Could Parceling Pell Payments Help Students?

The “Aid Like a Paycheck” system being tested at two community colleges may save federal dollars, help students manage funds, and reduce dropouts.

Triton College is a community college servince Chicago-area residents.
National Journal
Sophie Quinton
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Sophie Quinton
Nov. 4, 2013, 1:05 a.m.

With so much fo­cus on rising col­lege costs, it’s easy to for­get that some stu­dents re­ceive more state and fed­er­al fin­an­cial aid than they need to pay tu­ition and fees. Fed­er­al Pell Grants in­clude money to help stu­dents meet their liv­ing ex­penses, and low-in­come stu­dents, en­rolled full time at in­ex­pens­ive com­munity col­leges, can re­ceive a sub­stan­tial check after their tu­ition bills are paid.

Pres­id­ent Obama would like to re­quire col­leges with high dro­pout rates to par­cel out aid re­funds in in­stall­ments, in or­der to de­crease the num­ber of Pell dol­lars lost when stu­dents drop out. Re­search­ers hope that dis­burs­ing ex­tra aid this way, sim­il­ar to a paycheck, could also help stu­dents man­age their money and give them an ex­tra in­cent­ive to stay in school.

Non­profit re­search or­gan­iz­a­tion MDRC has tested the “Aid Like a Paycheck” concept at two com­munity col­leges. “The vast ma­jor­ity of stu­dents have said, ‘Oh, this makes per­fect sense,’ ” says Evan Weiss­man, op­er­a­tions as­so­ci­ate at MDRC. But it’s not yet clear wheth­er the new dis­burse­ment meth­od will help stu­dents make it to gradu­ation.

Dur­ing the 2011-12 aca­dem­ic year, the fed­er­al gov­ern­ment spent $33 bil­lion on Pell Grants for nearly 9.5 mil­lion stu­dents. The num­ber of com­munity-col­lege stu­dents who re­ceive Pell Grants has al­most doubled since 2006, ac­cord­ing to the Amer­ic­an As­so­ci­ation of Com­munity Col­leges. In 2011-12, 37 per­cent of Pell Grant be­ne­fi­ciar­ies were com­munity-col­lege stu­dents. In 2011, 44 per­cent of pub­lic two-year col­lege en­rollees were non­white, ac­cord­ing to the Na­tion­al Cen­ter for Edu­ca­tion Stat­ist­ics.

Only 20 per­cent per­cent of first-time stu­dents who en­roll full time in pub­lic two-year pro­grams gradu­ate with­in three years. Many drop out mid­way through the semester, which can cre­ate a prob­lem for col­leges. If a stu­dent re­ceiv­ing a Pell Grant drops out be­fore he’s 60 per­cent through the term, his col­lege has to re­turn un­earned aid to the Edu­ca­tion De­part­ment.

MDRC has found that giv­ing stu­dents ad­di­tion­al aid if they main­tained good grades can in­crease the num­ber of cred­its they earn. The In­sti­tute for Col­lege Ac­cess and Suc­cess has said that some Cali­for­nia com­munity col­leges are already dis­trib­ut­ing their aid in in­stall­ments to lim­it their fin­an­cial li­ab­il­ity. The two re­search or­gan­iz­a­tions teamed up to design a pi­lot that would test wheth­er dis­trib­ut­ing aid in in­stall­ments would work for both ad­min­is­trat­ors and stu­dents.

The first test site, Mt. San Ant­o­nio Com­munity Col­lege, is a Los Angeles-area in­sti­tu­tion that en­rolls about 28,000 stu­dents each year, more than 85 per­cent of whom are non­white. The second, Tri­ton Col­lege, en­rolls about 14,000 Chica­go-area stu­dents per year, about two-thirds of whom are non­white. MSACC en­rolled some 200 stu­dents in the Aid Like a Paycheck pi­lot from fall 2010 through fall 2012, while Tri­ton has in­cluded about 200 since its pi­lot began in spring 2012.

“These are stu­dents — many of them — who’ve have nev­er had any dis­cre­tion­ary in­come to man­age,” says Pa­tri­cia Zinga, Tri­ton’s as­so­ci­ate dean of fin­an­cial aid. After tu­ition and fees are paid and books are pur­chased, a Tri­ton stu­dent awar­ded a $2,000 Pell Grant can end up with a $1,000 re­fund — per­haps the largest check the stu­dent has ever re­ceived. 

After con­sult­ing with col­lege staff and stu­dent fo­cus groups, re­search­ers es­tim­ated that bi­weekly pay­ments would have to amount to at least $100 to be mean­ing­ful, re­quir­ing Pell re­funds to amount to $1,600 per aca­dem­ic year. At Mount San Ant­o­nio and Tri­ton, stu­dents par­ti­cip­at­ing in the pi­lots typ­ic­ally were en­rolled full time and re­ceived bi­weekly checks of between $125 to $350. When stu­dents took few­er courses and thus saw their ex­tra Pell aid drop to be­low $75 per week, the col­leges would re­turn to giv­ing them just a single check.

Most full-time stu­dents at both col­leges work part time. Along with Aid Like a Paycheck pay­ments, stu­dents re­ceived on­line ad­vice on budget­ing, such as re­mind­ers to save up so that they could work less and study more be­fore fi­nals. Stu­dents could leave the pi­lot if they faced a hard­ship — such as a hos­pit­al bill — that they needed a lump sum to pay.

The ma­jor find­ing was that stu­dents said, in sur­veys and fo­cus groups, that they liked get­ting their aid in this man­ner. MDRC has not eval­u­ated wheth­er the pay­ment sys­tem im­proves col­lege com­ple­tion, and is look­ing for fund­ing that would al­low a long-term study to show stat­ist­ic­ally rel­ev­ant find­ings. The Bill and Melinda Gates Found­a­tion, a Next Amer­ica spon­sor, helped cov­er the cost of the pi­lot pro­jects.

MDRC (the name was shortened in 2003 from Man­power Demon­stra­tion Re­search Corp.) es­tim­ates that more than 2 mil­lion stu­dents might re­ceive big enough Pell awards each year to al­low for their ex­tra aid to be dis­trib­uted like a paycheck. It tar­geted Cali­for­nia, Texas, Illinois, Michigan, and North Car­o­lina as states likely to have large num­bers of such stu­dents. 

“Ul­ti­mately, I would love to see this be my col­lege’s policy,” Zinga said. But im­ple­ment­a­tion can be tricky. Tri­ton’s cur­rent soft­ware doesn’t al­low for bi­weekly dis­burse­ments to be pro­cessed auto­mat­ic­ally, mak­ing it hard for the col­lege to ex­pand Aid Like a Paycheck to a large num­ber of stu­dents.

The ef­fects on stu­dent per­sist­ence may be small and hard to gauge. At Tri­ton, of the 55 stu­dents who op­ted to try the pro­gram in spring 2012, 44 are no longer en­rolled in the pro­gram — be­cause they gradu­ated, trans­ferred, left, or were dis­qual­i­fied — and five cur­rently are in­eligible for Aid Like a Paycheck pay­ments be­cause they are not re­ceiv­ing enough aid.  

It’s im­port­ant to re­mem­ber that com­munity-col­leges stu­dents aren’t like uni­versity stu­dents, Zinga says. “In com­munity col­leges, we have a pretty tran­si­ent stu­dent pop­u­la­tion,” she says.  “They’ll at­tend, and maybe they’ll trans­fer on; maybe they’ll gradu­ate—maybe they’ll drop out, start a fam­ily, and come back in a year.”

What the pro­gram does do is shield stu­dents, col­leges, and the gov­ern­ment from fin­an­cial risk. And even small im­prove­ments in com­ple­tion may make the in­ter­ven­tion worth­while, says Sandy Baum, a seni­or fel­low at the Urb­an In­sti­tute and a re­search pro­fess­or at George Wash­ing­ton Uni­versity. “It’s not clear that there’s a reas­on not to do this.”

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