History of Financial Aid

1. The following is a presentation prepared for NASFAA’s 2006 Conference in Seattle, WAJuly 5-8, 2006

2. History of Financial Aid Kristi Jovell Suffolk University Law School Moderator

3. Presenters • Curt Gaume Director of Financial Aid Canisius College • Dan Hunter Director Emeritus of Financial Aid Buffalo State College - SUNY • Bill Irwin Director Emeritus of Financial Aid Lock Haven University

4. Historical Review • Financial Aid began in the Private Sector • In 1643, it was noted that a private benefactor gave financial assistance to students at Harvard College • The college work study concept began when a school employed a student of the class of 1657 on a part-time basis

5. Historical Review • In the 1940s it was stated that “out of every 1000 boys and girls in the United States, 580 reach third year in high school… Of these only 150 enter college and 70 graduate.” Source:Warner, W. L., Who shall be educated? Harper and Brothers, New York: New York, 1944 • The President’s Commission on Higher Education: “… 32 percent of the population has sufficient ability to complete advanced liberal or specialized professional training, then it is obvious that far more than seventy (70) students, … should graduate from college”. Source: U. S. Government Printing Office, Higher Education for American Democracy. Washington, 1947, Vol. I

6. The Increasing Importance of Higher Education • Years of Schooling Completed by People 25 and Older, 1940–2004 Source: U.S. Census Bureau, 2005, Table A-1. printed in College Board: Education Pays 2005 Update

7. Historical Review • Early in the twentieth century, states were beginning to award financial aid • 1913: New York State instituted the Regents College Scholarship Program This was the beginning of this state’s involvement in financial aid for students

8. Historical Review • The federal government began its role in financial aid with the The Veterans’ Readjustment Act of 1944. • The rationale was that the veteran had earned and deserved an education • The country would benefit from the education of the veterans

9. Historical Review • In January 1950, Dr. Mc Grath stated: “ Low parental income is the paramount reason why seven out of ten individuals having college abilities never finish an undergraduate program.” Source:McGrath, E. C. “ On the outside-looking in,” school life, Vol 32.

10. Source Major portions of this section of the presentation have been extracted from the following: A Faithful Mirror - Reflections on the College Board and Education in America Michael C. Johanek,editor New York: College Entrance Examination Board, 2001

11. Historical Perspective • “The story of financial aid in America is more than financial aid. It is a story of American Culture and society.” • Need and Worthiness: • Poor and meritorious • Needy • Worthy • Were used to describe the students who should get aid

12. Historical Perspective • “Need” represented the welfare side of aid • “Worthiness” • Was personal achievement • The student or student’s family assume a high degree of financial responsibility for getting through college

13. Historical Perspective • “Working through college” • It honored personal effort and self-reliance • Part of the manual college of the 1830s to the 1850s • To not only support the college, but to promote a healthy unity of mind and body and respect for the dignity of labor

14. Historical Perspective • In 1897 the “Students Aid Society of Smith College” was formed to raise funds for student loans • To reduce the strain of combining academic work with employment • Increased the need for scholarships from some sectors • Insistence on extra merit plus work was a way of rationing the aid and making it go further.

15. Culture versus Economics • Traditional but changing conceptions of who should get how much aid – what need? • It has been a way of helping colleges survive and advance in the marketplace • There was little or no state aid and depended on tuition revenue and philanthropic gifts to keep afloat

16. Culture versus Economics • Colleges need students and have not always been fussy about the moral and mental caliber of students receiving financial aid discounts • Culture and economics have interacted in complex ways

17. Pluralism • The sheer variety of attitudes and issues that have been played about it. • Should aid go: • To the quite needy versus the very needy • To this or that racial group • To the pious, the personable, or socially virtuous • To students with scarce or needed aptitudes • To students in or from a specific locale

18. Targeting • Financial, social and political arguments were the forerunners of raising tuition and fees in the public sector while targeting some of the increased revenue toward financial aid for the neediest students. • Should zero or low tuition and fees subsidize those who could pay more? • Was it democratic and politically prudent to make tuition as cheap as possible ?

19. Targeting • Targeting issues also involved student work • In 1830s a school introduced compulsory “ domestic work” for all students to keep the costs down as well as bestowing the moral benefits of work • Others pursued a higher tuition and using some of the money for financial aid • Debate about class, community and work

20. Targeting • Think of the rules for the Federal College Work Study Program • Community Services requirement • America reads • On-campus versus off-campus opportunities • Career versus service opportunities

21. Trends in College Costs • Not much data • Limited to tuition and living costs • At Harvard: These costs did not rise relative to national median incomes from 1650s, or the 1860s to the early 1960s • Full tuition did rise in relation to room and board • Real costs shot up in the 1940s – 60s as they did in the 1980s – 90s

22. Changes Over Time in Tuition, Fee, Room and Board ChargesConstant (2005) Dollars, 1975-76 to 2005-06 (Enrollment-Weighted) Average Published Tuition and Fee Charges Average Published Tuition, Fee, Room and Board (TFRB) Charges at Four-Year Institutions Source: College Board: Trends in Pricing -2005

23. Some History in the Northeast • At Harvard in the 1700s, Bowdoin, and Amherst in the 1820s and New York University in the 1820s, one-third to one-half of the students received substantial scholarships. • These proportions were not reached again until the 1950s • As colleges upgraded, financial aid fell behind other college spending

24. Some History in the Northeast “ A study of Salem, Massachusetts, in the 1740s – 60s has found that families of local Harvard scholarship students were poorer than other Salem Harvard students but richer than Salem families as a whole. Two hundred years later, studies by concerned Harvard deans found the same to be true of Harvard scholarship students compared with other Harvard students and all American families” Source: Holtschneider, “Institutional Aid to New England College Students”33n: Richard G. King. “Financial Thresholds to College.” College Board Review (Spring 1957):22: Harris, The Economics of Harvard, 97-98

25. Some History in the Northeast • In the 1920s many four year colleges offered no scholarships • State scholarships offered some help but often they could not be used in the private sector • Big contrast was the GI Bill of World War II • In 1947: the high point of the GI Bill, 49 % of all college students were veterans receiving tuition, maintenance and books from the federal government

26. Motives and Target Groups • Need-related aid had many purposes: • American ideal of extending opportunity and upward mobility • A more defensive guard against downward mobility (colonial preference for extended “kin”) • Bringing together different students to learn from each other (a goal from the 1930s)

27. Motives and Target Groups • Other motives: ( may or may not include a need requirement) • Attracting and developing star talent • Moral and political claims of special groups, from Veterans to ethnic minorities • Memorializing a deceased dear one (common after World War I) • Assisting students from one’s hometown or high school (colonial vintage)

28. Motives and Target Groups • Enabling a campus to look democratic • Obtaining a wider pool of good recruits for a college • An occupation (historically the church) • Or in modern times, national leadership and citizenship

29. Motives and Providers • Colleges: a form of discounting price to increase enrollment and net revenue, and seeking scholarship endowments has been a means of raising money more generally • For States: • District – based scholarships spread college opportunities between different political areas of the state • Keep talent in-state • Support private schools by making them available at private and public institutions

30. State Grants to Undergraduate Students • Total Need-Based and Non-Need-Based State Grants in Constant (2004) Dollars, 1969-70 to 2003-04 Source: Based on annual survey of National Association of State Student Grant and Aid Programs (NASSGAP).

31. Motives and Providers • Some private donor student aid was used to exclude as well as recruit: • Defined geographical area • Rural students vs. urban students • Requirement to be native-born • Specific religious affiliation

32. Today’s Motives • Motives for financial aid have been economic • Some schools do it to increase enrollment • A matter of institutional advancement • Ideological and educational • Getting diverse talent to look good and do well in the marketplace • Changing cultural attitudes has been important in determining what kind of diversity is valued

33. Motives and Outcomes • Increase of 18-24 year olds from 3% in 1890 to 18% in 1950 as higher education became the gateway to “good jobs” • This made student borrowing more acceptable as personal investment. • Growing importance of a college education put pressure on state and federal government to provide their own student aid • As more and more sought a college education, there was a demand for governments to promote college access through “portable” student aid as well as low-tuition public colleges

34. Motives and Outcomes • For the decades after the GI Bill, it was cited as a precedent for civilian, need - related student aid bills • A new bidding war for top students increased college spending on merit scholarships • In response, elite colleges gathered together to apportion aid more closely and consistently on the basis of need

35. Motives and Outcomes • The College Scholarship Service, in 1954, began to operate America’s first collective “methodology” for assessing student financial need • Financial Aid History shows it was a joint product of ideology: • A social concern for needy students • Economic pressure

36. A Conclusion “In our own time, consensus on how to measure student need has weakened, and new kinds of price discounting have emerged, often favoring less needy students. … Student financial aid in American History has always lived a life of contest between different principles and practices….” Source:Michael C. Johanek, editor. A Faithful Mirror, Reflections on the College Board and Education in America. New York. College Entrance Examination Board. 2001

37. 1950s • 1954 – Establishment of the College Scholarship Service of the College Board • National Defense Education Act of 1958 The act specified that “… in the selection of students to receive loans … special consideration shall be given to: (a) students with a superior academic background who express a desire to teach in elementary or secondary schools, and (b) students whose academic background indicated a superior capacity or preparation in science, mathematics, engineering, or a modern language.”

38. Source Major portions of this section of the presentation have been extracted from the following: The History of Need Analysis – College Scholarship Service, The College Board 2002

39. History of Need Analysis Early in the 1950s a survey of colleges included, from Harvard, the criteria that they used known as the “15 percent rule”. The committee would calculate 15% of the families’ net income and subtract $100 for each other child attending a public school and $200 for each in a private school or college.

40. History of Need Analysis • Rarely did this rule give consideration to: • Assets of the family • The applicant’s savings • An assessment of the applicant’s earnings • It was not relevant to special family financial problems

41. History of Need Analysis • In 1953 a symposium was held and a number of papers were presented: • One presenter noted that a change was taking place in the philosophy underlying scholarships; while need continued to be a part, the scholarships were beginning to be used • to strengthen their student bodies through diversification, embellishment and enlargement • Ability was in terms of music, athletics or special intellectual accomplishments • Some focused on geographical goals • Some problems: Can colleges afford the amount, inflation of awards, massive recruitment campaigns and multiple applications?

42. History of Need Analysis • John Munro from Harvard noted two basic considerations: • The college costs (included tuition & fees, room and board and a set amount for books, personal expenses and recreation) • Student’ resources (made a distinction between student’s and family’s) • Aid applicant was to work during the summer and save an amount toward college’s cost • Student savings were pro-rated over the number of years of college that were left • Any outside awards were accepted at full value and added to student’s other resources

43. History of Need Analysis • The Harvard system established the data needed to be collected: • Parent’s employment status • Dependents • Income from all sources (past year & year ahead) • Itemized business expenses • Federal income taxes • Extraordinary expenses • Included reported assets and indebtedness • Contribution was separate for income and assets • Contribution developed in relation to the average offerings of the families of the students at that time

44. History of Need Analysis • Checked the calculated contribution versus the actual family offer • If a disparity existed, they checked for special circumstance • Some sort of compromise was sought • This system ultimately became the basis for a need analysis system

45. History of Need Analysis • The CSS developed the “Parent’s Confidential Statement ” (PCS) which helped eliminate the many forms which were developed by the colleges • An advisory committee was formed • The central role was to collect a single set of financial aid data from the student and his or her family. This was distributed to the colleges chosen by the student.

46. History of Need Analysis • CSS was able to collect data from the student’s family and able to refine the need analysis system using the advisory group. • The original system (1956-1959) was processed by hand with the complicated cases reviewed by a jury of admission and financial aid administrators

47. History of Need Analysis • By 1957, a national system had been developed. • Some modifications: • Lower expected contributions from average or lower income families • Reduced contribution from assets • Gave special consideration to those with unusual circumstances • Working wife was given an allowance of up to $1000 • Allowances for relatives other than children who were being supported • Against family assets was an allowance given to non-liquid holdings and other allowances given before determining the net amount

48. History of Need Analysis • The National Defense Student Loan Program (1958) increased the number and types of programs needing central processing and analysis of financial need. • Need Analysis forms were now submitted by all students, not just freshmen. • Now there were single independent and married students. • In 1961 there was a Married Student Supplement which later became the “Student’s Financial Statement” (SFS)

49. History of Need Analysis • A need for economic logic and rationale for the system was evident • In 1962 some major changes were introduced: • Up to certain level, considering family size, all the family’s income was required for basic maintenance • Above the so-called level of living, a family does have income to be used on discretionary expenses which can include postsecondary education.

50. History of Need Analysis • Using an effective income concept (family’s earnings (-) allowances) allowed more equitable treatment of applicants • In 1963, an overhaul of the treatment of assets occurred: • All assets were treated as being of equal value • Allowable debts were deducted • Modest / adequate levels of retirement were established • Remaining discretionary net worth was converted to an income flow which can be added to family’s effective income and a rate of contribution can be determined