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States Offer Students an Incentive to Graduate: Money

Stan Jones of Complete College America says “the expectations states have of students are really pretty low.”Stan Jones of Complete College America says “the expectations states have of students are really pretty low.”WASHINGTON — Every year states hand out more than $11 billion in financial aid to college students with no certainty as to whether they’ll ever graduate.

Many states don’t track the money. They simply hand it over and hope for the best, as one educational consultant put it.

It’s a “one-sided partnership,” according to Stan Jones, president of the advocacy organization Complete College America. “The states provide the funds, but the expectations states have of students are really pretty low.”

In Indiana, for instance, only around 40 percent of aid recipients will earn their four-year degrees in even six years, state figures show. That’s lower than the state average for all students. And while 75 percent may be certain they’re on schedule, only half will end up taking the minimum number of credits they need, per semester, to get through.

But things in the Hoosier State and several others are about to change, as states begin to demand something in exchange for their investments: higher graduation rates.

Starting next year, Indiana students will be required not only to start but also to finish 24 credits annually for their aid to be renewed. They’ll be rewarded with up to an additional $600 a year in aid at public colleges and universities and $1,100 more at private ones if they complete 30 credits or more. The idea is to put them on track to graduate within four years.

“We want to make sure we’re getting the best bang for the buck,” said Mary Jane Michalak, Indiana’s associate commissioner of student financial aid. “Right now our students aren’t succeeding, and we believe this keeps them on target and shows them how to get to the goal.”

Of course, there’s always been one powerful incentive for students to finish school: In most states, their eligibility for financial aid expires after the equivalent of four years of study. But to a typical college student, four years can seem very distant. And when the aid dries up, the experts say, some are forced to resort to loans or other ways to pay, and many more drop out.

“It’s the difference between immediate versus distant incentives,” said Nate Johnson, a senior consultant at HCM Strategists, a Washington firm that states often hire to review their education policies. “The fact that I’m going to run out of aid in four years is a lot less pressing than the fact that I need to pay my rent right now.”

Paradoxically, many state financial-aid programs pay for a maximum of 24 credit hours annually—12 per semester—which isn’t enough for a student to reach the 120 credits typically needed to earn a bachelor’s degree in four years. Thirty percent of full-time students at four-year universities and 72 percent at community colleges take even fewer than that and quickly fall behind, Complete College America reports.

“It’s absolutely backward,” Johnson said. “We’ve created a system where we cap (financial aid) at 12 credits (per semester), and the result is students taking a really, really long time to graduate, if they graduate at all.”

Early results in the few states that have started to require that financial-aid recipients take 15 credits a semester, or 30 per year, show that these and other new conditions have begun to nudge success rates higher.

That’s been the case in West Virginia, where about half the students who get state financial aid now are required to take 30 credits annually, said Brian Weingart, senior director of financial aid for the state’s Higher Education Policy Commission. The proportion of these aid recipients who graduate within six years has increased to 70 percent, compared with the average for all students in West Virginia of less than 48 percent.

“The pendulum is swinging from access to success and getting these students a credential, or else there isn’t much to show for the money you’re investing,” Weingart said.

Early results from similar pilot programs in Louisiana, Ohio and New Mexico show that connecting financial aid with meeting certain benchmarks has increased the number of credits earned and the proportion of students who stay in school.

Higher grades also resulted in Louisiana, where the aid was tied, in part, to academic performance. Tennessee gives preference for financial aid to recipients who return from one year to the next. California, Arizona and Florida are testing ideas like these.

In Indiana, more than two-thirds of financial-aid recipients say they’ll take 30 credits per year once it’s a condition of getting the money.

“We shouldn’t view financial aid simply as an entitlement,” said Richard Freeland, the commissioner of higher education in Massachusetts, which is trying the idea of giving some state grant recipients more money the more courses they take, up to an additional $2,000 a year. “I believe that it is reasonable to think of financial aid to some degree as a social contract between the state and the student. The state is saying we are investing in you because not only is it important to you, but it is important to the state.”

Graduating on time not only produces more degree holders in states that are struggling to find qualified employees for high-skill jobs, but it also saves students money. Indiana estimates that each additional year in school costs a student $50,000 in lost wages and additional tuition and fees for which financial aid typically has run out.

There have been similar proposals to tie federal financial aid to graduation rates by forgiving federal student loans for low-income students who graduate within four years, rewarding students with larger grant amounts for taking at least 30 credits per year and requiring students who drop out to pay back the government for any grant money they received.

Nationally, less than 58 percent of students at four-year universities and colleges graduate within six years, and 14.3 percent at two-year colleges within three, according to Complete College America.

Two-thirds of voters whom Hart Research Associates surveyed last fall for HCM Strategists said the highest priority for overhauling the financial-aid system should be to increase the number of recipients who graduate.

Some critics worry that pushing students this way might make things worse, not better. They say that students who already are struggling in school might fail if they’re forced to take more credits, or might switch to the easiest possible majors. At many public universities and colleges, which have suffered years of budget cuts, required courses may be full or unavailable when students need them.

“You want them to finish, but there’s also something to be said for having them learn something,” said Rodney Andrews, an assistant economics professor at the University of Texas at Dallas who has studied state financial-aid programs.

The federal Advisory Committee on Student Financial Assistance said last month that attaching strings to financial aid in order to increase graduation rates is “likely to further undermine the four-year college enrollment, persistence and completion of qualified low-income high school graduates, particularly minority students.”

But two states, California and Colorado, are doing exactly that: using their financial aid money to make institutions graduate more students.

In California, students no longer can use state financial aid to go to universities or colleges that have low graduation and high student-loan default rates. In Colorado, campuses will get more state financial-aid money for students who stay on track to finish their degrees. Colorado also is considering adding a stick to that carrot: cutting financial-aid allocations to campuses that take too long to graduate their lowest-income students.

“There’s got to be accountability,” said Darryl Greer, who focuses on higher education at the William J. Hughes Center for Public Policy at Stockton College of New Jersey. “And who should we hold accountable? The institutions.”

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