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Net Price Data Provides Only a Limited Picture of Colleges’ Institutional Aid Practices

Published:  June 30, 2011

As we recently wrote at Ed Money Watch, data from the Department of Education’s National Center for Education Statistics (NCES) on colleges’ net price provides a glimpse on how campuses are spending their institutional financial aid -- aid they provide students from their own resources. But the view is far from complete. The net-price information (the average price students and their families are expected to pay after all sources of grant and scholarship aid are taken into account) for students who receive federal financial aid is available by income quartile only, rather than for the student body overall. As a result, colleges do not have to reveal the average net price that affluent students who receive merit-based aid from the institutions pay.

Understanding how colleges spend their institutional aid dollars is important because of concerns that many schools may be undermining the federal government’s efforts to remove the cost barriers that often keep low-income students from pursuing a higher education. Are colleges using their resources to try to meet the full financial need of Pell Grant recipients? Or are they primarily using institutional funds to attract the students they most desire, including those who can afford to pay full freight without help. The answers to these questions are especially vital at a time when policymakers are considering making major changes to the Pell Grant program to reduce its costs.

The limits of the Education Department data are a result of compromises Congress made when it reauthorized the Higher Education Act in 2008. Under pressure from higher education lobbyists, Congressional leaders, particularly in the House of Representatives, backed down from earlier proposals that would have directed colleges to reveal more about their financial aid practices.

The original House bill required colleges to report to NCES the average amount of institutional grant aid they provide to their students and their average net price, with each disaggregated by students’ family income. This data was to reflect the experiences of all their students, including those from families earning $140,000 or more a year.

The Senate version was much less demanding. Like the House bill, colleges were to report the average amount of grant aid they provide to their students and the average net price. But it did not require them to break this information down by income. In addition, the reporting provisions in the Senate bill were completely voluntary. Colleges that chose to participate were to report the information on their websites, using a model form developed by the Education Department. The Senate bill did, however, require schools to include net price information broken down by income quartile in the admissions materials they provide prospective students.

College lobbyists objected to these provisions, arguing that they “would create a significant new reporting burden for institutions.” While the lobbyists much preferred the Senate version, they opposed any requirement that they break the data down by income groups for all of their students, arguing that schools don’t always know how much students’ families make if they haven’t applied for federal financial aid. While this argument may be legitimate, it’s not clear why they couldn’t at least ask students who receive institutional aid for this information.

Lawmakers took these objections into consideration when they drafted the final version of the bill. The measure still required colleges to report the average amount of grant aid they provide students but did not require them to disaggregate this information by family income. And while the measure continued to require colleges to break down the average net price by income, it directed the schools to include only students who had received federal aid in these calculations. As a result, they were no longer required to report income-specific data for students who received institutional aid only -- which can be a significant share particularly at four year public and private colleges. In addition, the lawmakers struck the provision requiring colleges to provide net price information in their admissions documents.

As we have said previously, the resulting net price data is a start, as it provides a clearer picture of the hurdles that low-income students face at different colleges. But Congress ultimately allowed colleges to keep the veil on their institutional aid practices. As a result, we still don’t know whether schools are predominantly helping or hindering the government’s goal of making college more accessible and affordable for low-income students.

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