The blog of the Urban Institute
April 22, 2020

The Federal Government Can Help Ward Off a College Enrollment Crisis

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides much-needed relief for the emergency expenses colleges and students encountered in the abrupt closing of physical campuses this spring. But neither these funds nor added funding for the federal financial aid system will solve the near-term problem of students paying tuition for the coming academic year. To help bolster students, colleges, and the economy, we propose the federal government step in to pay a portion of this tuition directly, keeping more students on track to complete their college educations.

Even if some colleges manage to physically open in the fall, students may be tempted to postpone enrollment for financial or health reasons. But data show students who stop out for a year are far less likely to graduate. This would mean a loss of human capital neither the students themselves nor the economy can well afford. And if too many students stop out, a significant number of colleges won’t be around to greet them a year later. If higher education institutions don’t survive the crisis, new ones will not easily emerge to educate the students who are shut out. Educational opportunities will be severely limited for years to come, worsening inequality and risking lasting damage to economic growth.

To support students and keep colleges afloat, we propose policymakers provide a new federal subsidy that would pay a portion of tuition costs directly to colleges for students with family incomes up to $125,000 who are enrolled at least half time for the 2020–21 academic year. This should happen whether or not students are able to return to physical campuses in the fall and would supplement other aid families receive.

Existing financial aid mechanisms are not generous enough or responsive enough for the moment

The American Reinvestment and Recovery Act, the stimulus bill provoked by the financial collapse of 2008, included large increases in financial aid for college students, including allowing the maximum Pell grant award to increase by more than $800 between the 2008–09 and 2010–11 school years. Federal policymakers could again make the Pell grant program more generous, but that approach is not enough for this crisis. Financial aid applications for the 2020–21 academic year are based on 2018 income information. Even if the Pell grant maximum, set at $6,345 for 2020–21, were increased now, additional funds would not be responsive to applicants whose financial situations have changed dramatically in recent weeks.

The federal government could allow applicants to amend their financial aid applications with better estimates of 2020 income. But this approach would likely encounter huge bureaucratic problems and leave out many who need the funds. Standard practice in the aid system for changes in circumstances, such as a parent losing a job, is to rely on professional judgment at the campus level. This may work when an occasional student runs into unexpected problems but would overwhelm financial aid offices in this crisis.

Moreover, few students from households with incomes over $60,000 qualify for Pell grants. The current situation calls for a temporary measure that will support a wider range of students.

A stimulus to encourage enrollment

What colleges need most is for students to be able and willing to enroll for the coming academic year. If campus closures persist into the fall, brick and mortar colleges might struggle to recruit or hang on to students. Waiting a year to enroll or enrolling at a cheaper and more established online alternative for a term or two might have appeal.

Moreover, even if it is safe to return to campus in the fall, many students will have a tough time coming up with the money to pay tuition bills and cover living expenses. Many students and parents are unemployed or soon will be. The savings families have set aside for college have shrunk. The challenge is to come up with a way to put money into the hands of students quickly so new students can carry out their plans to begin college and continuing students can pay the bills. Without the promise of assistance, many families will likely feel compelled to choose other options.

Under our proposal, eligible individuals and families would receive supplemental funds, in addition to their CARES Act stimulus checks and whatever student aid they qualify for, if they enroll at least half time in the fall. The tuition checks would go straight to the institutions to be used to offset tuition charges.

We recommend payments to full-time undergraduate students of between $1,500 and $2,500, roughly half the average $4,000 in net tuition and fees (tuition and fees minus grant aid) that in-state students at public four-year colleges paid in 2019–20. About 11 million students would benefit from this plan at a cost of less than $20 billion. The main goal here is not to pull in new students who were not planning on college. Rather, the goal is to encourage students and their families to stick with their original intention to start or continue with college, a decision where a modest subsidy might matter. (The plan could include some restrictions to limit increases in the net prices students pay to ensure that students, not just institutions, are better off than they would be otherwise.)

The income for determining eligibility for our proposed tuition subsidy will of necessity be based on the latest tax returns households have filed—2018 or 2019. But the fixed grant up to a relatively high income level means that in contrast with federal student aid, the precise amount awarded to most students through this program will not be sensitive to small variations in 2018 or 2019 income. There will likely be some households who would qualify based on 2020 income but not 2019 income. This might be solved through an appeal process.

These offsets would serve the dual purpose of bolstering institutional revenues and supporting students’ commitment to investing in themselves. A flat payment per student tapering off at higher incomes would acknowledge that the change in family circumstances is too rapid and too recent for the traditional federal student aid system to track. Our proposed program is temporary and does not diminish the need for an expansion of the Pell grant program. The payments should include a small amount for institutions to help with administrative costs.

Higher education will need continued support

The program we propose would complement, not replace, the CARES Act, whose higher education provisions will end before 2020 is over. These provisions should be renewed and strengthened if legislators want to support higher education. There are strong arguments for continuing the CARES Act’s focus on both direct payments to institutions and emergency aid, which is a good policy in the best of times, and one not properly addressed by the federal student aid system. No aid application filled out in advance can account for the students who will run into unforeseen difficulties during the year. The COVID-19 pandemic just multiplies the problem and makes it more obvious.

Minimizing the loss in human capital associated with missed educational opportunities is one of the challenges of containing the immense personal, social, and economic damage of the pandemic. By helping students pay their tuition next year, the federal government can help make sure more of them are able to make the investment on which their futures depend.

A wide view of the campus lawn at Columbia University during the coronavirus pandemic on April 14, 2020 in New York City. Shelter-in-place and social distancing continues across the city, emptying streets and businesses to curb the spread of the coronavirus. (Photo by Rob Kim/Getty Images)

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