968), make up the TRIO programs. Designed to help motivate and prepare high school students, these programs provide tutoring, mentoring, information on college opportunities, and assistance completing applications. The sum effect of these programs is that they established an active federal role in supporting college access, one that reverberates today in terms of the programs that still exist. From this point on, 2

4 the federal government would take a lead role in sharing the costs of college with students. The growing role of the federal government in higher education is evident from the increase in expenditures. As shown in Table 1, from to , federal spending on student aid to help finance postsecondary education increased by a multiple of 11 after taking into account inflation. 1 The higher education-related programs of the War on Poverty were also significant in that they focused on the broader population. They served as the first step to increasingly including new groups of potential students to higher education. As such, the policies put into practice the goal of making higher education available to the population broadly and focused on the needs of individual students in making that happen. This was justified with the continuing arguments about the importance of national competitiveness. However, there was new emphasis on educational inequities and helping low-income students. The War on Poverty programs also established importantly the basic framework for financial aid that continues today, though there have been changes in the relative balance between programs and which types of students are eligible for aid. Finally, the related legislation acknowledged that financial aid is not enough to support college access. The concept of broad-based college access can only be possible by acknowledging the importance of preparation and information, and the introduction of the first set of supports to help with these needs is also significant. This chapter will discuss how this collection of higher education policies changed the postsecondary landscape and evolved over time to create the current system. The repercussions of these programs created 50 years ago are evident even today. The combination of grants and loans still serve as the backbone of the American financial aid system, though the purchasing power of grants and the relative balance between grants and loans has shifted from time to time. However, there continues to be a focus on a student s ability to pay, though middle class students have increasingly been included as beneficiaries of federal aid programs given dramatic increases in tuition prices. During the past several decades, there has also been acknowledgement of the importance of program and policy design, and some of the early features of the War on Poverty EOG, such as the delivery mechanism and need analysis, were 1 College Board (2011). Trends in Student Financial Aid. Author s calculations. 3

5 revised shortly in subsequent HEAs and continue to be debated so as to better help low-income students. Moreover, as loan levels have increased, and many students now work significant hours, some have called into question what role loans and work study should play. There is agreement, however, that even more needs to be done in keeping with the goals of the TRIO programs. This chapter is organized as follows. Before providing more background on the major legislation and programs, I begin by discussing the state of higher education shortly before the War on Poverty. Then, I will summarize the goals and significance of the War of Poverty programs. The main focus of this discussion is how the War on Poverty programs and policies changed the status quo and shaped the postsecondary financial aid situation it currently exists. The next section considers the legacy of the War on Poverty by tracking the evolution of federal spending on higher education and enrollment rates generally and by income and race. I will also consider the evidence on the effects of these federal programs on individual outcomes. Have they had the intended effects on improving college access, choice, or persistence? The chapter concludes by discussing the implications of these findings for current policy decisions on how to improve the financial aid system as well as future research. II. SETTING THE STAGE: THE HIGHER EDUCATION CONTEXT BEFORE THE WAR ON POVERTY While the War on Poverty marked a significant step forward in the amount of financial support available to students, it was not the first federal initiative to address issues of college access and affordability. The 1940s witnessed several efforts to provide support to veterans while during the 1950s, aid was extended to students entering certain fields. Still, as evidenced by enrollment trends prior to the War on Poverty, college attendance remained limited to only a fraction of the population, and there were significant gaps in enrollment by income and race (as well as gender). Higher Education Policy before the War on Poverty 4

6 The GI Bill of 1944 is the most significant precursor to the War on Poverty higher education programs. Unlike grants to states or institutions with the purpose of supporting innovation, the GI Bill focused on individual students, in this case veterans. The policy gave veterans support to attend college for up to one year and three additional years for a limited number of veterans with special aptitudes (Cervantes, et al. 2005). As noted by Kim and Rury (2007), hundreds of thousands of former GIs poured onto the nation s campuses, taking advantage of a little heralded program to provide tuition and other benefits to veterans of the recently concluded World War II (p. 302). The authors mark this as the beginning of a remarkable period of expansion in higher education. Around this time, the 1947 President s Commission on Higher Education, more popularly known as the Truman Commission, was also formed to examine the possibility of expanding the role of the federal government with the aim of making higher education equally available to all young people to the extent that their capacity warrants a further social investment in their training. 2 The Commission suggested an expansive and inclusive system in which they estimated nearly half of young people could benefit from postsecondary study (Kim and Rury, 2007, p. 302). They suggested the creation of financial aid for academically-qualified students, and while Congress did not fund the initiative, the recommendation for more broad-based support for higher education served as future inspiration for the War on Poverty programs (Cervantes, et al. 2005). The Commission also grappled with issues of racial integration, which divided the panel as there was not clear support for the idea (Kim and Rury, 2007). Nearly a decade later, President Eisenhower signed the National Defense Education Act of 1958 (NDEA). Similar to previous policies, the aid available through the NDEA was targeted to a special group: students pursuing degrees in science, math, and modern foreign language. Although this program was only intended to be temporary, similar to future programs, it used a need-based formula to provide low-interest loans (Cervantes, et al. 2005). 2 President s Commission on Higher Education. (1947) Higher Education for Democracy: A Report of the President s Commission on Higher Education, Vol. 1, Establishing Goals. New York: Harper & Brothers. 5

7 Higher Education Trends during the 1960s While higher education had been the focus of several previous policies, college enrollment in the early 1960s clearly did not reflect the inclusion of all students. As previous financial support was only directed to specific groups (veterans) or fields (science and math), a college education remained largely out of reach for most students. Median educational attainment levels during this time were far below a college education. According to the 1960 U.S. Census, among persons age 25 and older, men had a median of 10.3 years of education while women had 10.9 years (with 12 years customarily being considered a high school degree). In addition to levels of attainment far below college level for the population overall, there were also large differences in educational outcomes by race. The median educational attainment of White men was 10.7 years while it was only 7.9 years for Black men. As reflected by median educational attainment, many Americans had not even completed a high school degree by Among the population age 25 and older, only 20 percent of Black men and women had completed four or more years of high school while more than double the proportion of White men and women (43 percent) had done so. College completion was understandably at much lower levels. Eight percent and 3 percent of White and Black individuals, respectively, had completed four or more years of college by Early data on the college enrollment rates around the time of the War on Poverty programs confirms that among younger people, there were differences in enrollment by race. Among White high school completers who were 18- to 24-years-old in 1967, 34.5 percent of White students were in degree-granting institutions while only 23.3 percent of Black students attended such colleges and universities. 4 Financial concerns were one likely cause for the lack of college access both overall and for minority students specifically. A comparison of family incomes and college tuition levels in 1965 illustrates how expensive higher education was for the average family. As shown in Table 2, for white 3 Source: U.S. Department of Commerce, Census Bureau, Current Population Survey (2012). Current population survey data on educational attainment. Retrieved from: 4 Source: Digest of Education Statistics (2010) Table 212. Data Source: U.S. Department of Commerce, Census Bureau, Current Population Survey (CPS), October, 1967 through

8 families at the median, the total cost of a public four-year university constituted about 14.5 percent of annual income; for a private university, the percentage was 30 percent. Affordability was an even greater concern for Black families at this time given they made only a little over half as White families. A public four-year university would have cost the median Black family 26 percent of annual income. Inequities in the higher education system by race were also highlighted by the Truman Commission. The Commission noted the system to be largely white, but there was quite a bit dissention among its members concerning what to do with African-American students (Kim and Rury, 2007, p. 320). By 1960, while high school graduation rates had improved for African-American and Hispanic youth, their graduation and college entry rates still lagged significantly behind White students. As summarized by Kim and Rury (2007): While higher education had expanded substantially by 1960, white males continued to predominate on the campuses, perhaps even more than before the war. It was in the 1960s, the decade of civil rights and widespread agitation over issues of equity and social justice, when things began to change (p ). Given affordability concerns even for White students, it is not surprising that there were also gaps in college attendance by income level. Although contemporaneous data is not available, data from 1975 suggests that high-income students, defined as the top 20 percent of the income distribution, were 30 percentage points more likely to attend college the October immediately following high school completion relative to low-income students, defined as the bottom 20 percent of the income distribution. About one-third of low-income students enrolled while about half of middle-income and two-thirds highincome students attended. As such, during the time of the War on Poverty, there was growing concerns about lack of college access to the detriment of individuals and the country as a whole. III. DEFINING THE WAR: THE PROGRAMS AND THEIR SIGNIFICANCE The higher education policies of the War on Poverty largely grew out of a task force created by President Johnson in 1964 to study the role of the federal government in aid. Led by John W. Gardner, 7

9 who would later go on to be Secretary of Health, Education, and Welfare in 1965, the task force decided to focus on helping needy students go to college. This was at least partly motivated by research study that found one out of six students who took the National Merit Scholarship test in high school did not attend college. As such, they recommended grants to very able students who are among the most needy, more extensive use of loans and loan guarantees, and customized aid packages determined by a student s financial need (Cervantes, et al. 2005). With the Civil Rights Act of 1964, the task force and resulting legislation ignored concerns about race and integration, which had plagued earlier efforts to expand financial aid (e.g. the Truman Commission). Instead, similar to the Elementary and Secondary Education Act (ESEA), the administration choose to focus on concerns about national growth and economic prosperity and framed the policies as an attempt to improve the outcomes of poor, low-income students and. The War on Poverty higher education programs were introduced with two major pieces of legislation: the Economic Opportunity Act of 1964 and the Higher Education Act of In quick succession, they established the foundation of the federal financial aid system that largely still exists today. This section outlines what this legislation created and how it originally set up federal student aid. I then note the significance of these programs for higher education policy and how this general framework evolved with several revisions in subsequent Reauthorizations of the Higher Education Act to what we currently have. What is quickly clear is how the role of higher education changed with the War on Poverty: to become a major investment of the federal government and the goal for most Americans. The Legislation and Major Initiatives The Economic Opportunity Act of 1964 (EOA) 5 introduced a number of programs designed to promote health, education, and general welfare, including Head Start and Job Corps. As part of this larger set of programs, the bill created Federal Work Study. This program is geared towards low-income students and subsidizes their wages for work done in a college-sponsored job. Due to his own 5 Public Law No , 78 Stat. 508 (1964) 8

10 involvement in the National Youth Administration, a New Deal project that provided education and jobs to youth ages 16 to 25, Johnson was a great supported of this work program (Cervantes, et al. 2005). EOA also broadly provided for general community action programs, including Upward Bound. While EOA was the first piece of legislation, the Higher Education Act of 1965 (HEA 1965) 6 did more to establish the War on Poverty s imprint on higher education. HEA 1965 not only consolidated the two EOA programs (i.e. work study and Upward Bound) under the Office of Education, it also created several new programs that continue to serve as the backbone of the financial aid system. Title IV of HEA 1965 focuses on the financial aid programs while the other parts strengthen community service programs (Title I), give assistance to library (Title II), support the development of mainly African-American institutions though also including two-year and technical colleges (Title III), and established Teacher Corps (Title V). Part A of Title IV introduced the Educational Opportunity Grant (EOG). Unlike previous programs that focused on gifted or particular types of students, this need-based grant focuses on student who showed academic potential but were unable to pay. To avoid feelings of the federal government overstepping bounds, EOG funds were originally appropriated to states, who then allocated funding to institutions; institutions than decided how to distribute the money to students based on their own need analysis. Therefore one student could get very different amounts of EOG at different colleges and universities based on differences in institutional need analysis. Future revisions (discussed below) changed this model. Part B of Title IV created the Guaranteed Student Loan program. Unlike previous federal loan programs that lended directly to a small group of students (e.g. veterans), this program used private funds but the federal government acted as the guarantor of the loan. This set up solved a problem at the time: low-income students could not provide collateral to secure loans and so lacked liquidity to pay for college costs. By guaranteeing the loans, the private banks were willing to participate in the program. Although the program was conceived to provide financial support to middle-income students too, the federal 6 Public Law No , 79 Stat (1965) 9

11 government provided low-income students (those with family incomes below $15,000) with a subsidy that paid for the interest on the loan while the student was in college. Parts C and D of Title IV moved programs created previously to be under the Office of Education. The first is the Work Study program, which was originally run by the Office of Economic Opportunity. Part D extended the National Defense Student Loans, which were originally enacted as part of the National Defense Education Act of This is direct loan program in which the government provides funds to students in the form of loans. The 1965 legislation included a change that included full loan forgiveness for students if they taught in an underserved area for seven years. In terms of the college preparatory parts of the War on Poverty, HEA 1965 added Talent Search while Student Support Services was added as part of the Reauthorization of Together with Upward Bound, these became the TRIO programs, which assist first-generation and other disadvantaged youth to prepare for and attend college. The services provided include tutoring, mentoring, information or college opportunities, and assistance completing applications. Putting the War on Poverty in Perspective The collection of financial aid policies and college preparatory programs is a significant list of initiatives created and consolidated during a relatively short period of time. This alone is an accomplishment. However, this set of programs represents several significant changes in the role of the higher education and the policies that government it. The War on Poverty did much to change the status quo of educational patterns and shaped greatly the financial aid system that continues to exist today. Below I discuss four major ways in which the world is different because of the War on Poverty programs and policies. (a) Establishing the Significant Federal Role in Higher Education As noted above, the War on Poverty was not the first time the federal government had invested in postsecondary training for individuals. However, 1965 marks an abrupt uptick in federal expenditures for 10

12 college student support. Table 1 tracks federal expenditures on student financial aid, along with those from states, institutions, and private sources, from to Shortly before the War on Poverty, total federal aid was only $1.6 billion in 2010 dollars, and this was mostly due to aid to veterans through grants and the National Defense Student Loans. By , federal expenditures reached over $18 billion (2010 dollars) through a combination of grants ($10.4 billion), loans ($6.6 billion), and work study ($1.1 billion). Such an increase was unheard of previously. Up until that point, there had been reluctance for the federal government to get so involved in the lives of individual citizens with concerns about big brother. Other arguments again federal involvement revolved around racial integration and questions about the support of religious schools (Cervantes, et al. 2005). However, under the War on Poverty, these concerns were diminished in the face of two strong arguments for federal involvement that were carefully framed and solidified during this time. The first was a carryover from earlier decades: national competitiveness. With the Cold War and increasing globalization, policymakers pointed to education as a key factor in economic prosperity. However, heightened focus emerged during this time for the federal government to directly address issues related poverty. In terms of higher education, increasing educational attainment and addressing large gaps in college attendance by income and race were paramount goals. Although not a new concern, the War on Poverty signifies a turning point when the federal government actually put into practice programs and policies that had previously been debated and recommended but not funded. Economic arguments for federal involvement were easily borne out by the educational patterns of the time. Left to its own devices, the market was not producing educational attainment levels that suggested academically-prepared students were attending college in high numbers. Earlier tasks forces had estimated that half of high school graduates would benefit from college attendance, far greater than enrollment rates in practice. Moreover, with the growth of the Civil Rights movement, and passage of the Civil Right Act in 1964, it was becoming less socially acceptable to have such large gaps in attendance by race. One failure in the market was the lack of liquidity, or access to capital, for individuals who might benefit from postsecondary training to make such educational investments. Without collateral or a 11

13 financial track record, talented, low-income students could not secure loans. As a result, the country was forfeiting the private and public returns that could have been realized by students unable to access the higher education system. Such a market failure justifies intervention by the federal government, and so one can easily see the implications of this point in the design of the Guaranteed Student Loan Program. While federal support for higher education increased substantially, concerns about how the federal government would exert its influence were still a matter of debate. As a result, the War on Poverty legislation reflects the delicate balancing act of dramatically increasing the federal role in higher education while still relying on important partners to lessen the appearance of the federal government overstepping bounds. 7 This compromise is evident in the design of some of the financial aid programs. For example, the major grant program, EOG, was not distributed directly from the federal government to students; the funds were given by the federal government to states, then the institutions who awarded it to students. Additionally, in the Guaranteed Student Loan Program, the funds came from private banks, and the federal government just acted as a background actor guaranteeing loan repayment and providing subsidies to the banks. In essence, the federal government became a strong supporter of higher education in the background, though this would change greatly in the years ahead starting with the Reauthorization of the Higher Education Act in (b) The Movement towards Mass Higher Education and Focus on Individual Students A second important distinction of the War on Poverty programs is how they offered support to a broad spectrum of students. With the legislation of 1964 and 1965, the government chose to address the lack of affordability among most Americans. Rather than just focusing on veterans or students with special skills, the aid was meant to be available to any low-income student academically prepared for college. This major departure from previous legislative efforts was partly tied to the market failure justification and concerns about poverty. Rather than focus on gifted students, Johnson is quoted as 7 Similar concerns also influenced ESEA, which created a series of programs geared towards primary and secondary education. 12

14 saying: The important role of the federal government is somehow to do something for the people who are down and out, and that s where its major energy in education ought to go. Summaries of the period confirm Title IV represented the first generally available aid program for postsecondary students (Cervantes, et al. 2005, p. 20). The move from just having a fraction of individuals attend college to a much larger proportion was partly motivated by a series of studies performed by presidential commissions and tasks forces. The Truman Commission nearly two decades earlier had suggested that nearly half of young people could benefit from postsecondary study (Kim and Rury, 2007). Years later, the task force created by Johnson had likewise discovered that among students who took National Merit Scholarship test and had families who could contribute only $300 or less to their educations, about 75 percent of men and 55 percent of women noted that they would have attended college if more money had been available (Cervantes, et al. 2005). The increasing documentation of loss potential beyond just the most talented or the veterans pushed for the expansion of higher education access. The changing labor market also spurred the need to individuals to get more training. While most financial support from states is in the form of appropriations to colleges and universities for operating expenses, which does in turn subsidize the price for in-state students, the federal approach has been much more directly to individual students. Rather than an across-the-board subsidy, much of federal aid is customized to the specific financial circumstances of the individual student. The focus on supporting the individual student and addressing their particular barriers is also evident in how Title IV aid is awarded. While the original EOG funds were distributed by the states, which in turn gave them to the colleges and universities, the clear emphasis was on institutions assessments of a particular student s financial need. This focus on the individual and her choices set the norm for many future aid programs. In fact, as discussed below, with the creation of the BEOG several years later (which later was renamed the Pell Grant), the majority of federal grant funds are customized and go directly to students. EOG and it successors also became the short-hand for identifying low-income students as Pell Grant eligibility is often used as part of need-based programs today. 13

15 (c) Establishing the American Landscape of Aid Programs What may be the greatest contribution of the War on Poverty to higher education is the establishment of the basic aid landscape that continues today. Up until this point, aid programs were small, piecemeal, and geared towards limited goals without much thought to coordination across programs or long-term levels of support. In contrast, the mixture of grant, loan, and work study programs created during the War on Poverty continue to be the predominant forms of financial assistance, though the exact design and relative size of each program has changed over time. (i) The Role of Federal Grants The War on Poverty established grants as the foundation of the aid system: the combination of EOG and grants to veterans and the military quickly became the bulk of student support, constituting 63 percent of total federal aid during However, while much of the War on Poverty rhetoric focused on addressing the needs of low-income students, the EOG was originally smaller than other federal grant programs. It also became clear quickly that its original design was problematic. By allowing colleges and universities to allocate the federal funds to students based on their own institutional assessment of need, two students with the same financial resources and facing the same costs could be awarded very different EOG amounts. The system of federal grants quickly evolved with the Reauthorization of Higher Education Act in 1972 (HEA 1972), 8 which corrected some of the problems of EOG and greatly expanded need-based grants. This was partly spurred by a 1969 report by Assistant Secretary of Health, Education and Welfare Alice Rivlin, which found that income was still the primary determinant of college enrollment (Mumper, 1996). HEA 1972 built from the EOG to create the Basic Educational Opportunity Grant (BEOG), which was renamed the Pell Grant in BEOG provides direct assistance to students rather than having states and colleges act as intermediaries. It also utilizes a centralized need assessment that is defined by the federal government. As such, BEOG took the basic tenets of EOG but corrected some of its design 8 Higher Education Amendments of 1972 (P.L ). 14

16 problems. After 1972, EOG became known as the Supplemental Educational Opportunity Grant (SEOG). As shown in Table 1, BEOG began small in awarding $234 million in aid, but together with, SEOG, these programs quickly formed the core of federal financial support for needy students. In , 9.1 million students received the Pell Grant and 1.3 million students received the SEOG. Together these programs awarded over $35.5 billion (College Board, 2011). While the move towards direct grants to students and centralized need analysis were improvements, one weakness of EOG that remains is the fact that it is not an entitlement program. Congress must appropriate money to the program each year. Failure of action has meant that the value of Pell Grant at times has not kept up with inflation and has trailed rapid increases in college costs. For example, in real terms, the maximum Pell Grant in was $5,064; it was only $4,050 by , a 20 percent decrease after accounting for inflation (College Board, 2006). Recently, federal grant aid has increased due to a combination of increasing the maximum Pell Grant along with changing economic conditions, but there are concerns about the sustainability of this growth (College Board, 2011). (ii) The Increasing Role of Loans Meanwhile, loans have grown in importance. The federal government began with the Guaranteed Student Loan Program, which eventually became the Stafford Loan Program. While the federal role was focused originally on the public nature of educational investments, with large support for grants that do not have to be repaid, over time the focus shifted more to emphasizing the private nature of the return to college and the loan programs grew considerably. For a brief amount of time, subsidized loans were made available to virtually all students in 1978 with the Middle Income Student Assistance Act (MISAA), and the number of guaranteed students loans grew from 1 million in 1978 to 3.1 million in 1982 (Mumper, 1996). However, due to escalating costs, Congress reinstated an income ceiling on subsidized loans in Still, MISAA was the beginning of the creation of several new federal loan programs, including the Parent Loans for Undergraduate Students (PLUS) program in 1980 (Cervantes, et al., 2005). 15

17 With the expansion of loans, the balance between grants and loans in financial aid has greatly evolved over time. Figure 1 graphs the growth of financial aid from (FY1964) to (FY1992). What is evident is the leap in federal expenditures from 1964 to 1970, and this was predominately in the form of grants. However, grant expenditures peaked in 1976, and by the early 1980s, loans had passed grants in terms financial aid expenditures. The role of loans increased even more after 1992 with the Reauthorization of the Higher Education Act (HEA 1992). At this time, the federal government created the Stafford Unsubsidized Loan Program, which joined the Stafford Subsidized Loan Program (the Guaranteed Student Loan Program had been renamed in 1988). This made federal loans available to all students again minus the interest subsidies available to low-income students. As shown in Table 1, during , there was a great leap in loan expenditures the first year after this policy change. HEA 1992 also created a direct lending pilot, in which 300 institutions could get loan funds directly from the federal government, foregoing the involvement of private lenders and guarantee agencies (Cervantes, et al., 2005). Added with the National Defense Student Loan Program, which was renamed the Perkins Loan Program in 1986, the federal government began to increase its involvement in direct lending. Today, loans remain the dominant form of aid, counter to the original intent of the War on Poverty. This is due not only to changes in the importance of different types of aid but also a shifting focus in the target population of federal aid. (iii) The Shifting Focus of Aid The expansion of loan availability to all students highlights the growing attention middle-income students have received in financial aid policy. While the War on Poverty originally focused most of its attention on low-income students, as college costs increased, the concerns of middle class became more prominent. As summarized by President Bush in 1992 with respect to HEA 1992: 16

18 This act that I m signing today gives a hand up to lower income students who need help the most. But is also reaches out into the middle-income families, the ones who skipped a vacation and drove the old clunker so that their kids could go to college. 9 Therefore, while low-income students remain the priority for some forms of aid, the intended beneficiaries of federal financial aid have broadened beyond President Johnson s original conceptualization. Several policy developments illustrate the change in focus. In 1992, along with the opening of student loans to all income levels, federal financial need calculations began to exclude home equity, thereby allowing many more middle class families to qualify for federal need-based support (Schenet, 1993). The shift in focus to middle-class families continued in 1997, when the federal government created the higher education tax credits. As originally designed, families had to have tax liability to reap a benefit, and few families with incomes below $30,000 qualified due to this requirement. Most beneficiaries have had family incomes over $50,000 (Long, 2004). The same is true of the benefits associated with college savings plans. Dynarski (2004), for example, finds that 90 percent of families with a college savings plans had at least a college degree. Ma (2004) finds that the median income among users of these plans was $100,000, far higher than the median income and median wealth among all families in the United States. Undoubtedly, college is a difficult expense for nearly every family to manage. However, the shift of financial aid policy in the context of limited resources has reduced the attention to issues of need that were so fervently pushed for during the War on Poverty. (iv) Other Aid Programs The War on Poverty also created the Federal Work Study program. However, this program has remained small from creation to the present as evident in Figure 1. Still, it is significant that the program acknowledges the role of student employment in paying for college expenses. Students have increasingly sought employment to help with college costs. According to Scott-Clayton (2012), among full-time undergraduates age 18- to 22-years-old, student employment nearly doubled from 1970 to George H.W. Bush, Remarks on Signing the Higher Education Amendments of 1992 in Annandale, VA, July 23, Woolley, John and Gerhard Peters. (2005) The American Presidency Project. Retrieved May 18, 2012 from: 17

19 However, only about one in five working undergraduates receives support from the Federal Work Study Program. (d) Aid is not enough: The Important Roles of Preparation and Information The fourth major contribution of the War on Poverty is the acknowledgement of the importance of support for academic preparation and providing information in making college access possible. The creation of the TRIO programs represents the first major effort to address these issues related to the transition from high school to college. While affordability is a barrier, researchers have increasingly recognized the fact that academic preparation can also be a major barrier. Students often do not finish high school or do so below grade-level competency (Bettinger and Long, 2009), and this affects their ability to access and succeed in higher education. There are also significant gaps in test scores by race and income (Jencks and Phillips, 1998), which has implications for access inequality. Lack of information another important impediment. College attendance is the culmination of a series of steps and benchmarks, and the process is too complex and difficult for many families to decipher and navigate. Research by Kane and Avery (2004) showed that low-income high school students possess little understanding of how to handle this admissions process or knowledge about actual college tuition levels. Other work has also found a significant lack of information among prospective college students in general (Ikenberry & Hartle, 1998; Horn, Chen, & Chapman, 2003). While much more could be done to address these academic and informational barriers, the early attention to these barriers marks another contribution of the War on Poverty. In 2004, about 52,000 students participated in 727 regular Upward Bound projects around the country (Myers, et al. 2004). At least two-thirds of each project s participants must be both low-income and potential first-generation college students. Students typically enter the program while in ninth or tenth grade and may participate through the summer following twelfth grade (most typically remain in Upward Bound for about 21 months). Projects provide students with a variety of services, including instruction, tutoring and counseling. In addition to regularly scheduled meetings throughout the school 18

20 year, projects also offer an intensive instructional program that meets daily for about six weeks during the summer. The vast majority of projects are hosted by four-year colleges (Myers, et al. 2004). IV. THE EFFECTS OF THE WAR ON POVERTY ON COLLEGE ACCESS AND SUCCESS While the War on Poverty created an impressive set of financial aid policies, the true measure of their impact is what effects they have had on making college access a reality. Without the subsidies provided by the programs, it seems highly unlikely that the nation s poor would have been able to capitalize on higher education opportunities. However, affordability is but one issue, and policy design matters for effectiveness. Moreover, as the programs have evolved into the current system of aid, certain tenets of the War on Poverty have lost prominence. This chapter concerns the long term effects of the War on Poverty on college access and postsecondary attainment. I begin by discussing trends in college costs and enrollment. Then, I review the research findings on the effectiveness of the programs. Trends in Spending and Enrollment While Table 1 and Figure 1 give one a sense of how federal expenditures for financial aid increased over time, Figure 2 translates what this support has meant in terms of students. It displays the average amount of aid a full-time equivalent (FTE) student has received overtime after accounting for inflation. Although these figures include aid from states and institutions, the bulk of the funding is from the federal government, and often the other sources of aid are explicitly awarded in relation to the amount of federal aid received (e.g., state aid programs in which eligibility is based on being a Pell Grant recipient). In , the average grant aid per FTE was $3,497; by , it had increased to $6,566. However, there have been periods of reductions and stagnation. For instance, during the 1980s, grant aid amounts fell, and it was not until that the mean grant aid per FTE passed the level of aid in Meanwhile, throughout the period, college prices increased at a rate far greater than inflation 19

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