What’s wrong with our current approach to financial aid?

(MPR Photo / Alex Friedrich)

I recently attended a financial aid forum hosted by the state Office of Higher Education -- the one where Saint Paul College President Rassoul Dastmozd warned about tying funding too closely to college performance measures.

The forum raised some interesting points, such as how our financial-aid system is essentially a voucher system based on the student-as-customer model -- yet managed by people who don't see the student as the main customer. The system has driven up costs, and tech-related solutions are not necessarily the answer.

The keynote speaker was former Macalester College President Michael McPherson, an economist who's now president of the Spencer Foundation. Joining him were LaShawn Richburg-Hayes, postsecondary-education policy director for the MDRC (formerly known as the Manpower Demonstration Research Corporation), and Zakiya Smith of the Lumina Foundation, who was a senior policy adviser on education in the Obama administration. Gov. Mark Dayton started the forum with a few remarks.

Here are some highlights:

McPherson on the implications of the U.S. government's 1972 decision to give financial aid to students instead of directly to colleges:

"This is a hugely consequential choice that the federal government made. ... So much is linked -- I won't claim completely caused -- but linked to that consequential decision. The existence of for-profit higher education is entirely a consequence of that choice. There were less than half a percent of students in for-profit education before Pell Grants and guaranteed loans came along. Now the share of for-profit institutions is very close to the share of not-for profit private institutions -- it's over 15 percent and growing. ... Because of the design we created, the feds have a really limited toolkit in affecting the undergraduate parts of universities."

McPherson on financial aid as a voucher system plagued by a lack of information for the customer:

"The whole idea of a voucher system is that the parents and students will be smart consumers -- that they will make good, well-informed decisions. We now have a lot of doubt that that really works as well as we think it ought to. ... And for adults, who aren't part of any system of any system of schools, they are really stranded. They're looking at signs on the bus to figure out where they can get a two-year technical degree. A lot of them, we think, make a lot of bad choices. That's the limit of a voucher program if you don't have strong information. ... But we can improve the ability people have to make these choices to have better information on which to base their choices."

Smith on the fundamental thing many low-income student "customers" don't understand about college:

"The piece of nuance that we don't often tell low-income students -- that is ingrained in middle-income and college-going families -- is that the college that you go to matters, and that some colleges are better than others. And that's something that's just so central to middle-income families that it's almost like, 'What? We need to say that? ' That's the challenge we're facing right now."

Richburg-Hayes on how colleges' academic and financial-aid bureaucracy alienate those customers:

"It has astounded me as a researcher to come into colleges to understand the amount of self-efficacy and responsibility that institutions place on students that we would not place on ourselves as professionals. ... When you look at us as professionals, I'm sure every one of us has a smart phone, has alarms on it, has a calendar. And we have people who are able to help us do things. And if we encounter a business that's not conducive to being user-friendly -- if we have to go through various hoops to get anything done -- we oftentimes will go someplace else. But many institutions will not regard students in that way."

Gov. Mark Dayton on just who higher education should be serving:

"My son, Eric was fuming because [one] semester he wanted to take a certain course. ... [But] the administration wouldn't let him switch from one section of another course that was required to another section so that it would fit his schedule. ... And this former CEO [who was with Eric and heard the complaint] gave him this wise smile, and he said, 'You know, Eric, you still don't understand. You're not the customer. The faculty is the customer.' It got me thinking. I went to Yale, and I can count the number of good professors that I had on one hand with fingers left over. My former wife went to St. Cloud State, and she got a much better education. The faculty were there to teach. So I think we need to ask ourselves: Who's the primary customer? Is it the students? Is it the faculty? Is it the institution itself? Is it the bottom-line profits?"

McPherson on how the low-income-student-as-customer approach -- a fundamentally good thing -- has raised the price of college:

"[The presence of more students] has led to a heavy burden on state appropriations. And that has led to on a per student basis big declines in most states in the amount of support per student. It is important to appreciate this is not because costs per student in higher education have been going up fast. The cost ... is actually lower in inflation-adjusted terms at [for example] California State University now than it was in 2000. The problem is the colleges haven't been able to cut fast enough to accommodate the declines in state appropriations ... and state student aid. So what gets called the 'college cost' problem is the college tuition problem. And for public higher education, which is the majority of students, it is driven by public finance changes, not by lavish increases in the spending at these institutions. ... A lot of people face higher tuition, especially middle- and upper-middle-income people going to public institutions. With less support and with more lower-income students going to college, we have more borrowing and more repayment problems."

McPherson on the promise of technology as a solution:

"We have great hope that internet technologies can permit colleges to deliver as-good education for less money. But we don't know whether that'll work or not. We have almost no evidence about that. And people who are confident that this is going to produce a dramatic evolution need to check the data. We just don't know."

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