Financial Aid Trends
By Dr. Gayle Saunders, president of Richland Community College
Originally presented at ICCTA's Sept. 13, 2002
"Trends in Financial Aid" seminar in Springfield, Illinois
Just over a half-century ago, American higher education
was transformed by the GI Bill and its underlying premise that the federal government would
provide significant financial assistance to college students. Today, the student financial
aid provided by federal and state governments stands as the most prominent symbol of the
nation's commitment to higher education opportunity. Student financial aid programs at
all levels of government enjoy broad bipartisan support. If the nation is to uphold
its commitment to democracy through higher education opportunities, policies must be
pursued that will advance that ideal.
According to an old adage, "Before you know where you are going, you've got to know
where you have been!" This adage is very appropriate as we look at financial aid
trends, past, present, and future.
As many of you know, prior to World War II, attending college was an activity reserved
primarily for the few who could afford it or who were bright enough to work their
way through, but most Americans thought of it as a privilege that was unavailable
to them. After World War II, college for the elite was ended with the GI Bill.
A grateful country offered to pay the tuition costs of returning veterans for
attendance at the college of their choice. Colleges were bursting at the seams
with the return of GIs eager to advance themselves.
The GI Bill constitutes higher education's first federal financial aid program
by rewarding veterans for the sacrifices they had made. The bill also assisted
the economy by providing opportunities for veterans to pursue training and education
to increase the number of employable persons. Today, those who perform military
service are still rewarded with financial benefits that assist them through college.
The second major event evoking federal financial aid efforts was the 1957 launching
of Sputnik I. Congress approved the National Defense Education Act. It offered
educational loans to students who would pursue programs in math, science, or modern
language. This act also established the notion that students would be the primary
beneficiaries of student aid, not the institution where the students attended.
Also, in 1957, Illinois lawmakers were creating what we call today the Illinois
Student Assistance Commission (ISAC) to ensure that financing a college education
did not prevent Illinois students from realizing their postsecondary educational goals.
Today, as in 1957, that priority continues to focus on making postsecondary education
accessible for students and families in Illinois.
In the next few years, more legislation was passed, creating an array of national and
state programs designed to create educational opportunities offering grants, jobs,
and government-sponsored commercial loans to prospective students who would not
otherwise be able to attend college.
The Higher Education Act (HEA) of 1965 was the next significant student aid legislation.
The HEA of 1965 is the current legislation that provides for funding of federal
student aid programs. It is reauthorized every other year. During reauthorization,
Congress often makes changes and improvements in the legislation, such as adding
new programs, streamlining existing programs, and increasing authorized funding
levels. The next reauthorization of the Higher Education Act will occur in 2003.
The Higher Education Act has multiple components (or "Titles") relating to specific
areas of education. The portion of the HEA that deals specifically with student
aid programs is Title IV of the HEA. Most of the federal student aid programs
fall under this title. These programs are in place specifically to assist students
and families with meeting the costs associated with pursuing a post-secondary education.
Title IV federal financial aid programs were established to provide financial assistance
to low-income students who could not otherwise afford a college education.
In 1972, the Basic Grant (now Pell Grant) program was created. It was conceived as
a new surge of support for higher education to America.
At that time, higher education was clearly viewed as the ticket to a rich future
for our country. We had moved from a mentality that new aid programs would address
our fears to a concept that aid enabled education, and education was now the avenue
to success and growth for our country.
In the late 80s and 90s, the focus was on educational loans as a favored method
for students to finance their education. With that emphasis, we have a new set of
opportunities and issues to address when speaking about access and opportunity to
It is an interesting journey that we have taken since 1944, swinging this way
and that in the use of higher education to nurture our GIs, to help us beat the
Russians, and to give us new hope for a brighter tomorrow. Financial aid was and
is still part of the impact higher education has on us as a nation and as individuals.
Trends in financial aid throughout the years have been political and symptomatic of
what has been going on throughout the United States.
The most prominent trend in student assistance today has been the growing reliance
on borrowing for higher education. Federal government has largely fueled this trend.
They provide 70 percent of all direct aid to postsecondary students. Almost 60 percent
of all aid is now in the form of loans.
Private and state loan programs for students and parents grew in the 1980s as college
prices outpaced inflation and federal aid failed to cover the difference. It is
estimated that for 2000-2001, non-federal loan volume exceeded $4.5 billion, up from
$3.5 billion a year earlier and $1.5 billion just five years ago.
Over the last decade, total aid has almost doubled in constant dollars, but the
growing reliance on loan programs has been responsible for two-thirds of this increase.
Loan aid has increased by 136 percent during the past decade in constant dollars,
while grant aid only increased by 64 percent. Loans comprise 58 percent of total
aid available to students, compared to 49 percent 10 years ago, and 41 percent in 1981.
Over the past quarter century, federal student aid has drifted from a grant-based to
a loan-based system, producing a sea of change in the way many students and families
finance postsecondary education.
Another trend has been the loss of purchasing power for the Pell Grant program.
Recent increases in Pell Grant appropriations have helped to stabilize the overall
loan-grant balance, but the maximum Pell at $3,300 in 2002 remains far below the
purchasing power it had two decades ago.
Originally designed as the foundation for student aid packaging, the Pell Grant
now covers only 40 percent of the average fixed costs (tuition and fees, room
and board) at four-year public colleges and only 15 percent at a private four-year
During the last decade, state grant funding has increased by 90 percent. State grant
funding accounts for only 6 percent of total student aid to students.
Our Illinois State Monetary Award Program, known as MAP, is the second largest
program of its kind in the country, annually awarding over $300 million in grants
to 128,000 undergraduates who demonstrate financial need for such assistance.
For some of the neediest MAP applicants, ISAC provides other aid as well. One
grant, the Illinois Incentive for Access grant, is available to freshman students
who have no financial resources of their own to pay for college.
Other gift aid programs offered by ISAC are more targeted in nature. They range
from those that recognize academic achievement or a chosen field of study to
those that reward military service. Collectively, these targeted scholarship
and grant programs award an additional $32 million in gift aid to qualified
applicants each year.
Monetary awards to Illinois community college students increased from $22 million
in FY93 to $41 million in FY01. Other state tuition waivers totaled $800,000 in
FY93, compared to $3 million in FY01.
As we are all aware, Illinois' recent economic conditions resulted in budget cuts
for the Monetary Award Program. For FY03, the Illinois Student Assistance Commission
has received $38 million less funding than was received in FY02. Never in its
32-year history has the program sustained such a substantial year-to-year reduction.
As many as 12,000 of Illinois' most needy college students were told that as a
result of state budget cuts, they would no longer be eligible for state financial
aid. Of the 12,000 students, 7,000 lost funds because it was their fifth year
of eligibility. The Commission reduced all announced 2002-03 MAP grants by 5 percent
below the calculated eligibility.
The federal government has a matching program through the LEAP (Leveraging Educational
Assistance Partnership, formerly SSIG) program that contributed $31 million to state
need-based grant programs in 2000-2001, down 60 percent compared to a decade ago.
LEAP has provided an important incentive for states to maintain or bolster their
need-based grant efforts, including Illinois. LEAP and other state grants to
Illinois community college students totaled $8 million in FY93, compared to
$10.4 million in 2001.
In recent years, federal policy makers have increasingly questioned the continued
need for the program, pointing out that nearly every state now has a need-based
grant program and that states have substantially increased their spending on these
grants since the advent of SSIG or LEAP. We need to increase funding for the
LEAP program and should oppose any efforts to scale back or discontinue it.
The Illinois Community College Trustees Association and the Association of Community
College Trustees have and are playing significant roles in the creation and
funding of the LEAP program that benefits many Illinois students.
Institutions also supplement student finance packages with grants accounting for
nearly 20 percent of total available aid. Since 1991, the estimated amount of
institutional grant assistance has almost doubled in value for students in Illinois.
Tuition increases outpaced growth in personal and family income during the 1980s
and 1990s. While tuition was flat in the 1970s, average tuition at both public and
private four-year institutions more than doubled from 1981 to 2000. At the same time,
median income for families has been relatively stagnant, rising only 27 percent
since 1981. Median family income, however, tells only part of the story, because
incomes steadily grew less equal during the 1980s and 1990s. The share of family
income required to pay college costs has increased for many families, but it has
gone up the most for those with low to moderate incomes.
Over this same period, 1981-2000, aid per full-time student increased in total
value but did not keep pace with growth in tuition levels. However, this growth
in aid came largely in the form of loans.
The proportion of federal aid that is awarded on the basis of need has been
declining since the mid-1980's, primarily because of the growth in unsubsidized,
non-need-based borrowing. While need-based assistance accounted for about
80 percent of all federal aid a decade ago, it now accounts for less than 60 percent.
Three quarters of state financial aid remains need-based, but especially since the
early 1990's, the states in general have taken a sharp turn in the direction of
non-need merit scholarships. Non-need state aid has grown 336 percent while
need-based aid has grown 88 percent. The American Association of Small Colleges
and Universities recently identified as part of its 2002 Policy Agenda the need
to address the trend of increased student aid programs emphasizing academic
achievement and middle-class affordability rather than financial need.
Parallel trends in the distribution of institutional aid reflect rapid growth of
spending on merit and other non-need-based aid at a wide range of institutions,
as well as a shift in need-based awards to more affluent students. The largest
increases in average institutional grants at private institutions in the 1980s
and 1990s were for middle-income and high-income rather than low-income students.
Another trend that has occurred over the past several years has been the lost
ground in college affordability by many Americans. Over the last decade, the
cost of attending two- and four-year public and private colleges has grown more
rapidly than inflation and faster than family incomes. Families are expected to
pay more toward education than ever before. Colleges have recently reported an
extraordinary number of appeals for increased financial aid packages due to
sudden layoffs, slashed stock portfolios, the tragedy of September 11, and
The presidents of the Illinois community colleges are grateful for the support
and legislative advocacy provided by the Illinois Community College Trustees Association,
the Association of Community College Trustees, and the American Association of
Community Colleges that have resulted in policy changes and increased funding
for Illinois community college students.
Future legislative priorities have been identified by ACCT, AACC, and others.
They are important considerations for discussion with our legislators and well as
ISAC members as they particularly affect our student body. They include:
- Increasing the Pell Grant Program and lobbying for it to become an entitlement
- Modifying the penalties tied to loan default rates that particularly affect
community college students
- Revising student aid eligibility rules to allow full use for all instructional
delivery formats, including distance education delivery
- Reviewing and pursuing legislation to reduce growing institutional reporting
and other related disclosure requirements imposed by the Higher Education Act
that do not support the success of students
- Eliminating loan origination fees
- Revising Title IV refund policy which is unduly harsh on high-risk, low-income students
- Eliminating non-germane student aid eligibility requirements such as selective
service registration and drug convictions
The community college represents the primary gateway to higher education and
employment for those who might not otherwise have access. Affordable access to
higher education is the key to continued economic prosperity and to extending its
benefits to all sectors of our society. Each year, community colleges educate more
than half of America's undergraduate students, and provide training for millions
of others seeking to upgrade their skills for the new economy. To assist community
colleges in this vital role, Congress must pursue an agenda that makes higher
education and training top priorities, both in the investment of federal resources
and in other policies that affect community college access and opportunity.
For information on the next ICCTA seminar, contact ICCTA at 1-800-454-2282.
Illinois Community College Trustees Association|
401 E. Capitol Ave., Suite 200
Springfield, IL 62701-1711
| Home | News
| Events | Links |