A Failing Financial Aid System Keeps Students Out of College

Ralph Perri, director of financial aid at the Texas A&M-Kingsville campus, says he tries to make sure that the poorest students get enough grants and low-cost loans to cover all their costs. But there simply isn't enough grant money to give students everything they need. The approximately $400 million the state of Texas is spending on grants this year doesn't even cover half the students who qualify. That means that tens of thousands of families such as the Rudolphs, who have proved they need money for college even under today's stingy rules, get no grants at all. They simply have to borrow more, work more, or scale back their educational ambitions.

Meagan Rudolph will fund her sophomore year by working and borrowing more to supplement her parents' contribution of $2,000 to $3,000. Her younger sister, Elizabeth, will work this fall instead of enrolling as a freshman. She's considering taking a correspondence course or two and hopes to enroll at the nearby Corpus Christi campus of Texas A&M this spring. The precariousness of their children's college funding worries the Rudolphs. They each had to leave college for financial reasons. "We really want to make sure our children get an education. We know how important it is," Jayme says. But how to pay for it? "I feel like I am caught in a trap. I have no retirement if I pay for their college," she adds. "It is really scary."

Getting worse. For the short term, at least, plenty more students and parents are likely to be scared. As job prospects for those with less education dry up, enterprising Americans have little choice but to enroll in college. About two thirds of recent high school graduates now enroll in college, up from less than half in 1980, raising the number of college students by 50 percent to 18 million this year. That means financial aid "is helping more people every year. It is also failing to help more people every year," says Sandy Baum, a Skidmore economist and cochair of the blue-ribbon panel that is calling for financial aid reform.

The few recent hopeful developments, such as the nearly $700 increase in the maximum federal Pell grant over the past two years, have been more than overwhelmed by increases in college bills. The cost pressures are only likely to get worse as economic troubles are forcing many states, including California, Rhode Island, and New York, to consider drastic tuition increases. Meanwhile, the housing and credit crunches are reducing the availability of home equity and private educational loans that many parents had counted on as a last resort. All this means that what Baum describes as the "horrible" gap between low-income and high-income college graduation rates could get worse. The aid system is becoming so dysfunctional, she says, that "at some point it will blow up."

A simpler system. As dire as that sounds, it may the best hope for students for the long term. Members of the Rethinking Student Aid Study Group hope that a growing sense of crisis will rally support for their proposals—the details of which they will release next month—for a simple system that "provides every student with enough grants so that they can succeed and get a bachelor's degree with reasonable amounts of work and borrowing."

They have reason to be optimistic. Both presidential candidates are pushing for financial aid simplification and improvements. A growing number of schools, communities, and donors have started making clearer and more generous financial aid pledges, such as the Kalamazoo, Mich., and El Dorado, Ark., promises, which guarantee full in-state tuition scholarships to kids who pass kindergarten through 12th grade in their communities' public schools. Harvard upped the simplicity and generosity ante late last year when it promised enough grants so that families earning up to $180,000 would be asked to pay no more than 10 percent of their income. And a number of highly selective colleges guarantee that students from families that earn less than $60,000 will receive enough aid to graduate debt free. For the lucky students who qualify for these new programs, such as Victoria Rduch of San Antonio, the outlook is bright.