Evolution of Financial Aid Presented by: Tracy Reisinger Director of Financial Aid Marylhurst University

Evolution of Financial Evolution of Financial AidAid

Presented by: Tracy ReisingerPresented by: Tracy Reisinger

Director of Financial AidDirector of Financial Aid

Marylhurst UniversityMarylhurst University

History of AidHistory of Aid

In the beginning there was nothing…In the beginning there was nothing…

Then there was chaos and darkness…Then there was chaos and darkness…

Nothing’s changed…Nothing’s changed…

Any Questions?Any Questions?

ContextContext

Social and political environmentsSocial and political environments

Public policy considerationsPublic policy considerations

Economic climateEconomic climate

World and national eventsWorld and national events

QuestionsQuestions

Who deserves financial assistance with Who deserves financial assistance with postsecondary education?postsecondary education?

Who benefits from postsecondary education?Who benefits from postsecondary education?

How much should it cost?How much should it cost?

Who should fund it?Who should fund it?

Questions (cont’d)Questions (cont’d)

What form should funding take?What form should funding take?

How should eligibility for it be determined?How should eligibility for it be determined?

How should funding decisions be affected How should funding decisions be affected by social, political, and economic by social, political, and economic changes?changes?

Current IssuesCurrent Issues

Simplification of applicationSimplification of application Elimination of certain income and assetsElimination of certain income and assets Expanded definitions of independent studentExpanded definitions of independent student Non-Financial Aid requirements (such as)Non-Financial Aid requirements (such as)

Selective ServiceSelective Service Drug ConvictionDrug Conviction IncarcerationIncarceration Constitution DayConstitution Day Crime RatesCrime Rates Graduation RatesGraduation Rates

How did we get here?How did we get here?

Beginnings IBeginnings I

Lady Anne’s $100 – 1643Lady Anne’s $100 – 1643 ““Perpetual scholarships” – 1800’sPerpetual scholarships” – 1800’s First unfunded scholarships – 1800’sFirst unfunded scholarships – 1800’s First student loans – 1838First student loans – 1838 First permanently endowed scholarship First permanently endowed scholarship

funds – 1852funds – 1852 Land Grant Act - 1862Land Grant Act - 1862

Beginnings IIBeginnings II

Economic downturn and consequences – Economic downturn and consequences – 1890’s1890’s

First comprehensive state-funded financial First comprehensive state-funded financial aid (New York) – 1919aid (New York) – 1919

First federally funded work-study program First federally funded work-study program - 1934- 1934

Early Developments IEarly Developments I

Veteran’s Readjustment Act – 1944Veteran’s Readjustment Act – 1944 The federal government began its role in The federal government began its role in

financial aid with this actfinancial aid with this act The rationale was that the veteran had earned The rationale was that the veteran had earned

and deserved an educationand deserved an education The country would benefit from the education The country would benefit from the education

of the veteransof the veterans

Early Developments I (cont’d)Early Developments I (cont’d)

Truman Commission – 1946Truman Commission – 1946 First standardized need analysis formula – First standardized need analysis formula –

19531953 College Scholarship Service created – College Scholarship Service created –

1954 1954 Parent’s Confidential Statement - 1956 Parent’s Confidential Statement - 1956

First standardized financial aid applicationFirst standardized financial aid application

Early Developments IIEarly Developments II

National Defense Education Act – 1958National Defense Education Act – 1958 National Defense Student LoansNational Defense Student Loans Graduate FellowshipsGraduate Fellowships

Health Education Assistance Act – 1963Health Education Assistance Act – 1963 Civil Rights Act - 1964Civil Rights Act - 1964

Early Developments II (cont’d)Early Developments II (cont’d)

Economic Opportunity Act – 1964Economic Opportunity Act – 1964 Campus Work-Study (CWS) createdCampus Work-Study (CWS) created Education Opportunity Grant (EOG) createdEducation Opportunity Grant (EOG) created

• Later to become the SEOGLater to become the SEOG Guaranteed Student Loan (GSL) establishedGuaranteed Student Loan (GSL) established

• Later to become the Stafford LoanLater to become the Stafford Loan

Modern Era IModern Era I

Higher Education Act (HEA) – 1965Higher Education Act (HEA) – 1965 The first one and what gets “reauthorized” The first one and what gets “reauthorized”

every “5” years (has taken longer)every “5” years (has taken longer) HEA – 1968HEA – 1968

Maximum loan of $1500Maximum loan of $1500 Interest rate at 7%Interest rate at 7%

Modern Era I (cont’d)Modern Era I (cont’d)

HEA – 1972HEA – 1972 Created BEOG (later to become Pell)Created BEOG (later to become Pell) EOG got an “S” to become SEOGEOG got an “S” to become SEOG Sallie Mae was charteredSallie Mae was chartered State Student Incentive Grants (SSIG)State Student Incentive Grants (SSIG)

(Later to become LEAP/SLEAP)(Later to become LEAP/SLEAP) Proprietary Institutions become Title IV Proprietary Institutions become Title IV

eligibleeligible Part-time students become Title IV eligiblePart-time students become Title IV eligible

Modern Era I (cont’d)Modern Era I (cont’d) The 1970-1980’s were a period of philosophical and The 1970-1980’s were a period of philosophical and

policy change, increased scrutiny and regulation of policy change, increased scrutiny and regulation of programs and practices, appeal to special interest programs and practices, appeal to special interest groups, and movement away from need-based aid.groups, and movement away from need-based aid.

Middle income families (large voting block) noticed the Middle income families (large voting block) noticed the increasing cost of sending kids to college, and that low-increasing cost of sending kids to college, and that low-income families were receiving what looked like a lot of income families were receiving what looked like a lot of aid.aid.

They wanted to know what the government would do for They wanted to know what the government would do for themthem

Private institutions started using own institutional money Private institutions started using own institutional money more strategically to discount their costs for desirable more strategically to discount their costs for desirable students.students.

Modern Era I (cont’d)Modern Era I (cont’d)

Student Loan Marketing Association (Sallie Mae) Student Loan Marketing Association (Sallie Mae) – 1972– 1972

Uniform methodology – 1974 (later to become Uniform methodology – 1974 (later to become federal methodology)federal methodology)

““Financial Aid Form” (FAF) – 1976Financial Aid Form” (FAF) – 1976 HEA – 1976HEA – 1976

Satisfactory Academic ProgressSatisfactory Academic Progress Guarantee AgenciesGuarantee Agencies Consumer InformationConsumer Information MDE’s Authorized (to process FAF forms)MDE’s Authorized (to process FAF forms)

Modern Era IIModern Era II

Middle Income Student Assistance Act Middle Income Student Assistance Act (MISAA)- 1978(MISAA)- 1978 Income limits removed for GSL’sIncome limits removed for GSL’s Expanded Pell Grant eligibilityExpanded Pell Grant eligibility

Modern Era II (cont’d)Modern Era II (cont’d)

HEA – 1980HEA – 1980 U.S. Dept of Education createdU.S. Dept of Education created BEOG renamed Pell with $10 ACABEOG renamed Pell with $10 ACA Common Need Analysis form and formulaCommon Need Analysis form and formula Minimum Room and Board limitsMinimum Room and Board limits Defined Independent StudentDefined Independent Student

• Included definition of student who earned over $4000 prior two Included definition of student who earned over $4000 prior two years and not claimed on parent’s tax return (definition of “self-years and not claimed on parent’s tax return (definition of “self-sufficient”)sufficient”)

Four year cap eliminated for PellFour year cap eliminated for Pell NDSL (now Perkins loan) Interest Rate increased to 4%NDSL (now Perkins loan) Interest Rate increased to 4% GSL rate 7% to 9% for first time borrowersGSL rate 7% to 9% for first time borrowers PLUS loans (for parents)PLUS loans (for parents)


Omnibus Reconciliation Act – 1981Omnibus Reconciliation Act – 1981 Tightened Pell Grant eligibilityTightened Pell Grant eligibility Made GSL need-basedMade GSL need-based GSL origination fee 5%GSL origination fee 5% Eliminated $10 ACA for GSLEliminated $10 ACA for GSL Pell formula restrictedPell formula restricted


Solomon Amendment to Defense Solomon Amendment to Defense Authorization Act – 1982Authorization Act – 1982 Selective Service Registration required for Selective Service Registration required for

Title IV eligibilityTitle IV eligibility(And so the social regulations begin)(And so the social regulations begin)

Gramm-Rudman-Hollings – 1985Gramm-Rudman-Hollings – 1985 Multiple disbursements for GSLMultiple disbursements for GSL GSL checks sent to schoolsGSL checks sent to schools Title IV aid denied to loan defaultersTitle IV aid denied to loan defaulters


HEA – 1986 and Technical Amendments – 1987HEA – 1986 and Technical Amendments – 1987 Congressional Methodology (CM – later to be FM)Congressional Methodology (CM – later to be FM) Simplified Needs TestSimplified Needs Test Verification limited to 30%Verification limited to 30% NDSL’s renamed to Perkins loanNDSL’s renamed to Perkins loan Supplemental Loans for Students (SLS) Supplemental Loans for Students (SLS)

(later became Unsubsidized Stafford Loan(later became Unsubsidized Stafford Loan Changed Independent student definitionChanged Independent student definition FFEL Consolidation LoansFFEL Consolidation Loans Professional Judgment for Financial Aid OfficersProfessional Judgment for Financial Aid Officers

Modern Era IIIModern Era III

GSL’s renamed Stafford Loans – 1987 GSL’s renamed Stafford Loans – 1987 Drug Free School and Communities Act – Drug Free School and Communities Act –

1988 1988 Schools must have program to prevent drug Schools must have program to prevent drug

and alcoholand alcohol Crime Awareness and Campus Security Crime Awareness and Campus Security

Act – 1988Act – 1988 Requires collecting and reporting on campus Requires collecting and reporting on campus

crimecrime

Modern Era III (cont’d)Modern Era III (cont’d)

1989 Default rates = 17.6%1989 Default rates = 17.6% 1990 Default rates = 22.4%1990 Default rates = 22.4% Omnibus Budget Reconciliation Act – Omnibus Budget Reconciliation Act –

19901990 Title IV loss at high default rate schoolsTitle IV loss at high default rate schools


The 1990’s were a time of dramatically The 1990’s were a time of dramatically increasing tuition costsincreasing tuition costs

Continued movement away from need-Continued movement away from need-based aid and toward assistance to middle based aid and toward assistance to middle and upper income familiesand upper income families

Federal aid processes, and processes at Federal aid processes, and processes at schools became increasingly automatedschools became increasingly automated


HEA – 1992HEA – 1992 PLUS loan up to full cost of attendancePLUS loan up to full cost of attendance Redefinition of the Independent StudentRedefinition of the Independent Student

• No more “self-sufficiency” definitionNo more “self-sufficiency” definition Mandates CM (FM) for all Title IVMandates CM (FM) for all Title IV ““Free Application for Federal Student Aid” – FAFSA Free Application for Federal Student Aid” – FAFSA Created negotiated rule makingCreated negotiated rule making Stafford loan limits raisedStafford loan limits raised Interest rates are cappedInterest rates are capped Mandated 5% Community Service for CWSMandated 5% Community Service for CWS Mandates refund policy (not yet R2T4)Mandates refund policy (not yet R2T4)


National Service Trust Act – 1993National Service Trust Act – 1993 AmericorpsAmericorps

Student Loan Reform Act – 1993Student Loan Reform Act – 1993 Full Implementation of Direct LoansFull Implementation of Direct Loans Reduced margins on FFELPReduced margins on FFELP Cancelled SLS loan programCancelled SLS loan program Reinstated PJ for Pell GrantsReinstated PJ for Pell Grants

Violent Crime Control and Law Enforcement Act Violent Crime Control and Law Enforcement Act – 1994– 1994 Eliminated Pell for incarcerated studentsEliminated Pell for incarcerated students


Improving America’s Schools Act – 1995 Improving America’s Schools Act – 1995 Student Right to KnowStudent Right to Know Direct Loans renamed to Ford Direct LoansDirect Loans renamed to Ford Direct Loans

FAFSA on the Web – 1997FAFSA on the Web – 1997 Taxpayer Relief Act – 1997Taxpayer Relief Act – 1997

Hope ScholarshipHope Scholarship Lifetime Learning Tax CreditLifetime Learning Tax Credit

Modern Era III (cont’d)Modern Era III (cont’d) HEA – 1998HEA – 1998

SSIG renamed LEAPSSIG renamed LEAP Parent in college FAFSA change (no longer counted Parent in college FAFSA change (no longer counted

in college)in college) R2T4 created (but not required until 2000)R2T4 created (but not required until 2000) Community Service requirement for CWS increased Community Service requirement for CWS increased

to 7%to 7% Loss of Title IV for drug convictionsLoss of Title IV for drug convictions Authorized ED-IRS database matches (still not in Authorized ED-IRS database matches (still not in

effect)effect) Clarified professional judgment (due to abuse by Clarified professional judgment (due to abuse by

some schools)some schools) Teacher loan cancellation (has it ever been funded?)Teacher loan cancellation (has it ever been funded?)

Modern Era IVModern Era IV

The 2000’s were and continue to be an The 2000’s were and continue to be an era with regulatory and complexity era with regulatory and complexity increasesincreases

Continued movement away from need-Continued movement away from need-based aid programsbased aid programs

Reathorization delay (10 years) longest Reathorization delay (10 years) longest ever required 14 CR’s to keep aid ever required 14 CR’s to keep aid programs operatingprograms operating

Modern Era IV (cont’d)Modern Era IV (cont’d)

P.L.107-139 (2002)P.L.107-139 (2002) Changed loan interest rates from variable to Changed loan interest rates from variable to

fixedfixed Variable rate on old loans hit new lowVariable rate on old loans hit new low Consolidation possible for continuing students Consolidation possible for continuing students

(closed loophole in 2005)(closed loophole in 2005)


Higher Education Reconciliation Act – 2005Higher Education Reconciliation Act – 2005 $12.7 billion cut from student aid$12.7 billion cut from student aid Continued freeze on Pell Grant maximumContinued freeze on Pell Grant maximum ACG and SMART grants createdACG and SMART grants created

• First time Feds get into realm of merit aidFirst time Feds get into realm of merit aid Fixed Stafford and PLUS interest ratesFixed Stafford and PLUS interest rates Graduated reduction in loan feesGraduated reduction in loan fees Some annual loan limits increasedSome annual loan limits increased Creation of Graduate student PLUS loansCreation of Graduate student PLUS loans


Ethical, misconduct, conflict of interest Ethical, misconduct, conflict of interest allegations – 2007allegations – 2007

Increased scrutiny of financial aid administrators Increased scrutiny of financial aid administrators and lenders – 2007and lenders – 2007

College Cost Reduction and Access Act – 2007College Cost Reduction and Access Act – 2007 Created TEACH Grant (thinly veiled loan forgiveness Created TEACH Grant (thinly veiled loan forgiveness

program)program) Cut interest rates for subsidized Stafford loans for Cut interest rates for subsidized Stafford loans for

undergraduate studentsundergraduate students Made changes to FM increasing average need againMade changes to FM increasing average need again

Modern Era VModern Era V

Higher Education Opportunity Act – 2008 Higher Education Opportunity Act – 2008 Created sweeping changes to many aspects Created sweeping changes to many aspects

of aid programs that are still being discussed, of aid programs that are still being discussed, regulated and implementedregulated and implemented

Economic downturn (“credit-crunch”) hurt Economic downturn (“credit-crunch”) hurt lender liquidity on heels of allegations of lender liquidity on heels of allegations of misconduct and subsidy cuts.misconduct and subsidy cuts. Many lenders leave FFEL programMany lenders leave FFEL program

Modern Era V (cont’d)Modern Era V (cont’d)

HEOA - 2008HEOA - 2008 Self-certification required for private loansSelf-certification required for private loans Drug and Alcohol Abuse PreventionDrug and Alcohol Abuse Prevention Transparency in College Tuition for Transparency in College Tuition for

ConsumersConsumers


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Schools required to post “Net Price Schools required to post “Net Price

Calculator” on institutional web-sitesCalculator” on institutional web-sites Cost of attendanceCost of attendance Amount of need-based aid and merit-based Amount of need-based aid and merit-based

aid available (as must as practicable)aid available (as must as practicable)


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Litany of consumer information must be posted on Litany of consumer information must be posted on

college web-sites (such as)college web-sites (such as) Average annual grant amount (federal, state, and institutional Average annual grant amount (federal, state, and institutional

aid) awarded to first-time full-time UG students enrolled who aid) awarded to first-time full-time UG students enrolled who receives financial aidreceives financial aid

Total annual grant aid awardedTotal annual grant aid awarded Average annual loans provided to enrolled studentsAverage annual loans provided to enrolled students Number of students receiving Pell GrantNumber of students receiving Pell Grant Cohort Default RateCohort Default Rate Link to Bureau of Labor Statistics web-site that provides Link to Bureau of Labor Statistics web-site that provides

information on regional starting salary data in major occupationsinformation on regional starting salary data in major occupations


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Multi-year tuition calculator to help current Multi-year tuition calculator to help current

and prospective students estimate the and prospective students estimate the amount of tuition they may pay to attend in amount of tuition they may pay to attend in future yearsfuture years

Includes extensive disclosure Includes extensive disclosure requirements, for lenders and institutions requirements, for lenders and institutions participating in “educational loan participating in “educational loan arrangements”.arrangements”.


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Increased preferred lender arrangement regulationsIncreased preferred lender arrangement regulations Increased Pell Grant Authorizations Increased Pell Grant Authorizations

But not appropriate funding for higher authorizations as in pastBut not appropriate funding for higher authorizations as in past Implements “Year-Round-Pell” where student can Implements “Year-Round-Pell” where student can

receive up to two years of Pell Grant in one academic receive up to two years of Pell Grant in one academic yearyear

Puts back time-limit on Pell Grant (4-year cap had been Puts back time-limit on Pell Grant (4-year cap had been removed in 1980)removed in 1980)

18 semesters or its equivalent18 semesters or its equivalent


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Eliminates Pell eligibility for sexual Eliminates Pell eligibility for sexual

offensesoffenses Extends eligibility for TRIO programExtends eligibility for TRIO program Eliminates all Veteran’s Benefits from Eliminates all Veteran’s Benefits from

being considered as resource for financial being considered as resource for financial aid eligibilityaid eligibility

Changes Cohort Default Rate to be based Changes Cohort Default Rate to be based on 3 years (was 2 years) from repaymenton 3 years (was 2 years) from repayment


HEOA – 2008 (cont’d)HEOA – 2008 (cont’d) Increased annual and cumulative loan Increased annual and cumulative loan

limits for Perkins loanlimits for Perkins loan Increased definition of dependent studentIncreased definition of dependent student

Students in foster care or wards of courtStudents in foster care or wards of court Homeless YouthHomeless Youth

Additional requirements if school has Additional requirements if school has recommended lender list (FFEL program)recommended lender list (FFEL program)

Mandates schools have a code of conductMandates schools have a code of conduct

Where We Are NowWhere We Are Now

Consumer information and all the new Consumer information and all the new “Transparency” rules in where policies can “Transparency” rules in where policies can be found that school’s are struggling with, be found that school’s are struggling with, all came about after years and years of all came about after years and years of cumulative, unique, minute, and “irrelevant cumulative, unique, minute, and “irrelevant to aid eligibility” regulations.to aid eligibility” regulations.

SimplificationSimplification

Increased ability to get “Auto-Zero” EFCIncreased ability to get “Auto-Zero” EFC Increased ability to qualify for “Simplified Increased ability to qualify for “Simplified

Needs-Analysis”Needs-Analysis” Elimination of certain types of income and Elimination of certain types of income and

assetsassets Increasingly easy to become independentIncreasingly easy to become independent Makes easier to qualify for aidMakes easier to qualify for aid

Still limited fundingStill limited funding Not enough aid to fill the increased needNot enough aid to fill the increased need

Why do we do it?Why do we do it?

““To give away money is an easy matter and To give away money is an easy matter and in any man’s power. But to decide to in any man’s power. But to decide to whom to give it, and how large and when whom to give it, and how large and when and for what purpose and how, is neither and for what purpose and how, is neither in every man’s power, nor an easy matter. in every man’s power, nor an easy matter. Hence it is that such excellence is rare, Hence it is that such excellence is rare, praiseworthy and noble.”praiseworthy and noble.”

- Aristotle - Aristotle

Questions?Questions?

Tracy ReisingerTracy Reisinger

Marylhurst UniversityMarylhurst University

[email protected]@marylhurst.edu

503-699-6253503-699-6253

Documents

Evolution of Financial Aid Presented by: Tracy Reisinger Director of Financial Aid Marylhurst University