Beyond Need and Merit: Strengthening State Grant Programs
Brookings Institution Event
Remarks of USM Chancellor William Kirwan
Tuesday, May 8, 2012
Good afternoon. I am pleased to join you today. I thank Sandy Baum and Matt Chingos
for the invitation to participate in this program.
Let me start by noting that I am in general agreement with the recommendations in the
Beyond Need and Merit report. The report has an especially distinguished and
knowledgeable group of authors and so we had every right to expect a thoughtful and
useful report. They have met that expectation admirably.
As we’ve heard, the basic thrust of the report is that states should: Target state financial
aid to needy student who have the best chance of succeeding in college; Consolidate and
simplify state aid programs; And reward students making progress toward a degree.
This all sounds so logical that the first reaction may be “why do we need a report to state
the obvious”? But then you look at the plethora of different approaches and programs
that states use to provide aid to college students, which is well documented in the report,
and the need for this report becomes evident.
If I have a regret about the report, it is that – at least for me – it doesn’t adequately
convey a sense of urgency for implementing its recommendations.
From my perspective, college completion has become the social equity issue of our time.
A few decades ago, armed with a high school degree, a person could expect to find a
reasonable job and build a successful career. That is much less likely today and there is
no reason to believe that it won’t become even rarer in the years to come.
As the cost of attending college continues to soar at rates far in excess of the CPI, we are
at grave risk of becoming a two-tiered society where those born into poverty have little or
no chance of ever pursuing the American dream. If this is to be the legacy of the current
generation of university officials and state and national policy makers, it will be a
travesty and a total reversal of our national ethos as a land of opportunity.
I probably don’t need to remind this audience that we have gone from being the nation
with the highest proportion of adults with a college degree to 12th in this category.
Surely, it is in everyone’s interest for every qualified student, independent of family
income, to earn a college degree.
That’s why this report is so important. It focuses on those with the ability to get a college
degree but who are least likely to earn one. As some of you may be aware, the Ed Trust
issued a report a few years ago with data showing that a high ability, low income student
is no more likely to earn a college degree than a high income, low ability student. Is that
an America any of us wants our children or grandchildren to grow up in?
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The report notes that some states allow Tuition Set-Aside Programs, whereby institutions
redistribute some of their tuition revenue to grant aid. Maryland is one of those states.
The report says that students would benefit if all aid came through the “state” in one
program. Here I am going to quibble a little with the report. State financial aid programs
are highly dependent on state appropriations and are usually supported by state General
Funds. When the economy tanks, as it has starting with the Great Recession in 2008,
state General Funds decline, which then threaten state aid programs. On the other hand,
tuition dollars tend to rise in periods of economic downturn. So, if an institution has a
policy of redistributing tuition dollars to need-based aid there is a built in means for
mitigating the tuition increases facing low-income students.
Let me be more specific by describing what has happened in Maryland in recent years
and how USM’s policies have actually enabled the state to move toward some of the
goals of this report.
When I became Chancellor in 2002, I was concerned about the growing national trend of
institutions diverting institutional aid to merit and away from need. I appointed a
commission to study USM’s use of institutional aid and found that we were as guilty as
many others are of spending the vast proportion of our institutional aid on merit
scholarships.
As a result of this study, the Board passed a policy stipulating that students low income
students should incur debt at a rate that is at least 25 percent less than the average student
debt across the system. This has forced institutions to direct much more institutional aid
funds to needy students. In fact, because of this policy, NEED-based institutional aid has
increased 125 percent since 2005. USM now spends $38 million annually on need-based
aid, 44 percent of the total need based-aid available to our students from institutional and
state sources. I can assure you this amount of need-based aid simply would not have
been possible without the USM policy.
There is one final point I would like to make. As sensible as this report is, it will have
little impact if we don’t find the means to stabilize tuition costs. We can have the most
rational financial aid policies imaginable, but if tuition rates continue to rise in this
decade at rates anything like they have in the past decade, these very sensible policies
will have little impact. In effect, they would amount to nothing more than a better
arrangement of the deck chairs on the Titanic.
Part of the answer to keeping college affordable for needy students, in addition to the
policies proposed in this report, is for states to place a much greater priority on funding
higher education, if and when the economy rebounds. In constant dollars, state
appropriations on a per FTE basis nationally have declined almost 13 percent since 2006.
This is the single largest factor in the precipitous rise in tuition over this period, which
has increased almost 16 percent from 2006 to 2011, again in constant dollars.
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But, higher education has an enormous responsibility here too. As an enterprise, we
simply must become more cost conscious and we must put much greater effort into
finding lower costs means of delivering high quality higher education. So far, we are
earning low marks on both of these imperatives.
At a time when essentially every other area of human endeavor is reengineering itself to
adjust to the new fiscal realities, higher education has been slow to react. Too many in
higher education keep waiting for things to rebound so that we can return to the “good
old days.” I fear these colleagues are, in effect, “waiting for Godot.” If we in higher
education have any hope of restoring public trust and confidence, and meeting our
responsibilities to society, do our part and take strong action to address our cost structure.
Now, at risk of some immodesty, USM has avoided this vicious tuition spiral through
efforts we launched some years ago at the end of the previous recession. Do you
remember the recession at the turn of this century? We look back on it now with a sense
of nostalgia. But, it sure seemed bad at the time.
Through this system wide effort, which is on-going, we were determined to lower cost
structure without impacting quality of our programs.
We began taking a serious look at all of our academic and administrative operations
processes. Today the fiscal and academic impacts of these efforts speak for themselves.
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We consolidated back office operations of our campuses.
We began buying major commodities as a system and not as individual
institutions.
We limited degree programs to 120 credits.
We require students to earn 12 credits outside the traditional classroom.
We required on average a 10 percent increase in faculty’s student contact hours.
All told, we have removed more than $250 million in direct costs from our budget
through efficiencies.
Academically, we are servicing 15,000 more students.
USM’s four-year and six-year graduation rates are at an all-time high.
Average time to degree is down from 5 to 4.4 years.
And the rankings of our institutions have never been greater
Perhaps the most compelling success of our efforts can be seen in what we has happened
with tuition.
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Thanks to our cost containment efforts and the resulting state support, coming as a
result of the fiscal credibility we established with the state, tuition has risen just a
little over 6 percent since 2008. That’s less than 1 percent a year.
I mentioned a moment ago that, in constant dollars, tuition at public universities
has risen nationally by about 16 percent since 2006. In Maryland, again in
constant dollars, tuition has decreased by 3.4 percent, a swing of almost 20
percentage points, compared to the rest of the nation.
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As a result, Maryland has moved from having the 6th highest tuition in the nation
all the way down to 25th.
Now, as I’m sure you may have noticed, presidents and chancellors are given to hype.
But in this case there is third party validation of our efforts. In the Washington Monthly,
writer Jon Marcus referred to E&E as “A Mid-Atlantic Miracle.” Steven Pearlstein of the
Washington Post highlighted E&E in his piece about “Cost-Conscious Colleges.” And
President Obama challenged university leaders to “follow the example of the University
[System] of Maryland”.
So, in sum, I applaud this report. Its recommendations are simple but profound, a very
powerful combination. With my one quibble aside, it sends exactly the right message on
how state-based financial aid should be managed. But, even if fully implemented by all
fifty states, we will not get to where we need to be as a nation in terms of college access
and completion unless higher education also steps forward with complementary policies
on institutional need-based aid and with serious efforts to control costs.