More Than Tuition: How to Improve Cost of Attendance

In our series, we have written about how colleges’ cost of attendance (COA) does not accurately represent the yearly budgets of today’s students, and how there is wide variance in how institutions account for living costs, even within the same geographic area, and how COA has evolved over the years. Given the enormous complexity and competing incentives involved in setting an accurate COA, what, if anything, can be done to improve this important cornerstone to financial aid? Below we detail some recommendations that could help improve COA for today’s students.

Expand the Federal Government’s Role in Cost of Attendance:

Currently, Congress prohibits the U.S. Department of Education from regulating any component of COA. Lawmakers added this clause to the Higher Education Act in 1986 to prevent the Department’s political leaders from using COA as a way to ration federal financial aid. While well-intended, these restrictions have left the Department with little say on how schools set COA.

Moving forward, the Education Department must be able to regulate on some parts of COA. We don’t believe that the Department should create a rigid system in which to calculate COA (and potentially ration aid), but instead it should specify allowable methods institutions can use to determine COA. In addition, policymakers should revisit some of the components of COA. For example, they should require schools to include technology/connectivity and, as the Wisconsin Hope Lab suggests, health care costs as part of COA since these expenses have become such a substantial budget item for students.  

The Department must also require transparency and occasionally review an institution’s COA to ensure it’s not mismatched with student need. It’s unclear if requiring transparency would necessitate regulation, in which case Congress would have to take action first. But there are many methods colleges can use to understand the budgets of their students, from conducting a survey to looking at regional cost of living data. The Department should decide on the appropriate methods colleges should use and then hold schools accountable for utilizing them. At the same time, institutions should be required to disclose how they created their COA estimates and share this information with students in ways that are accurate and meaningful. Students would then be able to better understand if the schools’ estimates are appropriate for their personal circumstances and borrow accordingly. If students find repeatedly that their COA does not meet their needs, the institution should adjust their COA.

Sara Goldrick-Rab and Nancy Kendall, researchers from the Wisconsin Hope Lab who have been at the forefront of researching issues surrounding COA, also call for a survey of undergraduate expenditures that would help provide better data and guidance to institutions when setting COA. This is a worthy idea and we support the generation of better information on living costs, and think the Department should explore whether this information can be incorporated into existing surveys and other data collections.

Institutions Can Take an Active Role in Providing Students with Money When They Need It:

Another option for helping students manage their financial life is by offering multiple financial aid disbursements. While federal regulations require schools to offer no less than one financial aid disbursement per payment period, colleges are generally free to distribute grants and loans on any schedule that they believe best fits students’ needs. But many colleges stick to providing a single disbursement at the start of the semester, despite being able to make multiple disbursements. Many students may be unaccustomed to managing large sums of money and often have competing financial obligations that require difficult budgeting decisions. When a student’s car won’t start and he has just been given thousands of dollars in federal aid, for instance, it can be tough to weigh the impact of fixing a car now or making rent payments four months down the road. Disbursing loan and other grant aid gradually over the course of the semester may ensure students have enough to cover living costs throughout the term, and instead turn to emergency one-time aid (discussed below) when their car breaks down. One promising method of financial aid disbursement, the Aid Like a Paycheck model, is currently undergoing a randomized control trial by researchers at MDRC. While findings from MDRC’s experiment are not yet conclusive, initial research suggests that disbursing federal aid on a biweekly basis, like a paycheck, improves student outcomes including persistence, course credit progression, and degree completion.

Provide Emergency Aid for Students:

In Community College Online, New America recommended providing emergency aid in the form of grants or loans for community college students. Emergency aid can be an incredibly important resource to students who face sudden economic hardship and they should be a tool in an institution’s arsenal to help ensure that financially-strapped students stays enrolled. Colleges can make these loans or grants without tinkering with COA and help students whose car breaks down or whose childcare falls through, or who face a family medical emergency that results in a bill too difficult to pay off. Low- and moderate-income students should never be put in the situation where they must choose between academics and food, rent, and keeping the lights on. Many community colleges are already experimenting with providing emergency funds, and more must be done to explore how to scale these programs using local, state, and federal dollars. Nearly 50 community colleges, for example, participate in the Scholarship America Dreamkeepers

https://scholarshipamerica.org/dk.php

program, which helps provide financial resources and support services to students experiencing unexpected financial hardship.

Going Beyond COA:

As this series nears its conclusion, it is also important to recognize the role institutions play in helping students better understand their financial aid packages and access the financial aid available to them. While stronger federal regulation would help prevent colleges from manipulating COA numbers, institutions acting in good faith could go a long way toward improving their financial services now. Improving financial aid award letters and providing supplemental financial information would be a good way to help students make optimal financial decisions and curb excessive borrowing while ensuring students have access to the resources they need. As we will explore tomorrow,, students should be provided basic information about their borrowing, total outstanding balances, and what their monthly repayment options and earnings might look like after graduation.

In addition, since loans and grant aid have dramatically different implications for students’ financial futures, another possibility might involve allowing institutions to lower loan eligibility without affecting other forms of financial aid. The Education Department is already experimenting with allowing schools to limit borrowing. The program operates as part of the Department’s Experimental Sites Initiative, which gives institutions flexibility in their administration of federal student aid. In an upcoming post, we will talk more about this experiment and what can be learned from it.

But in the end, given all these piecemeal solutions, is there a better way for students to get the resources they need to attend college and pay for their living expenses? In many ways, colleges have become a financial safety net for low-income students--by going to college, they get access to money for living expenses they wouldn’t otherwise have. But this money often comes in the form of loans, which carry significant risk.

In the final post in this series, we will explore how better coordination of existing federal and state benefits beyond financial aid that can help students now, and how a universal basic income can help provide people with access to money to help them defray the costs of living expenses, regardless of whether they are pursuing higher education or not."