1. Student Financial Aid in Kentucky Affordability Policy Group Council on Postsecondary Education January 14, 2004 Dr. Joe L. McCormick Executive Director

2. 2 Student Financial Aid in Kentucky State Student Aid Program Activity Questions from November meeting Policy Considerations

3. 3 Loans: 58% Other Student Aid: 42% Average Indebtedness for Kentucky graduates: $13,500 Federal and State Aid in Kentucky — FY2002 FY2002 is the most recent year for which federal data is available Total: $698.6 Million

4. 4 Current FFELP Interest Rates Variable rates are in effect July 1-June 30: 2.82% for Stafford loans during enrollment, grace period, or deferment. 3.42% for Stafford Loans in repayment. 4.22% for PLUS Loans.

5. 5 Affect of Student Loans on Graduation Rates KHEAA does not have data to directly address this issue, however: Six-year graduation rates at Kentucky four-year public institutions range from 27% to 57%. The rate is much higher at private colleges and universities. National survey data suggests the typical graduating undergraduate student will have up to $15,000 in student loan debt. Average indebtedness for students with KHEAA- insured loans is $13,500.

6. State Student Aid Program Activity

7. 7 ProgramFY2002 Awards FY2002 Amount Disbursed FY2003 Awards FY2003 Amount Disbursed KEES CAP 1 KTG 1 TS OMS ECDS KWS KNGTAP 43,660 34,530 8,850 650 120 850 780 1,700 $38,002,900 34,523,100 13,798,700 2,144,500 1,530,900 479,100 683,200 2,145,400 55,990 35,550 10,230 570 110 990 1,110 860 $58,191,000 36,346,000 15,396,100 1,909,500 1,353,600 678,600 901,500 2,198,000 Total91,140$93,307,800105,410$166,974,300 Source: Kentucky Higher Education Assistance Authority. 1 CAP and KTG are “need-based” student aid programs. Kentucky State Student Aid Program Activity

8. 8 KEES, CAP, & KTG The First Four Years KEES, CAP, & KTG combined represent 325,035 awards to 266,723 students in the first four years of KEES, 1999-2000 to 2002-2003. Approximately 18% of these students have received aid from two or more of these programs over the four years. (In the most recent year, almost 20% received awards from two or more programs.) The ratio of recipients receiving only one award is sharply declining: 58.1% CAP-only awards in 2003 19.2% KTG-only awards in 2003

9. 9 Institutions Attended by CAP Recipients—AY2003

10. 10 Family Income of CAP Recipients—AY2003

11. 11 Family Income Ranges of KTG Recipients—AY2003

12. 12 Family Income Ranges of KEES Recipients—AY2003

13. 13 Institutions Attended by KEES Recipients—AY2003

14. 14 Ratio of KEES Awards Earned and Used By Gender—AY2003 Female to Male Ratio KEESNumberAmount Earned1.12 : 1$1.35 : $1 Used1.46 : 1$1.60 : $1

15. Policy Considerations 2004 Legislative Session & Beyond

16. 16 Interim Joint Subcommittee on Postsecondary Education KEES Report Give priority to funding the need-based student financial aid programs over the merit-based KEES program. Use a student’s numeric grade score average rather than grade point average to determine annual KEES base amount. Permit high school students to use projected KEES awards to pay for: Dual credit courses Advanced Placement exams

17. 17 KEES Funding: Lottery Allocations By statute, all Net Lottery Proceeds (excluding $3 million for literacy efforts) will go toward need-based and merit-based student financial aid as of FY2006 Merit-Based KEES Need-Based CAP/KTG Total of Net Lottery Proceeds FY1999$14 million FY2000$7 million$15 million$22 million FY200115 percent32 percent47 percent FY200225 percent32 percent57 percent FY200332 percent 64 percent FY200440 percent 80 percent FY200545 percent 90 percent FY200645 percent55 percent100 percent

18. 18 Total Unfunded Amount―$39.7 million Total Number of Unfunded Eligible Students―36,416 Unfunded Eligible Students Who Attended College: 4,909 (13.5%) Unfunded Potential Awards for Eligible Students—FY2003

19. 19 “More families at all income levels are borrowing more than ever before to pay for college.” Both nationally and in Kentucky, student loans are by far the major source of financial aid for students. Over $334 million in federal student loans* was disbursed to students attending Kentucky colleges in 2003 as compared to only $117 million in state student financial aid. Over 58% of a student’s financial aid to attend a Kentucky college is in the form of a student loan**. The average student graduating from a four-year public university in Kentucky owes about $13,500. *Does not include credit card debt or alternative, private loans. **Source: Department of Education

20. 20 The Rise of Student Loans NationallyKentucky doubled In the last decade, the amount of federal student loans has more than doubled— both nationally and in Kentucky. Source: U.S. Department of Education and Kentucky Higher Education Assistance Authority

21. 21 Default Rates— Fiscal Year Comparison Rates are based on the percentage of borrowers who enter repayment in a certain fiscal year and default before the end of the next fiscal year. The 2001 rate is the most current available. Published 2000Published 2001Published 2002Published 2003

22. 22 Lowest Cost Student Loans in Kentucky Help Fill the Gap  0% origination fee; 0% insurance fee through KHEAA  2% credit to the principal after completion of the academic period for which the loan was made .25% interest rate reduction for automatic payments  3.5% credit to the original loan principal after first 30 consecutive on-time payments  Interest forgiveness for all teachers, guidance counselors, and librarians  20% loan forgiveness annually for: Math teachers Science teachers English as a Second Language teachers Special education teachers  Interest forgiveness for current registered nurses  20% loan forgiveness for registered nurses (with loans made after July 1) for each year of service

23. 23 Student Credit Card Debt No credit card borrowing data for college students is required to be reported. National survey data suggests credit card debt is rising rapidly among undergraduate students. HB 130 and 63 were introduced January 6 in the General Assembly to address this concern. HB 130 would: Prohibit the offer of a gift in exchange for a student credit card application. Require public and encourage nonpublic postsecondary institutions to include credit card/debt education sessions as part of new student orientation. Direct CPE to promulgate administrative regulations to regulate credit card marketing practices on public postsecondary campuses. Make the adoption of a credit card marketing policy a requirement for licensure of a nonpublic postsecondary college or university.

24. 24 Student Credit Card Debt HB 63 would: Require credit card issuers to register with a postsecondary institution prior to soliciting students on a college campus to include the principal place of business of the credit card issuer. State that an application for a credit card executed by a student who was solicited for the card on a college campus shall be void and unenforceable unless the parent or legal guardian consents in writing to the student's submission of the application. State that parental consent shall not be construed as an agreement by the parent or guardian to be liable under the credit card agreement unless the parent or guardian specifically agrees in writing to do so. Prohibit a credit card issuer to take any debt collection action against the parent or legal guardian of a student for whom a credit card has been issued unless the parent or guardian has agreed in writing to be liable for the debts of the student and make a violation of this prohibition an unfair trade practice. State that this Act shall be known and may be cited as the College Campus Credit Card Solicitation Act.

25. 25 Student Aid Bills Introduced to 2004 Legislature HB 28 Would permit a student to use a KEES scholarship award to attend a postsecondary institution with a program of study comprised solely of sectarian instruction. HB 69 Directs the General Assembly to appropriate general funds, in addition to lottery revenues, to cover the full costs of awarding the statutory amounts for KEES scholarships and prohibits the Council on Postsecondary Education from lowering award amounts as specified in statute. HB 79 Would permit an eligible student to use his or her KEES scholarship award at an out-of-state institution that meets the requirements for a participating institution if the student's degree major is not available in Kentucky or in the Academic Common Market.

26. 26 Student Aid Bills Introduced to 2004 Legislature HB 99 Would provide KEES scholarships to eligible high school seniors enrolled in a dual credit course of study. HB 169 Would allow a student to be eligible for a KEES award if the student's parent or guardian is a resident of Kentucky but teaches in a school in a contiguous state and if the student graduates from an accredited high school in the district in which the parent or guardian teaches. HB 183 Would equalize the KEES amount for students who graduate from high school in three or fewer years with the amount earned by students completing high school in four years. HB 250 Would permit a student to use a KEES award to attend an accredited out-of- state institution that offers a degree program in a field of study not offered at any institution in Kentucky.

27. 27 Additional Student Aid Issues Raised Expand KEES eligibility to include summer school. Extend KEES eligibility to graduate school for early completers. Give financially-needy students priority for KEES. Provide KEES to less than half time students on a pro rata basis. Provide added KEES awards based on CATS scores. Increase renewal eligibility requirements for KEES. Cancel the restoration of KEES award; once it is lost, it cannot be regained. Put an income cap on KTG awards. Change academic progress requirements in CAP.

28. 28 “The guardian genius of democracy is an educated people.” ―Thomas Jefferson