1. Funding Low-Income Workers’ Education How Well do Financial Aid & Tuition Assistance Programs Support Low-Income Workers? Prepared by Kira Dahlk LukeWorks, LLC August 2008

2. 2 Postsecondary Ed Critical to Workers Source: U.S. Census Bureau, 2005 American Community Survey Median Earnings by Education, MN & US, 2005 MinnesotaU.S. No High School Degree $19,797$18,435 High School $27,330$25,829 Some College, Assoc. Degree $32,462$31,566 Bachelor’s Degree $44,010$43,954 Graduate/Prof. Degree $57,196$57,585

3. 3 Minnesotans Lack Postsecondary Credentials  70% of Minnesotans 25 & older do not possess a postsecondary degree or diploma  Just 3.8% of Minnesotans 25-49 yrs were enrolled part-time in college-level education and training in 2006 - 10% less than a decade ago Source: U.S. Census Bureau, 2005 American Community Survey & the National Center for Higher Education and Public Policy, Measuring Up, The National Report Card on Higher Education, 2006.

4. 4 Need for Workers w/College Ed. Will Grow Demographic Shifts Affect MN Economy  Aging population: boomers retiring, taking skills w/ them By 2015: retirements of those with BA will grow from 9,000 to 25,000 per yr The number of new jobs requiring at least a BA will increase by an avg. of 10,500 per year between 2000-2010  Diversifying population: minority population growing Fastest growing populations in Minnesota (Blacks & Hispanics) have traditionally been among the most underrepresented in higher education Source: Trouble on the Horizon, 2004 Citizens League Report on Higher Education in Minnesota

5. 5 Educational Attainment by Race, MN, 2005 White African- American Latino Some College, Associate Degree 33%32%19% Bachelor’s Degree 22%12%9% Graduate, Prof. Degree 10%8%5% Source: U.S. Census Bureau, 2005 American Community Survey Population 25 years and over

6. 6 Rising College Costs in Minnesota From 1995-2005, average tuition and fees at:  U of M, Twin Cities, grew 130% to $8,263  Community & tech colleges grew 93% to $4,086  State universities grew 98% to $5,242  Private colleges & universities grew 72% to $21,467 Source: Minnesota Office of Higher Education, Highlights of Financial Aid Awarded 2005.

7. 7 The Affordability Gap Tuition & fees alone at the LOWEST priced colleges in the state = about 25% of income among the poorest Minnesota families. Source: The National Center for Higher Education and Public Policy, Measuring Up, The National Report Card on Higher Education, 2006.

8. 8 Living Expenses Push College Costs Up Estimate of Costs for a Full-Time Student at Lake Superior College, 2008-09 Direct Costs Tuition & Fees$4,261 Books & Supplies$1,500 Indirect Costs Living Expenses$9,385 Transportation$2,200 Total$17,346

9. 9 Types of Financial Aid  Grants Need-based  Federal Pell Grant  MN State Grant Merit-based  Work study  Tax credits Lifetime Learning Credit Hope Credit  Loans Need-Based  Federal Perkins Loans  Federal Subsidized Loans Non-Need-Based  Federal Unsubsidized Loans  Private Loans

10. 10 Minnesota State Grant Program (FY 2006)  71,108 recipients 75% from families earning less than $40,000 38% attended MnSCU 2-year colleges 38% were independent (self-supporting), with a median income of $14,390  $124 million in total grants awarded $1,696 average award $6,567 maximum 2-year program award $9,208 maximum 4-year program award

11. 11 Trends in Financial Aid Burden Low-Income Students Falling Need-based grant aid Rising Merit-based grant aid Education tax credits Student borrowing

12. 12 Value & Share of Need-Based Aid Has Fallen  Grants not kept pace with rising costs Pell Grants covered 84% of cost of attendance in 1975; today, they cover just 32% of costs Value of MN State Grant has fallen 14% since 2000, when adjusting for inflation  Grants’ share of financial aid pie has declined MN State Grant was 13% of financial aid pie in 1991, 8% in 2005 Federal grants share has fallen from 23% to 11% Source: Minnesota Private Colleges, 2006, www.mnprivatecolleges.org

13. 13 Shift from Need-Based to Merit-Based Aid  At the state level From 1985 to 2005, the states’ non-need based grant aid to undergrads grew from 9% to 28% Just 44% of merit-based aid goes to low-income families  At the institutional level Since 1995, merit aid grew 212%, compared to 47% growth for need-based aid. Almost 60% of merit grants went to students from families above the median income; 13% went to students from families making above $125,000 Portion of institutional aid awarded to low-income students fell from 55% to 35% between 1995-2003 Source: Heller, Donald, Merit Aid and College Access, March 2006.

14. 14 Growth in federal investments in tax credits  Education tax credits and deductions are available only to students or families who earn enough to owe taxes  Nearly half of the benefits of federal tax credits went to students with incomes above $50,000 in 2005 Source: The College Board, Trends in Student Aid 2007

15. 15 Swell in Borrowing  Loans are the fastest growing form of financial aid in MN; loans’ share of financial aid pie grew from 44% to 54% over 1991-2005  In 2005, MN undergraduates borrowed more than $1 billion; the avg. debt for new college graduates totaled $20,300 Especially from Private Lenders  U.S. students borrowed $1.3 million from private lenders in 1995-96, and $10.6 billion by 2003-04  In MN, borrowing from private lenders increased 83% from 2003-05 Source: The National Association of State Student Grant and Aid Programs, 37th Annual Survey Report on State-Sponsored Student Financial Aid, 2005-2006 Academic Year & The Minnesota Office of Higher Education

16. 16 Market Crisis Tightens Borrowing Options  Since early 2008, dozens of lenders have suspended their federal student lending programs  Two-year institutions especially hard hit  Congressional response: new law raises amount in unsubsidized federal loans students can borrow by $2,000

17. 17 Low-Income Students Shut Out  In MN, 29% of students from low-income families go to college today compared to 48% in 1993  From 1995-2003, students from families earning under $40,000 fell from 38% to 28% of all undergrads at 4-yr public colleges in the U.S.  By age 24, 75% of students from top income quartile have a bachelor’s degree; less than 9% of students from low- income families earn a B.A. by age 24 Source: Haycock, Katy, Promise Abandoned: How Policy Choices and Institutional Practices Restrict College Opportunities, The Education Trust, August 2006 and Minnesota Private Colleges, 2006.

18. 18 Financial Aid Favors “Traditional” Students  Traditional students: recent HS grads, w/out significant work or family responsibilities, attend full-time w/out interruption  Non-traditional students: self-supporting working adults, often parents, taking one or two classes at a time as job, family obligations, and costs allow  Non-traditional students comprise the majority of undergrads in U.S.

19. 19 “Non-Traditional” Students in MN Of all undergrads in 2004-05:  41% self-supporting  21% 30 or older  21% had children  28% worked full-time  53% enrolled part-time At public 2-yr colleges:  57% self-supporting  32% 30 or older  34% had children  38% worked full-time  57% enrolled part-time Source: Minnesota Office of Higher Education, 2006

20. 20 Eligibility Rules Disadvantage Low-Income Working Adults  Contingent on half-time enrollment or more  If less than half-time (LTHT) students are eligible, living expense allowances are reduced  Restricted to students enrolled in degree, diploma, or certificate programs; short-term occupational training NOT eligible  Contingent on minimum course hours/weeks per semester, but capped at maximum number of credits/semesters

21. 21 MN State Grant Disadvantages Low-Income Workers 1. Lifetime eligibility limited to 8 semesters (120 credits) Applies to developmental courses Applies to all prior college credits 2. Eligibility restricted to students in degree, diploma, or certificate programs 3. No specific features to support student success

22. 22 State Grant Disadvantages Low-Income Workers 4. Independent students must pay twice The student (ASR) & family (AFR) 5. Living & misc. expense (LME) allowance prorated for part- time students

23. 23 Recognized Tuition & FeesLiving & Miscellaneous Expense (LME) Allowance Recognized Price of Attendance Family & Taxpayer Share Assigned Family Responsibility Assigned Student Responsibility Assigned Taxpayer Responsibility Pell GrantMN State Grant Design for Shared Responsibility Source: Minnesota Office of Higher Education

24. 24 Washington Opportunity Grants  Need-based awards cover tuition and fees + $1,000/yr. for educational supplies  State allocated $10.6 million in 2007 to expand the program to all community and tech colleges in WA  Public colleges receive $1,500 per FTE enrollment in program for success services - advising, tutoring, transportation, childcare  Workforce Development Councils linking students with business and labor mentors for career exploration, job shadowing, internships

25. 25 Illinois Monetary Award Program (MAP) & Student Success Grants  In 2006, IL spent $350 million on MAP to serve 128,000 students, including those enrolled less than half-time, with awards up to $4,968. In 2007, funding increased by $34.4 million with an infusion of dollars originally slated for merit- based tax credits.  Student Success Grants, financed through the IL Higher Education Board budget, go to community colleges for retention and completion services. In 2002, $13.3 million in grants supported 305,000 students.

26. 26 Kentucky Go Higher Grants & the Ready to Work Initiative (RTW)  Go Higher Grants provide adults up to $1,000/yr when they enroll in college less than half-time  RTW Coordinators at each tech college provide TANF students w/skills assessment, tutoring, peer support groups; help with career counseling, financial aid, job development, placement, and retention services  RTW participants have access to support services offered under TANF including childcare, transportation aid

27. 27 Vermont’s Part-Time & Non-Degree Grant Programs  The Part-time Grant Program awards up to $8,650/yr. State appropriates $1.3 million & serves approx. 5,000 students/yr.  The Non-Degree Grant Program serves about 2,000 students/yr, with max grants of $840 per term. In determining need, the living expenses of working adults and their children are taken into account.

28. 28 West Virginia Higher Education Adult Part- Time Student (HEAPS) Grant Program  Covers tuition and fees for students enrolled LTHT; average grant was $4,900 in 2006-07  Beginning in 2002, the legislature set aside 25% of program funding ($5 million in 2006-07) for students in shorter-term, technical certificate programs in high-demand occupations

29. 29 Financial Aid Outreach  The likelihood of knowing about financial aid drops with family income  About half of all undergraduates fail to apply for financial aid; adults attending community colleges are the least likely to apply  Less than a third of adult students receive federal, state or institutional grant aid Source: Christopher Mazzeo, Brandon Roberts, Christopher Spence and Julie Strawn, Working Together: Aligning State Systems and Policies for Individual and Regional Prosperity. Workforce Strategy Center, December, 2006. Working Together: Aligning State Systems and Policies for Individual and Regional Prosperity

30. 30 State Financial Aid Outreach Efforts  Kentucky’s Go Higher media campaign specifically targets adults, encouraging them to return to school & offering assistance applying for and obtaining financial aid  California has spent about $34 million/yr since 2003-04 to expand community college financial aid outreach and administrative capacity; $3 million/yr supports a statewide media campaign to promote financial aid availability  North Carolina spent $3.6 million in 2006 to hire additional financial aid officers at each of the state’s community colleges

31. 31 Minnesota’s Admission Possible Program expands access to higher education for students from Minneapolis and Saint Paul by pairing high school students with Americorp volunteers to walk them through the college application process.

32. 32 The Minnesota College Access Network MCAN promotes access to higher education Provide trainings Host networking events Serve as a conduit for information for best practices and innovative strategies Provide technical assistance for communities wishing to start college access centers http://www.mncollegeaccess.org/MCAN.html

33. 33 Other Sources of Funding for Low-Income Worker Education  TANF and WIA funds  Targeted grants supported by general purpose revenue MJSP Low-Income Worker Training Grants  Programs financed by state lottery or Unemployment Insurance (UI) dollars  Employer or industry-specific workforce development initiatives (e.g., skills sector strategies, industry partnerships, career pathways, etc.)

34. 34 Employer Provided Tuition Assistance Employers can provide up to $5,250 a year in tax-free educational benefits like tuition, fees, books, supplies, and equipment

35. 35 Employer Practices Limit Tuition Assistance for Low-Income Workers 1. Reimburse tuition expenses after coursework is completed, so worker must pay tuition up front 2. Make reimbursement contingent on the receipt of a certain grade 3. Grant reimbursement on the condition that workers remain with the firm for a certain period of time 4. Only offer tuition assistance to full-time employees

36. 36 Employer Practices Limit Tuition Assistance for Low-Income Workers 5. Fail to offer tuition assistance if they employ mainly low-income workers strongest predictors of whether a worker will receive employer support for training are: 1) having a higher level of education to begin with and 2) having an income of at least $50,000 Strawn, Julie, Policies to Promote Adult Education and Postsecondary Alignment, prepared for the National Commission on Adult Literacy, August 20, 2007.

37. 37 Use of Tuition Assistance in Minnesota Of 3,374 private-sector employers in MN in 2005:  19% offered tuition assistance benefits to full-time workers; just 10% did so for part-time workers  Big firms were more likely to offer tuition assistance than small; but low-wage workers are more likely to work for small firms Among firms offering it to full-time workers, 79% were large firms (250+ employees), while 25% (10-49 employees) were small firms Among firms offering it to part-time workers, 40% were large firms while just 11% were small firms Source: Minnesota Department of Employment and Economic Development, 2005 Employee Benefits Survey, Spring 2005 and Strawn, Julie, Policies to Promote Adult Education and Postsecondary Alignment, prepared for the National Commission on Adult Literacy, August 20, 2007.

38. 38 Contact Information Kira Dahlk Workforce Development Consultant kdahlk@gmail.com 651.207.5876