Winners and Losers in Work-Study Plan

"House Republicans' rewrite of the Higher Education Act was a dud in almost all respects for student aid advocates and higher education associations. But in its proposal for the Federal Work-Study formula, the bill appeared to deliver on calls to make the program’s funding allocation more equitable," Inside Higher Ed reports.

"The work-study formula has long been criticized for unfairly favoring elite private colleges in the Northeast.

Under the PROSPER Act -- as House Republicans have deemed their bill -- those are the institutions that would lose out the most on funding, according to an analysis by the American Council on Education.

The new formula would distribute funding in some surprising ways, however. Community colleges would see a big boost in work-study funding. But for-profit colleges would, too.

The bottom line, ACE says, is that the formula change would benefit institutions that primarily serve undergraduates over those that have a serious research mission and support graduate students. That's true because the legislation makes graduate students ineligible for work-study, but also because four-year institutions have traditionally been favored under program allocations.

As a result, for-profits would see the most new funding as a sector (a $71.8 million increase in the sector's annual allocation six years after the new formula takes effect) and the largest average increase in awards per college ($188,000).

However, the biggest losers under the new formula would include some large public institutions that enroll large numbers of low-income students. The City University of New York, for example, would see the largest drop-off in funding of any campus or system in the projections from ACE. After getting more than $9 million in work-study funds in the 2015-16 academic year, CUNY would get just over $136,000 in the sixth year after the proposed formula took effect.

More than half of students enrolled at CUNY are eligible for Pell Grants, compared to closer to a fifth at nearby private institutions like Columbia University and New York University. But all three still see large drop-offs in work-study, according to ACE.

The analysis comes with some important caveats -- ACE assumed appropriations for Federal Work-Study would remain flat, while the PROSPER Act proposes nearly doubling overall funding to $1.7 billion. (Total spending on the program would ultimately be settled by House appropriators, which is true for many provisions of the proposed HEA reauthorization.) And institutions could conceivably change their enrollment mix as well.

Still, the data highlights the potential winners and losers under the proposed formula and points to where battle lines could be drawn in a formula fight between different sectors of higher ed.

... Higher ed lobby groups see challenges ahead -- even for institutions getting more work-study funds -- if the House proposal is adopted. In a letter to the House education committee in December, Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators, warned lawmakers that a larger window for phasing out the existing formula may be needed. And he said some institutions may struggle with requirements to match federal funding.

Karen McCarthy, the group’s director of policy analysis, said that NASFAA is concerned about colleges being able to adjust to the new formula, partly because setting up a work program is more complicated than distributing grant funding to low-income students.

'Sharp increases are just as big a problem as decreases,' McCarthy said. 'Primarily because if an institution does not use all the funds it receives, there is a penalty associated with work-study.'"

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 2/15/2018

View Desktop Version