New proposal for redesigning financial aid outlines path to a debt-free college guarantee

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Ed Trust’s blueprint for college aid improves access, affordability and completion – at no additional cost to taxpayers

Publication date: 
February 14 2013

WASHINGTON (February 14, 2013) — College tuition is skyrocketing, forcing far too many students to take on frightening debt loads. To make matters worse, our financial-aid system is difficult to navigate and burdensome for those who rely on it most. It doesn’t have to be this way.

Doing Away With Debt: Using Existing Resources to Ensure College Affordability for Low and Middle-Income Families,” a new Education Trust report, proposes a redesign of the federal financial-aid system to increase college completion, reduce student debt, and close the opportunity and attainment gaps that consign so many talented young Americans to lives on the margins of our society. The organization calls for a shared responsibility among the federal government, state governments, institutions of higher education, and students themselves to help low-income and working-class students complete college with no loans and middle-income students to do the same with no-interest loans and affordable, income-based repayments.

This proposal couldn’t come at a more appropriate time. While almost half of college-going students borrow to pay for their education, bachelor’s degree recipients leave school with an average of $26,600 in debt, and more than one million Americans have student debt loads in excess of $100,000. Today, even after scholarships and grant aid are counted, the lowest income students must find a way to come up with an amount equivalent to roughly three-quarters of their annual family income to pay for one year at a public four-year college. That’s a recipe for disaster in a nation that already owes more than $1 trillion in student loans.

“Access to a good education should not be determined by whether your parents can afford to pay a premium for it. But every year, high price tags are standing in the way of far too many deserving students. And that has very real consequences for our entire country,” said Kati Haycock, president of The Education Trust. “By redesigning the aid system and better targeting the dollars our country is already spending, we can ensure that more students get to and through college, and set them on a path to a bright future that doesn’t mire them – or our economy – in student loan debt.”

Ed Trust’s debt-free college guarantee will extend to students with family incomes that fall in the bottom 40 percent. Students whose family incomes fall in the bottom 80 percent can receive no-interest loans and an affordable, income-based repayment plan. To receive these benefits, students need to have completed a college- and career-ready course of study in high school, attend college full-time and complete an average of 10 hours of work or service a week, and complete their degrees in a reasonable amount of time.

"For over a decade, we have seen and felt the divestment from higher education. Students from low-income communities and students of color still have the most barriers to entering and finishing college,” said Tiffany Dena Loftin, president of the United States Student Association. “We want an affordable education, and The Education Trust has proposed healthy and smart next steps."

This plan was designed to be cost neutral and executed at no additional cost to taxpayers. To achieve this goal, a series of existing higher education tax, loan, and grant programs would be consolidated and retargeted – while keeping the Pell Grant program intact.

Approximately $24 billion from these existing programs would be shifted to grants to states, distributed based on a state’s percentage of students in poverty and performance on college access, affordability, and success measures. Funds must be spent on higher education, though a portion could be spent on secondary school improvement to ensure that all students are provided with a college- and career-ready course of study with accompanying support services.

“Our proposal would have the federal government stop spending so many billions on the students, families, and institutions that do not need the money and start directing it toward those who do,” said Michael Dannenberg, The Education Trust’s director of higher education and education finance policy and co-author of the report. “For low and middle-income families, debt should be a supplementary feature of our financial-aid system, not its centerpiece.”

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