As I wrote in a post yesterday, it is standard practice for both public and private colleges and universities to use tuition revenue to provide financial aid. The typical challenge for public institutions is that they don't generate nearly as much revenue as private institutions, and thus don't have as much to contribute to aid. Among public institutions, the other significant challenge to ensuring affordability is convincing administrators to focus aid on financial need, rather than academic merit.
One of the strong points of Chancellor Martin's arguments for the NBP is that UW-Madison ought to be able to use tuition to support need-based aid, if it so chooses. It has chosen to do so recently, under the Madison Initiative for Undergraduates. I base that last statement on the clear upward trajectory of resources for institutional need-based aid (what she says is a 226% increase), shown in a graph provided by the director of financial aid, Susan Fischer, at a recent meeting of the University-wide Committee on Undergraduate Recruitment, Admissions, and Financial Aid-- a committee that I've chaired for three years. I hesitate on the statement just a bit, though, because the use of tuition to support need-based aid does not equate with enhanced affordability unless the approach reduced net price for students and no sticker shock occurred-- two conditions for which I've been shown no evidence.
In any case, let's say this: Martin and I agree that UW-Madison ought to be allowed to use tuition to fund need-based aid if it chooses. The question is how to make that happen. Her proposed approach is the NBP. Here's an alternative:
The Wisconsin Legislature ought to simply change the rules, freeing the Board of Regents to approve the use of tuition in this manner. Individual institutions should submit their requests for using tuition in this way to the Board.
Why this model? And is it feasible?
The Board of Regents needs to set tuition holistically, across all public universities, in order balance students' needs with institutional interests. Sadly, sometime universities act like "Cookie Monster" -- they gobble every dollar then can, and then ask for more. Since funding doesn't equate with quality education, students can get hurt.
Based on the January 2011 report on University of Wisconsin tuition, published by the Legislative Fiscal Bureau, it certainly seems that the Legislature can act to change this rule without the NBP. As author Emily Pope writes, "tuition typically supports only the "instructional" portion of the UW budget. Instructional costs include faculty salaries and fringe benefits, which comprise the largest portion of instructional costs, supplies and services, administration, libraries, student services, and support costs. Exceptions to this occurred in the 1997-99, 1999-01, and 2001-03 state budgets, when the University was allowed to use tuition revenues to support the unfunded portion of the compensation plan for faculty and academic staff, which included compensation increases for faculty and academic staff whose time was spent on activities other than instruction."
The italics are mine. If exceptions have been granted to allow tuition revenue to be used for compensation, why couldn't it be used for financial aid?
Now, I admit-- I am not an expert on these kinds of rules. I am simply hoping someone will read this and explain it to all of us.
***************
On a different but related issue:
Why is it that the NBP does not include language comparable to this language in the Board of Regents current tuition policy?
GPR financial aid and graduate assistant support should "increase at a rate no less than that of tuition" while staying "commensurate with the increased student budget needs of students attending the UW System." In addition, support should
also reflect "increases in the number of aid eligible students."
That's called tying aid to tuition...
Saturday, April 30, 2011
Friday, April 29, 2011
UW-Madison's Average Family Income is $90,000?
Based on the tweets from today's student conversation with Chancellor Martin, there's a big myth running around campus:
No, the average family income of UW-Madison students isn't $90,000.
That number came from reports like these that were discontinued back in 2008. Why were they discontinued? Because the data they are based on is a train wreck. The information comes from students' self-reporting of their parents' income when they were in high school (reporting is done on the ACT questionnaire) and according to UW-Madison's office of academic planning and analysis 30% of UW-Madison students left the question blank (and that percent has been rising over time).
Is it a high estimate? A low one? Well, what we know is that a study done by two La Follette professors using Census blocks to estimate income (better than student self-report most likely) finds that family income at UW-Madison for Wisconsin residents isn't very out-of-whack with Wisconsin family incomes as a whole. For example, families of Wisconsin applicants to Madison have incomes that are 1.2 to 1.3% higher than the state average.
Why don't we have a really accurate measure of family income? Because UW-Madison doesn't ask students to report their family income on their application (for obvious reasons) nor does it require them to complete a financial aid application (otherwise known as a FAFSA). So we only know family income--according to parents--for those who apply for aid. And less than 50% of UW-Madison students apply. That doesn't mean less than 50% are needy; many needy kids don't apply every year because the application is insanely onerous and difficult to complete correctly. In fact, upper-income folks are more likely to complete it, and to do it correctly, because they're hoping to get a loan.
If we really want to promote affordability at UW-Madison we should make FAFSA completion an "opt out" rather than "opt in." This is the kind of nudge behavioral economists love, since it makes the default option less painful (people tend to resort to inaction over action).
Why aren't we doing it now? This did, after all, come up during debates over the Madison Initiative for Undergraduates and I made the proposal directly to Chancellor Martin over lunch in spring 2009.
I can think of a few possible reasons, see which one you think fits:
(1) We are worried about privacy. But remember, you can opt out.
(2) We are worried about deterring students who don't want to complete the form. But remember, we'd only require it after you applied and were accepted, and were able to enroll. Even then, you could opt out.
(3) We are worried about undocumented students. But remember, you can opt out.
(4) We are worried about the increased paperwork and staff time. But think about all of the financial aid $ our students would get at no cost to us (e.g. federal $)
(5) We are worried about our institutional aid costs. The more you identify as needy, the more you have to "hold harmless."
I'm willing to bet that requiring all entrants to complete the FAFSA or opt out would increase the percent receiving Pell by a fair bit, and increase retention rates by getting more students the financial aid they deserve. And once we have more accurate family income information for more than 90% of our population, we'll likely find out that right now our average Wisconsin family income is much lower than $90,000. Under NBP, I'm willing to bet that will change drastically because of (a) an increased perception of elitism, (b) disjuncture from the System, (c) sticker shock, and (d) insufficient discounting over time.
But of course, who am I to make such judgments? We are told, after all, we have nothing to worry about.
No, the average family income of UW-Madison students isn't $90,000.
That number came from reports like these that were discontinued back in 2008. Why were they discontinued? Because the data they are based on is a train wreck. The information comes from students' self-reporting of their parents' income when they were in high school (reporting is done on the ACT questionnaire) and according to UW-Madison's office of academic planning and analysis 30% of UW-Madison students left the question blank (and that percent has been rising over time).
Is it a high estimate? A low one? Well, what we know is that a study done by two La Follette professors using Census blocks to estimate income (better than student self-report most likely) finds that family income at UW-Madison for Wisconsin residents isn't very out-of-whack with Wisconsin family incomes as a whole. For example, families of Wisconsin applicants to Madison have incomes that are 1.2 to 1.3% higher than the state average.
Why don't we have a really accurate measure of family income? Because UW-Madison doesn't ask students to report their family income on their application (for obvious reasons) nor does it require them to complete a financial aid application (otherwise known as a FAFSA). So we only know family income--according to parents--for those who apply for aid. And less than 50% of UW-Madison students apply. That doesn't mean less than 50% are needy; many needy kids don't apply every year because the application is insanely onerous and difficult to complete correctly. In fact, upper-income folks are more likely to complete it, and to do it correctly, because they're hoping to get a loan.
If we really want to promote affordability at UW-Madison we should make FAFSA completion an "opt out" rather than "opt in." This is the kind of nudge behavioral economists love, since it makes the default option less painful (people tend to resort to inaction over action).
Why aren't we doing it now? This did, after all, come up during debates over the Madison Initiative for Undergraduates and I made the proposal directly to Chancellor Martin over lunch in spring 2009.
I can think of a few possible reasons, see which one you think fits:
(1) We are worried about privacy. But remember, you can opt out.
(2) We are worried about deterring students who don't want to complete the form. But remember, we'd only require it after you applied and were accepted, and were able to enroll. Even then, you could opt out.
(3) We are worried about undocumented students. But remember, you can opt out.
(4) We are worried about the increased paperwork and staff time. But think about all of the financial aid $ our students would get at no cost to us (e.g. federal $)
(5) We are worried about our institutional aid costs. The more you identify as needy, the more you have to "hold harmless."
I'm willing to bet that requiring all entrants to complete the FAFSA or opt out would increase the percent receiving Pell by a fair bit, and increase retention rates by getting more students the financial aid they deserve. And once we have more accurate family income information for more than 90% of our population, we'll likely find out that right now our average Wisconsin family income is much lower than $90,000. Under NBP, I'm willing to bet that will change drastically because of (a) an increased perception of elitism, (b) disjuncture from the System, (c) sticker shock, and (d) insufficient discounting over time.
But of course, who am I to make such judgments? We are told, after all, we have nothing to worry about.
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