Campus-Based Student Financial Aid Programs Under the Higher Education Act David P. Smole Specialist in Education Policy January 9, 2012 Congressional Research Service 7-5700 www.crs.gov RL31618 CRS Report for Congress Prepared for Members and Committees of Congress Campus-Based Student Financial Aid Programs Under the Higher Education Act Summary Three Higher Education Act (HEA) student financial aid programs—the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program—collectively are referred to as the campus-based programs. The campus-based programs were reauthorized under the Higher Education Opportunity Act (HEOA; P.L. 110-315), which amended and extended authorization for programs funded under the HEA. The campus-based programs are currently authorized to be funded through FY2014. Under the campus-based programs, federal funding is provided to institutions of higher education for the provision of need-based financial aid to students. Institutions participating in the programs are required to provide a match of approximately one-third of the federal funds they receive. The campus-based programs are unique among the need-based federal student aid programs in that the mix and amount of aid awarded to students are determined by each institution’s financial aid administrator according to institution-specific award criteria (which must be consistent with federal program requirements), rather than according to non-discretionary award criteria, such as those applicable for Pell Grants and subsidized Stafford Loans. Each program provides students with a distinct type of aid. The FSEOG program provides grant aid only to undergraduate students. The FWS program provides undergraduate, graduate, and professional students the opportunity for paid employment in a field related to their course of study or in community service. The Perkins Loan program provides low-interest loans with favorable terms and conditions to undergraduate, graduate, and professional students. Funding is provided to institutions separately for each program according to formulas that take into account both the allocation institutions received in years past (their base guarantee) and their proportionate share of eligible students’ need that is in excess of their base guarantee (their fair share increase). From these funds, institutions’ financial aid administrators award aid to eligible students who have financial need. The programs are among the oldest of the federal postsecondary aid programs; however, they now operate amidst a host of other aid programs and tax benefits, some of which are not needbased. At present, a relatively small proportion of all students receive campus-based financial aid. This report describes the FSEOG, FWS, and Federal Perkins Loan programs, as amended by the HEOA. It also presents historical information on appropriations provided for the programs and the federal student aid that has been made available to students through the programs. It will be updated to reflect legislative action in the 112th Congress. Congressional Research Service Campus-Based Student Financial Aid Programs Under the Higher Education Act Contents Introduction...................................................................................................................................... 1 Program Descriptions ...................................................................................................................... 1 Federal Supplemental Educational Opportunity Grants ............................................................ 2 Allocation of Funds to Institutions...................................................................................... 3 Federal Work-Study Programs................................................................................................... 4 FWS Employment ............................................................................................................... 5 Job Location and Development Programs........................................................................... 8 Work Colleges ..................................................................................................................... 8 Allocation of Funds to Institutions...................................................................................... 9 Federal Perkins Loans ............................................................................................................. 10 Award Procedures and Terms of Perkins Loans................................................................ 10 Allocation of Funds to Institutions.................................................................................... 14 Transfer of Funds Between Campus-Based Programs ............................................................ 16 Administrative Costs ............................................................................................................... 16 Funding and Program Data ............................................................................................................ 17 Funding for the Campus-Based Programs............................................................................... 17 Institutional Participation ........................................................................................................ 18 Students Served and Average Aid Amounts ............................................................................ 19 FSEOG .............................................................................................................................. 19 FWS................................................................................................................................... 20 Perkins Loans .................................................................................................................... 21 Figures Figure 1. Institutions Participating in the Campus-Based Programs ............................................. 19 Figure 2. FSEOG: Number of Students Receiving Awards and Average Award Amounts........... 20 Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts ................ 21 Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award Amounts...................................................................................................................................... 22 Tables Table 1. FWS Requirements for Federal Share of Compensation ................................................... 7 Table 2. Perkins Loan Cancellation Rates by Type of Service ...................................................... 13 Table 3. Administrative Cost Allowances for the Campus-Based Programs ................................ 17 Table 4. Campus-Based Program Funding: Appropriations for FY2002-FY2012 ....................... 17 Table 5. Perkins Loan Cohort Default Rates ................................................................................. 23 Congressional Research Service Campus-Based Student Financial Aid Programs Under the Higher Education Act Contacts Author Contact Information........................................................................................................... 23 Congressional Research Service Campus-Based Student Financial Aid Programs Under the Higher Education Act Introduction Three postsecondary student financial aid programs authorized under the Higher Education Act of 1965 (HEA) are collectively referred to as the campus-based programs—the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program. The campus-based programs are unique among the need-based federal student aid programs in that federal funds are awarded to institutions of higher education (IHEs) according to formulas that take into account past institutional awards and the aggregate financial need of students attending the institutions. The mix and amount of aid students receive under the programs is determined by each institution’s financial aid administrator according to institution-specific award criteria, rather than according to non-discretionary award criteria, such as that applicable for Pell Grants and subsidized Stafford Loans.1 The campus-based programs were most recently amended and extended under the Higher Education Opportunity Act (HEOA; P.L. 110-315), which reauthorized the programs that are part of the HEA.2 Authorization for the appropriation of funds for the campus-based programs was extended through FY2014.3 Several changes were made to the Federal Perkins Loan program, including increases to loan limits and an expansion of loan cancellation benefits. Minor changes were made to the FSEOG and FWS programs. This report begins by providing a brief description of each of the campus-based programs, including the terms under which financial aid is awarded to students and the procedures under which federal funds are allocated to institutions for that purpose.4 It then provides historical information on federal funds appropriated for each of the programs, an analysis of the number and types of students served, and selected program statistics. Program Descriptions This part of the report provides a description of each of the three HEA campus-based financial aid programs—the FSEOG program, the FWS program, and the Federal Perkins Loan program. Program descriptions explain the purpose of each program and the terms under which aid is provided to students. They also include a brief explanation of how federal funds are allocated to institutions for the purpose of providing aid to students. 1 Institutions are required to establish written procedures for selecting recipients of campus-based financial aid. These selection procedures must meet the requirements of each campus-based program, and must be kept on file at each institution. Consistent with the availability of funds, institutions must make campus-based aid reasonably available to all eligible students demonstrating financial need. 2 For additional information on the HEOA and the reauthorization of the HEA, including amendments to the campusbased programs, see CRS Report RL34654, The Higher Education Opportunity Act: Reauthorization of the Higher Education Act, by David P. Smole et al. 3 Authorization of appropriations is automatically extended for an additional fiscal year according to § 422(a) of the General Education Provisions Act (GEPA). Thus, authorization of the programs would be provided through FY2015. For additional information on GEPA, see CRS Report R41119, General Education Provisions Act (GEPA): Overview and Issues, by Rebecca R. Skinner and Jody Feder. 4 The allocation procedures for each of the three campus-based programs are described in greater detail in CRS Report RL32775, The Campus-Based Financial Aid Programs: A Review and Analysis of the Allocation of Funds to Institutions and the Distribution of Aid to Students, by David P. Smole. Congressional Research Service 1 Campus-Based Student Financial Aid Programs Under the Higher Education Act Federal Supplemental Educational Opportunity Grants The FSEOG program authorizes the Secretary to grant funds to institutions of higher education for the purpose of providing financial assistance to undergraduate students with exceptional financial need to aid them in obtaining the benefits of postsecondary education. The FSEOG program is authorized by Title IV, Part A, Subpart 3 of the HEA. It first was incorporated into the HEA under the Education Amendments of 1972 (P.L. 92-318). Prior to authorization of the FSEOG program, Education Opportunity Grants, authorized under the HEA of 1965 (P.L. 89329), served a similar purpose. From the funds allotted to them by the Secretary, institutions award FSEOG aid to eligible students as part of their financial aid packages. Institutions are required to award FSEOG aid first to students with exceptional financial need, as determined according to the HEA need analysis provisions,5 with priority going to students receiving Pell Grants. Institutions may establish categories of students for purposes of packaging FSEOG awards. For example, “categories may be based on class standing, enrollment status, program, date of application, or a combination of factors.”6 Categorization of awards may not be used to arbitrarily deny FSEOG aid to students, for example by establishing a policy of awarding aid on a first-come, first-served basis. FSEOG aid consists of a federal share, not to exceed 75% (except if the Secretary determines that a larger share is necessary to further the purpose of the program), and a non-federal share of at least 25%. The non-federal share is required to be funded through the institution’s resources, such as institutional grants and scholarships, tuition or fee waivers, state scholarships, and foundation or other charitable organization funds. ED has determined that all state scholarships and grants can be counted toward meeting the non-federal share, except for funds provided under the Leveraging Educational Assistance Partnership (LEAP) and the Special Leveraging Educational Assistance Partnership (SLEAP) programs.7 (Under the HEOA, the SLEAP program was repealed and replaced with the Grants for Access and Persistence (GAP) program.) Unlike the other two campus-based programs, students are eligible to receive FSEOG aid only during the period required to complete a first undergraduate baccalaureate course of study. The maximum FSEOG award amount per academic year is the lesser of the student’s financial need or $4,000. In the case of a student studying abroad, and if the cost of studying abroad exceeds the cost of studying at the student’s home institution, the FSEOG award may be increased to a maximum of $4,400. The minimum value of an FSEOG award is $100 per year. For students enrolled for less than a full academic year, the value of FSEOG awards must be proportionately reduced. Institutions are required to award a “reasonable proportion” of FSEOG aid to 5 Per HEA Title IV, Subpart F—Need Analysis, a student’s financial need is calculated as the cost of attendance, minus the expected family contribution (EFC)—the amount that a student’s family is expected to contribute toward the student’s education, and minus the estimated financial assistance (EFA) not received under HEA Title IV (this includes scholarships, grants, loans, veterans’ education benefits (Section 480(c)), national service educational awards, and postservice benefits under Title I of the National and Community Service Act of 1990. 6 U.S. Department of Education, 2011-2012 Federal Student Aid Handbook, vol. 3—Calculating Awards & ackaging, pp. 3-124 through 3-125, at http://ifap.ed.gov/ifap/byAwardYear.jsp?type=fsahandbook&awardyear=2011-2012. (Hereafter cited as ED, 2011-2012 FSA Handbook.) 7 U.S. Department of Education, 2010-2011 Federal Student Aid Handbook,, vol. 6—Campus-Based Programs, pp. 612, at http://ifap.ed.gov/ifap/byAwardYear.jsp?type=fsahandbook&awardyear=2010-2011. (Hereafter cited as ED, 2010-2011 FSA Handbook.) Congressional Research Service 2 Campus-Based Student Financial Aid Programs Under the Higher Education Act independent students8 and to those who are enrolled less than full-time if the institution’s allocation of FSEOG funds was based in part on the financial need of such students. (Students enrolled less than half-time are eligible for aid under each of the campus-based programs.) Students do not repay FSEOG awards. Allocation of Funds to Institutions The federal share of FSEOG funds are allocated to IHEs according to procedures prescribed in the authorizing statute. Institutions first are allocated funds in proportion to the amount they received in previous years, with priority going to institutions that participated in the program in FY1999 or earlier. Next, funds are allocated to those institutions that began participating after FY1999, but which are not first- or second-time participants. Following this, funds are allocated to institutions that are first- or second-year participants. Provided that sufficient funds are appropriated, institutions that participated in the FSEOG program in FY1999 or earlier receive 100% of their FY1999 allocation. This is referred to as their base guarantee. Institutions that began participating after FY1999, but which are not first- or second-time participants receive a base guarantee that is the greatest of 90% of the amount they received in their second year of participation, or $5,000. Institutions participating in the FSEOG program for their first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount proportional to that received by comparable institutions, or 90% of what the institution received in its first year of participation. However, if an institution began participating in FSEOG after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation. Institutions’ base guarantees are adjusted to be proportional to the ratio of total funds available for the FSEOG program to the national total of institutions’ base guarantees. This amount is called an institution’s adjusted base guarantee.9 After allocating institutions their adjusted base guarantee, any remaining FSEOG funds are allocated to institutions proportionately according to their eligible amount of need that is in excess of their adjusted base guarantee. An institution’s eligible amount of need, or fair share, is calculated by subtracting the sum of aid provided under the Pell Grant, Academic Competitiveness Grant (ACG), National Science and Mathematics Access to Retain Talent (SMART) Grant, and LEAP/SLEAP programs from the aggregate financial need of the institution’s undergraduate students. Undergraduate student financial need is determined through a formula that takes into account the cost of attendance (COA) at the institution and the expected family contribution (EFC) of a representative sample of students.10 Institutions with a fair share amount of need that is greater than their FSEOG adjusted base guarantee are considered to have an excess eligible amount of need. These institutions receive an allocation in excess of their base 8 An independent student is one who is not considered dependent upon his parents’ income for financial aid purposes. In instances where total funds available is greater than or equal to the national total of base guarantees, then the base guarantee and the adjusted base guarantee would be equal. 10 ED has calculated a table of EFCs used in the campus-based funding process. The table includes average EFCs within 14 income bands for dependent and independent undergraduates, and for graduate and first-professional students. The EFC for students is based on information from the second preceding fiscal year. EFCs from this table, rather than the actual EFCs of students at a particular institution, are entered into the allocation formula. The table of EFCs for the 2011-2012 award year is available from ED http://www.ifap.ed.gov/eannouncements/attachments/ 012511AttachStandard20112012EFCs.pdf. 9 Congressional Research Service 3 Campus-Based Student Financial Aid Programs Under the Higher Education Act guarantee, which is called their fair share increase. Institutions’ total allotments are the sum of their adjusted base guarantee and their total fair share increase.11 Other FSEOG Funding Provisions Institutions are provided flexibility to carryover up to 10% of their allocation for use in a succeeding fiscal year to carry out the FSEOG program. They also may carry-back funds to make grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary is authorized to reallocate any excess funds returned by institutions. An institution returning more than 10% of its allocation will have its next year’s allocation reduced by the amount returned, unless the Secretary determines it would be contrary to the interest of the program. Finally, the Secretary is authorized under FSEOG to allocate up to 10% of funds appropriated in excess of $700 million for the programs authorized under HEA Title IV, Part A,12 to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to fouryear institutions. Federal Work-Study Programs13 The purpose of FWS is to provide part-time employment to undergraduate, graduate, and professional students in need of earnings to pursue their course of study; and to encourage student participation in community service activities. FWS programs are authorized under the HEA at Title IV, Part C. They first were authorized under the Economic Opportunity Act of 1964 (P.L. 88452) and administered by the U.S. Department of Labor’s Office of Economic Opportunity. In 1968, under P.L. 90-575, authority for the Work-Study Programs was transferred to Title IV of the HEA. An institution’s financial aid administrator is responsible for awarding FWS aid to eligible students. Unlike the FSEOG and Perkins Loan programs in which aid is required to be awarded first to students with exceptional financial need, FWS aid may be provided to any student demonstrating financial need. Awards typically are based on factors such as each student’s financial need, the availability of FWS funds, and whether a student requests FWS employment and is willing to work.14 Students receive their award as compensation for the hours they have worked. Earnings from FWS employment are considered “excludable income” in determining a student’s financial need for the subsequent year. Awards are based on a combination of factors 11 Institutions may receive both an initial fair share increase and an additional fair share increase, the latter being based on the reallocation of excess funds returned by other institutions (described in the next section). 12 HEA Title IV, Part A—Grants to Students in Attendance at Institutions of Higher Education, includes the following programs: Pell Grants, the TRIO programs, GEAR-UP, Academic Achievement Incentive Scholarships, FSEOG, LEAP, Migrant and Seasonal Farmworker Programs, the Robert C. Byrd Honors Scholarship Program, Child Care Access Means Parents in School, Learning Anytime Anywhere Partnerships, and TEACH Grants. 13 This report covers only FWS programs authorized under Part C of the HEA. The LEAP program provides federal funds that can be used by states to support state work-study programs. The Department of Veterans Affairs also administers the Veterans Administration Student Work-Study Allowance Program (VASWSAP) for veterans and eligible persons. Authorization for this program is codified at 38 U.S.C. §§ 3485 and 3537. 14 U.S. Department of Education, Office of the Under Secretary, Planning and Evaluation Service, Postsecondary, Adult, and Vocational Education Division, The National Study of the Operation of the Federal Work-Study Program: Summary Findings from the Student and Institutional Surveys (Washington, DC: 2000), p. 57. Congressional Research Service 4 Campus-Based Student Financial Aid Programs Under the Higher Education Act such as a student’s financial need, financial aid available from other sources, the wage rate, and how many hours per week the student can work. There is no maximum award amount. FWS Employment FWS employment may consist of work for the higher education institution a student attends, for a private non-profit organization, for a federal, state, or local public agency, or for a private forprofit organization. Conditions applicable to all types of FWS employment include that it: (A) will not result in the displacement of employed workers or impair existing contracts for services; (B) will be governed by such conditions of employment as will be appropriate and reasonable in light of such factors as type of work performed, geographical regions, and proficiency of the employee; (C) does not involve the construction, operation, or maintenance of so much of any facility as is used or is to be used for sectarian instruction or as a place for religious worship; and (D) will not pay any wage to students employed ... [through the FWS program] that is less than the current federal minimum wage as mandated by Section 6(a) of the Fair Labor Standards Act of 1938.15 Students working for private for-profit organizations must be employed in jobs that are academically relevant to their pursuits. Furthermore, such students cannot be employed under FWS if they otherwise would have been employed by the organization. Students employed by proprietary institutions that they also attend either must be employed on-campus in jobs that, in addition to the aforementioned requirements, also provide student services directly related to the student’s education; or in community service jobs. Proprietary institutions cannot employ FWS students in jobs that involve the solicitation of other students to attend the institution. Employment by private for-profit organizations must be arranged between the sponsoring institution and the for-profit organization. FWS Community Service Employment Since FY2000, institutions participating in FWS have been required to use at least 7% of their FWS allocation to compensate students employed in community service jobs, including 100% of any excess FWS funds they receive through reallocation of other institutions’ unspent FWS funds.16 In meeting the 7% requirement, institutions are required to ensure that they are operating at least one tutoring or family literacy project in service to the community. Institutions may use up to 10% of the funds they receive for administrative expenses under Section 489 of the HEA and attributable to the FWS program for the operation of their FWS community service-learning programs. The HEA defines community service as follows: COMMUNITY SERVICES.—For purposes of this part, the term “community services” means services which are identified by an institution of higher education, through formal or 15 HEA, § 443(b)(1) (42 U.S.C. § 2753(b)(1)). From FY1994 through FY1999, institutions were statutorily required to use 5% of their FWS allocation to compensate students employed in community service jobs. 16 Congressional Research Service 5 Campus-Based Student Financial Aid Programs Under the Higher Education Act informal consultation with local nonprofit, governmental, and community-based organizations, as designed to improve the quality of life for community residents, particularly low-income individuals, or to solve particular problems related to their needs, including: (1) such fields as health care, child care (including child care services provided on campus that are open and accessible to the community), literacy training, education (including tutorial services), welfare, social services, transportation, housing and neighborhood improvement, public safety, emergency preparedness and response, crime prevention and control, recreation, rural development, and community improvement; (2) work in a project, as defined in Section 101(20) of the National and Community Service Act of 1990 (42 U.S.C. § 12511(20)); (3) support services to students with disabilities, including students with disabilities who are enrolled at the institution; and (4) activities in which a student serves as a mentor for such purposes as— (A) tutoring; (B) supporting educational and recreational activities; and (C) counseling, including career counseling.17 Tutoring and family literacy projects include those that employ students as reading tutors of children who are of preschool age or who are in elementary school, or in family literacy projects. In many instances, FWS jobs in tutoring and family literacy projects count toward an institution’s 7% community service requirement. However, this may not always be the case. For instance, ED has determined that if FWS students are employed as tutors in an institution’s daycare center and the center is not open and accessible to the community, then the job could not be counted toward satisfying the institution’s 7% community service requirement.18 Civic Education and Participation Activities The HEOA amended the FWS programs to establish new categories of employment for participating students. To the extent practicable, IHEs must give priority to the employment of students participating in FWS projects that educate or train the public about evacuation, emergency response, and injury prevention strategies relating to natural disasters, terrorist acts, and other emergencies. Institutions may also use FWS funds to employ students employed in projects that teach civics in schools, raise awareness about government functions or resources, or increase civic participation. Institutions also must ensure that participating students are appropriately trained to carry out these activities.19 17 HEA, § 441(c) (42 U.S.C. § 2751(c)). ED, 2010-2011 FSA Handbook, vol. 6—Campus-Based Programs, pp. 6-29 through 6-39. 19 HEA, § 443(e) (42 U.S.C. § 2753(e)). 18 Congressional Research Service 6 Campus-Based Student Financial Aid Programs Under the Higher Education Act Federal and Non-Federal Shares of Compensation Under the FWS programs, students are compensated with a combination of federal funding and a matching amount provided either by the institution or the employer. The share of compensation that may be provided through federal funding varies according to the type of FWS employment. For most FWS jobs, the maximum federal share of compensation is 75%; however, in certain instances, the federal share may be higher (see Table 1). For employment in the private for-profit sector, the federal share of compensation is limited to 50%. An institution’s matching share of compensation may come from any source (other than FWS), and may be paid in the form of services, such as tuition, room, board, or books provided by the institution. Table 1 highlights the maximum federal share of compensation for the various types of FWS employment. Table 1. FWS Requirements for Federal Share of Compensation Type of FWS Employment Maximum Federal Share Specific Requirements FWS—In general 75% General requirement Private non-profit or government agency other than the institution May exceed 75%, but may not exceed 90%, consistent with regulations Employer selected for student on case-by-case basis and otherwise would be unable to afford cost of employment; and no more than 10% of the institution’s FWS students are employed in jobs for which the federal share exceeds 75% Regulatory exceptiona 100% Determination by the Secretary that federal share in excess of 75% is necessary to further the purpose of the FWS program Private for-profit sector 50% Employing for-profit organization must provide the nonfederal share of compensation Tutoring and Literacy Projects 100% Priority given to employment of students in projects funded under the Elementary and Secondary Education Act (ESEA) Work-Colleges 50% Separate funding authorization; institution must match dollarfor-dollar with non-federal funds Civic education and participation activities 100% Projects must teach civics in school, raise awareness of government functions or resources, or increase civic participation. Source: HEA, §§ 443, 444, 447, 448 (42 U.S.C. §§ 2753, 2754, 2756a, 2756b); and ED, 2010-2011 FSA Handbook, vol. 6—Campus-Based Programs, pp. 6-10 through 6-13. a. Applicable for schools designated as eligible schools under the Developing Hispanic Serving Institutions Program, the Strengthening Institutions Program, the American Indian Tribally Controlled Colleges and Universities Program, the Alaska Native and Native Hawaiian-Serving Institutions Program, the Strengthening Historically Black Colleges and Universities Program. b. This provision was added by the HEOA. Specific requirements may be addressed in future regulations. Off-Campus Community Service Employment The HEOA established an FWS Off-Campus Community Service Employment program with a separate authorization of appropriations. Under the program, the Secretary is authorized to make grants to IHEs otherwise participating in the FWS programs to supplement off-campus community service employment. Recipient institutions must use funds to recruit and compensate students, and may use funds to compensate students for travel and training directly related to their community service employment. In awarding grants to institutions, the Secretary is required to Congressional Research Service 7 Campus-Based Student Financial Aid Programs Under the Higher Education Act give priority to institutions whose students would be employed in community service related to early childhood education and the preparation for emergencies and natural disasters.20 Flexibility in Making Payments to Disaster-Affected Students Institutions located in areas affected by a major disaster may continue to make FWS payments to students affected by the disaster who during the award year had earned FWS aid and who, as a result of the disaster, became unable to fulfill their work-study obligation and were unable to be reassigned to another work-study job. Disaster-affected students may receive FWS compensation for no more than one academic year. Payments to disaster-affected students also must meet maximum federal matching requirements, unless waived by the Secretary. Job Location and Development Programs Institutions may use up to the lesser of 10% of their FWS allocation or $75,000 to establish or expand a job location and development program operated either by the institution or jointly with another institution. The program must locate and develop jobs, including community service jobs, for currently enrolled students. Jobs located and developed should be compatible with students’ scheduling needs and complement their educational and vocational goals. The federal share of funds used to operate the program cannot exceed 80%. Job location and development programs cannot be used to find jobs at the institution, nor should they be used to find jobs for students after graduation. Work Colleges The FWS programs authorize funding to support comprehensive work-learning-service programs at select institutions called “work colleges.” Work colleges are public and private nonprofit, fouryear, degree-granting institutions with a commitment to community service that require students to participate in comprehensive work-learning-service programs that contribute to their education and the welfare of the broader community. Specifically, at least half of full-time students must participate in a comprehensive work-learning-service program for at least five hours per week, or at least 80 hours per each period of enrollment. In work colleges, all resident students must be required to participate in work-learning-service programs that are an integral and stated part of the institution’s educational philosophy and program, participation by all resident students must be required for enrollment and graduation, work-learning-service must be included as part of students’ college records, and there must be consequences for nonperformance or failure in the work-learning-service program that are similar to the regular academic program. The Work Colleges program contains its own authorization of appropriations. Institutions also may transfer funds from their regular FWS program allocation and their Perkins Loan FCC allocation to the Work Colleges program. Authorized activities under the Work Colleges program include providing support to students participating in work-learning-service programs; promoting the work-learning-service experience in postsecondary education; carrying out traditional FWS and job location and development programs; developing, administering, and assessing comprehensive work-learning-service programs; coordinating and carrying out joint projects to 20 HEA, § 447(b); (20 U.S.C. § 2756a(b)). Congressional Research Service 8 Campus-Based Student Financial Aid Programs Under the Higher Education Act promote work-learning-service; and carrying out comprehensive longitudinal studies of worklearning-service programs. Allocation of Funds to Institutions Similar to the FSEOG program, FWS funds are allocated to IHEs according to statutorily prescribed procedures. Funds first are allocated to institutions based on previous years’ allocations, with priority going to institutions that participated in the program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation as their base guarantee.21 Institutions that began participating after FY1999, but which are not first- or second-time participants receive a base guarantee that is the greatest of 90% of the amount they received in their first year of participation, or $5,000. Institutions participating in the FWS program for their first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount proportional to that received by comparable institutions, or 90% of what the institution received in its first year of participation. However, if an institution began participating in FWS after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation. If sufficient funds are not appropriated, then institutions’ awards are reduced proportionately, resulting in an amount called their adjusted base guarantee. Funds in excess of the amount required to meet institutions’ base guarantee are allocated according to institutions’ proportionate share of excess eligible need. For the FWS program, excess eligible need is the amount by which an institution’s share of self-help need (fair share) exceeds its base guarantee. Self-help need is calculated separately for undergraduate students and graduate and professional students according to formulas that take into account the cost of attendance at the institution and the approximate EFCs of students attending the institution. Institutions whose grants are based in part on the need of independent students or those attending less than full-time are required to assist these students through FWS employment with a reasonable portion of the FWS grant. The Secretary is authorized to allocate up to 10% of funds appropriated for FWS that are in excess of $700 million to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to four-year institutions. Institutions are provided flexibility to carryover up to 10% of their FWS funds for use in a succeeding fiscal year to carry out the FWS program. If an institution neither uses funds in the year for which they were granted, nor carries them over to the next fiscal year, the Secretary may, in the next succeeding fiscal year, reallocate them to other institutions within the same state. Up to 10% of an institution’s allocation may be granted by the Secretary for the purpose of making grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary also is required to reallocate any excess funds returned by institutions to eligible institutions that in the previous fiscal year used at least 5% of their FWS allocation to compensate students employed in tutoring in reading or family literacy activities. Reallocated funds must be distributed to such institutions according to their excess eligible need. Institutions returning more than 10% of their allocation may, at the discretion of the Secretary, be subject to having their next year’s allocation reduced by the amount returned. 21 This is equal to the sum of its FY1999 (award year 1999-2000) base guarantee, plus its initial award year 1999-2000 pro rata increase, plus the additional FWS funds the institution received from the $17 million set aside that year for allocation to institutions that certified that they graduated or transferred at least 50% of their Pell Grant recipients. Congressional Research Service 9 Campus-Based Student Financial Aid Programs Under the Higher Education Act Federal Perkins Loans The Federal Perkins Loan program authorizes the allocation of federal funds to IHEs to assist them in capitalizing revolving loan funds for the purpose of making low-interest loans to students with exceptional financial need. The Federal Perkins Loan program is authorized under the HEA at Title IV, Part E. It supersedes Title II—Loans to Students in Institutions of Higher Education, of the National Defense Education Act of 1958 (P.L. 85-864), which was incorporated into the HEA through the Education Amendments of 1972 (P.L. 92-318). Previously, these loans were known as National Defense Student Loans (Defense Loans) and National Direct Student Loans (NDSLs). Institutions capitalize revolving loan funds created under the Federal Perkins Loan program with a combination of federal and institutional capital contributions (FCCs and ICCs, respectively). Institutions apply to ED for FCC funds which are allocated according to procedures similar to those used for the FSEOG and FWS programs. Each institution’s ICC must be equal to one-third of the FCC. After making loans, institutions recapitalize their loan funds by depositing the principal and interest repaid by students who borrowed under the program, as well as any other charges or earnings associated with the operation of the program. Award Procedures and Terms of Perkins Loans Institutions are required to establish written selection procedures for awarding Perkins Loans to eligible students and to keep these on file at the institution. Loans must be made reasonably available to all eligible students, to the extent that funds are available, and priority must be given to students with exceptional financial need. Institutions’ selection procedures may include individuals’ willingness to repay the loan. Undergraduate students (including those seeking an additional undergraduate degree, if they are otherwise eligible), and graduate and professional students are eligible to borrow from the institutions they attend under the Perkins Loan program. Students studying abroad in programs approved for academic credit by participating institutions also may receive Perkins Loans. Under the terms of the program, the maximum amount a student may borrow per academic year is $5,500 for undergraduate students and $8,000 for graduate and professional students. The maximum aggregate amount that a student may borrow is limited to $27,500 in unpaid principal for undergraduate students who have completed two years of study, but who have not completed their baccalaureate degree; $60,000 for graduate and professional students; and $11,000 for any other students. Both the annual and aggregate loan limits may be increased by up to 20% for students studying abroad in approved programs. If the amount of an institution’s FCC is based in part on independent students or those studying less than full-time, then these students must be provided with a reasonable portion of the Perkins Loans made by the institution. Interest on Perkins Loans is fixed at a rate of 5% per year.22 However, no interest accrues prior to a student beginning repayment, nor while repayment is suspended during deferment (described below). Borrowers must begin repaying Perkins Loans nine months after they no longer are enrolled at least half-time, and must complete repayment within 10 years after beginning repayment. Institutions may establish incentive repayment programs in which they may reduce 22 Loans made prior to July 1, 1981 were at 3%; loans made between July 1, 1981 and September 30, 1981 were at 4%; and loans made on or after October 1, 1981 are at 5%. Congressional Research Service 10 Campus-Based Student Financial Aid Programs Under the Higher Education Act the interest rate by up to one percentage point in instances where a student makes 48 consecutive payments. In addition, if a student repays a Perkins Loan in full prior to the end of the repayment period, an institution may discount the loan balance owed by up to 5% at the time the repayment is made. However, institutions may not use either federal or institutional funds from the Perkins revolving loan fund to absorb the costs of incentive repayment programs and must reimburse the fund on a quarterly basis for any lost income. Deferment In general, deferment is a period during which a borrower is not required to make payments on the loan balance and during which interest does not accrue. A Perkins Loan borrower is granted a deferment if the borrower • is enrolled at least half-time at an eligible institution; • is pursuing a graduate fellowship or rehabilitation training program approved by the Secretary (excluding medical internship and residency programs); • is seeking, but unable to find, full-time employment (for up to three years); • is serving on active duty in the military or is performing qualifying National Guard duty during a war or other military operation of national emergency, and for 180 days following such service; • is experiencing an economic hardship (for up to three years); • is engaged in a type of service that makes the borrower eligible for loan cancellation (discussed later); or • is a member of the National Guard or other reserve component of the armed forces, or a member of the armed forces in retired status, who was called to active duty service while enrolled, or within six months after being enrolled, at an eligible institution (for up to 13 months following the completion of such service or re-enrollment).23 Borrowers are not required to request deferment in writing, but must provide the institution with information necessary to document their deferment status. They also are not required to resume making payments until six months following the completion of any of the periods described above for which they are exempted from making payments. Time in deferment does not count toward the 10-year repayment period. Forbearance In general, forbearance is a temporary suspension or postponement of payments during which interest continues to accrue. A borrower may be granted forbearance from paying principal and interest or of principal only if the borrower’s debt burden due to HEA student financial assistance loans is greater than or equal to 20% of the borrower’s gross income, or if the institution determines that forbearance should be granted for other reasons. Examples include services in AmeriCorps or for reasons due to a “national military mobilization or other national 23 Other types of deferments may be available to borrowers of Perkins Loans made before July 1, 1993. Congressional Research Service 11 Campus-Based Student Financial Aid Programs Under the Higher Education Act emergency.”24 Forbearance may be granted for a period of up to one year at a time, and may be renewed for a total period of up to three years. Loan Cancellation Individuals who have engaged in the following types of public service are eligible to have part or all of their loans cancelled25 • full-time elementary or secondary school teacher employed at a public school, private nonprofit school, or location operated by an educational service agency, in which low-income students are more than 30% of total enrollment;26 • full-time staff member employed in a Head Start preschool program, or a prekindergarten or child care program that is licensed or regulated by the state; • full-time special education teacher employed in a public or nonprofit elementary or secondary school system (including a system of an educational service agency), or a professional provider of Individuals with Disabilities Education Act (IDEA) early intervention services in a public or nonprofit program; • member of the U.S. Armed Forces serving in an area of hostilities; • Peace Corps or Americorps*VISTA volunteer;27 • full-time law enforcement or corrections officer employed in a local, state, or federal law enforcement or corrections agency, or full-time attorney employed in a public defender organization; • full-time teacher of mathematics, science, foreign languages, bilingual education, or other shortage subject area (as determined by the SEA); • full-time nurse or medical technician28 providing health care services; • full-time employee of a public or private nonprofit agency serving high-risk children from low-income communities and their families; • full-time firefighter serving in a local, state, or federal fire department or district; • full-time faculty member at a Tribal College or University; • librarian with a master’s degree in library science employed in an elementary or secondary school eligible for assistance under ESEA , Title I-A, or in a public library serving a geographic area that contains such a school; or 24 ED, 2010-2011 FSA Handbook, vol. 6—Campus-Based Programs, pp. 6-75 through 6-88. HEA, § 465(a) (20 U.S.C. § 1087ee(a)). 26 Teacher cancellations may be granted only to individuals teaching in a school serving children from low-income families and which is listed in the Directory of Designated Low-Income Schools for Teacher Cancellation Benefits. 27 Borrowers who have received a national service education award for volunteer service with Americorps under Title I-D of the National and Community Service Act of 1990 are not eligible for loan cancellation benefits for the same volunteer service. 28 For additional information on the definition of “medical technician” see U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter CB-08-14, “Medical Technician Loan Cancellation Benefit in the Federal Perkins Loan Program,” (December 8, 2008), at http://ifap.ed.gov/dpcletters/attachments/CB0814Attach.pdf. 25 Congressional Research Service 12 Campus-Based Student Financial Aid Programs Under the Higher Education Act • full-time speech language pathologist with a master’s degree and working exclusively with schools eligible for assistance under ESEA, Title I-A. Perkins Loan cancellation is based on both the number of years of service an individual has completed and a rate of cancellation applicable to the particular type of service. Table 2 presents the percentage of the principal of Perkins Loans that is canceled for each year of service in an activity eligible for Perkins Loan cancellation. The terms of the program prescribe that the amount of principal and interest canceled for public service shall not be considered as income for purposes of the Internal Revenue Code (IRC) of 1986. The Secretary is required to reimburse institutions for Perkins Loans canceled for students engaged in public service. Funds for reimbursing institutions for loan cancellations may not come from the appropriation designated for FCCs. Rather, funds for the reimbursement of Perkins Loan cancellations are appropriated under a separate authorization from funds for Perkins Loan FCCs. Each year, the Secretary is required (to the extent feasible), to reimburse institutions within three months after they file their applications for reimbursement of campus-based funds. Table 2. Perkins Loan Cancellation Rates by Type of Service Type of Service Percent of Perkins Loan Principal Canceled Per Year of Service 1st and 2nd Years 3rd and 4th Years 5th Year and Later Max. Total Full-time elementary or secondary school teacher in a designated low-income school 15 20 30 100 Full-time staff member in preschool, prekindergarten, or child care program 15 15 15 100 Full-time special education teacher/IDEA professional provider 15 20 30 100 Member of Armed Forces in area of hostilities 15 20 30 100 Peace Corps or Americorps*VISTA volunteer 15 20 N/A 70 Full-time law enforcement/corrections officer or public defender 15 20 30 100 Full-time math, science, foreign language, bilingual education, or other shortage subject area teacher 15 20 30 100 Full-time nurse or medical technician 15 20 30 100 Full-time employee of agency serving high-risk children and their families 15 20 30 100 Full-time firefighter 15 20 30 100 Full-time faculty member at a Tribal College or University 15 20 30 100 Librarian with a master’s degree in an ESEA, Title I-A, school 15 20 30 100 Full-time speech language pathologist with a master’s degree working in an ESEA, Title I-A, school 15 20 30 100 Source: HEA, § 465 (20 U.S.C. § 1087ee). Congressional Research Service 13 Campus-Based Student Financial Aid Programs Under the Higher Education Act Loan Discharge Institutions must discharge a borrower’s liability to repay Perkins Loans if the borrower dies; becomes permanently and totally disabled, as determined according to regulations issued by the Secretary; becomes unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that is expected to result in death, or that has continuously lasted or can be expected to continuously last for 60 months; or is determined by the Secretary of Veterans Affairs (VA) to be unemployable due to a service-connected disability.29 Collections may be resumed if a borrower whose loan has been discharged subsequently receives a loan under HEA, Title IV, if the borrower earns income in excess of the poverty line, or if the Secretary determines the resumption of collections to be necessary. Institutions are not reimbursed by the Secretary for losses due to the discharge of Perkins Loans. Loan Default and Rehabilitation In general, a Perkins Loan is considered to be in default if the borrower has failed to comply with the terms of the promissory note or failed to make payments on a loan for 240 days (for a loan repayable monthly) or 270 days (for a loan repayable quarterly). The cohort default rate for an institution is defined as the percentage of current and former students entering repayment on Perkins Loans received for attendance at that institution who default on their loans before the end of the following award year.30 For institutions with less than 30 students entering repayment in any year, the cohort default rate is calculated over a three-year period. A borrower who has defaulted on a loan may rehabilitate the loan by making 9 consecutive ontime payments. Rehabilitated borrowers are returned to regular repayment status, begin a new 10year repayment schedule, and have the default removed from their credit history. A borrower may rehabilitate a loan only once. Allocation of Funds to Institutions Under the Perkins Loan program, funds are allocated to IHEs according to procedures using a two-stage process somewhat similar to that used for the FSEOG and FWS programs—funds first are allocated according to institutions’ previous year’s allocations (base guarantee), and any remaining funds are allocated according to institutions’ share of excess eligible amounts of student need (fair share increase). Unlike the formulas for the FSEOG and FWS programs, however, the Perkins Loan allocation formulas also include a default penalty applicable to institutions with large proportions of borrowers defaulting on their Perkins Loans. The default penalty is used to limit the awarding of Perkins Loan FCCs to only institutions with cohort default rates below a maximum threshold. Institutions with a cohort default rate of less than 25% are assigned a default penalty of “1” and those with a default rate of 25% or greater are assigned a default penalty of “0.” 29 For additional information on the discharge of Perkins Loans, see CRS Report R42110, Federal Student Loan Discharge Procedures for Borrowers Who Become Totally and Permanently Disabled: Current Issues and Policy Considerations, by David P. Smole and Umar Moulta-Ali. 30 HEA, § 462(g) [42 U.S.C. § 1087bb(g)]. Congressional Research Service 14 Campus-Based Student Financial Aid Programs Under the Higher Education Act According to the allocation formulas, FCC funds first are allocated to IHEs according to their previous year’s allocations with priority going to institutions that participated in the Perkins Loan program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation.31 Institutions that began participating in the Perkins Loan program after FY1999, but which are not first- or second-time participants, are eligible to receive 100% of the amount they received in their first year of participation. Those institutions that began participating after FY1999, and which are first or second time participants, generally are eligible to be awarded either 90% of the amount they received in the previous year or 90% of the amount awarded to comparable institutions on a per-capita basis. However, if an institution began participating in the Perkins Loan program after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation if this is a larger amount than it would otherwise receive. The minimum grant amount is $5,000. Any institution with a default penalty of “0,” however, has its FCC allotment reduced to $0. After allocating funds according to institutions’ previous year’s allocations, any remaining FCC funds are allocated based on each institution’s fair share of excess eligible student need. This is the amount by which an institution’s share of eligible self-help need exceeds the amount already allocated to it according to its base guarantee. Like in the FWS program, self-help need is calculated separately for undergraduate students, and for graduate and professional students according to formulas that take into account the institution’s COA and the approximate EFCs of students attending the institution. However, for the Perkins Loan program, an institution’s eligible amount of need is the amount of the institution’s self-help need, minus the institution’s collections (defined as the amount the institution collected in the second year prior to the award year, multiplied by 1.21), multiplied by its cohort default penalty (either 1 or 0). The Secretary is authorized to reallocate any excess Perkins Loan funds returned by institutions. Eighty percent of these funds must be reallocated to institutions according to their excess eligible amounts of student need, while the remaining 20% can be reallocated according to regulation established by the Secretary. An institution returning more than 10% of its allocation will have its subsequent year’s allocation reduced by the amount returned, unless waived by the Secretary as contrary to the interest of the program. Distribution of Assets from Perkins Loan Funds Upon ceasing to participate in the Perkins Loan program, institutions are required to begin a distribution of assets from their revolving loan funds.32 Upon such occurrence, an institution must repay the Secretary a portion of the balance of its loan funds that is proportional to the amount constituted by FCCs. In many instances, this percentage could range between 85% and 90% of an institution’s Perkins Loan fund.33 31 According to the Department of Education’s Explanation of Worksheet 2011-2012 Award Period for the campusbased programs, this is equal to the institution’s award year 1999-2000 conditional guarantee, multiplied by its award year 1999-2000 cohort default penalty factor, multiplied by a 60.77% reduction factor. 32 Statutory language at HEA, § 466 (20 U.S. C. § 1087ff) provides that institutions must begin a distribution of assets from their revolving loan funds after October 1, 2012; however, ED has determined that this language is superseded by language at HEA, § 461(b), and GEPA, § 422(a), which together authorize the Perkins Loan program through September 30, 2015. For additional information, see ED, Dear Colleague Letter, GEN-11-02, “Status of the Federal Perkins Loan Program,” February 17, 2011, at http://www.ifap.ed.gov/dpcletters/GEN1102.html. 33 U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter CB-00-05, Enclosure 1. (continued...) Congressional Research Service 15 Campus-Based Student Financial Aid Programs Under the Higher Education Act Transfer of Funds Between Campus-Based Programs Institutions have flexibility to transfer funds between the campus-based programs in which they participate. They may transfer up to a total of 25% of their allotment under the Federal Perkins Loan program for use in the FSEOG or FWS programs, or both. Institutions may transfer up to 25% of their allotment under the FWS program for use in the FSEOG or Federal Perkins Loan program, or both. Institutions also may transfer up to 25% of their FSEOG allocation for use in the FWS programs. As noted earlier, work colleges also may transfer up to 100% of their Perkins Loan FCC or FWS allocation to their Work Colleges program. For award year (AY) 2009-2010, based on data reported to ED, 1,460 institutions transferred a total of $115.3 million from the FWS to the FSEOG program; 214 institutions transferred a total of $4.2 million from the FSEOG to the FWS program; and 24 institutions transferred a total of $2.1 million from the FWS to the Perkins Loan program.34 In prior years when Perkins Loan FCCs were appropriated, some institutions also transferred funds from the Perkins Loan program to the FSEOG and FWS programs. Administrative Costs Institutions participating in the campus-based programs are entitled to an administrative cost allowance to cover the expenses of administering the programs. Administrative cost allowances are determined according to the following schedule • 5% of the institution’s first $2.75 million in expenditures; plus • 4% of the institution’s expenditures greater than $2.75 million and less than $5.5 million; plus • 3% of the institution’s expenditures in excess of $5.5 million. In calculating administrative costs, institutions include both federal and institutional expenditures.35 Institutions take their administrative cost allowances out of federal funds allocated for the FSEOG and FWS programs, and from cash on hand in their revolving loan funds for the Perkins Loan program. Institutions have some discretion in determining how to allocate administrative costs across the three campus-based programs. Administrative cost allowances as claimed for the campus-based programs are shown in Table 3. (...continued) Institutions participating in the Perkins Loan program typically have received FCCs throughout the duration of their participation in the program. From the inception of the program through the 1992-1993 award year, the federal share was 90%. In the 1993-1994 award year, the federal share was 70%. Since the 1994-1995 award year the federal share has been 75%. 34 U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based Programs Data Book 2011, http://www2.ed.gov/finaid/prof/resources/data/databook2011/databook2011.html. (Hereafter cited as ED, Federal Campus-Based Programs Data Book, 2011.) 35 HEA, § 489 (20 U.S.C. § 1096); ED, 2010-2011 FSA Handbook, vol. 6—Campus-Based Programs, pp. 6-6 through 6-7. Congressional Research Service 16 Campus-Based Student Financial Aid Programs Under the Higher Education Act Table 3. Administrative Cost Allowances for the Campus-Based Programs (AY2008-2009) Campus-Based Program Administrative Cost Allowance FSEOG $12,605,202 FWS 58,278,715 Perkins Loans 40,817,891 Total 111,701,808 Source: U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based Programs Data Book 2011. Funding and Program Data This section presents budget information on past funding levels for the campus-based programs, and also program information including the number of institutions participating in each program, the number of students awarded aid and average award amounts, and the distribution of campusbased aid according to student and institutional characteristics. Funding for the Campus-Based Programs In recent years, funding for the FSEOG program has decreased slightly. Funding for the FWS program has also decreased slightly in recent years, with the exception of an additional $200 million provided in FY2009 under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5). Funding for the FWS Off-Campus Community Service program, which was established under the HEOA, was only provided for FY2010. Discretionary appropriations were last provided for Perkins Loan FCCs in FY2004; and funding was last provided for Perkins Loan Cancellations in FY2009. Appropriation figures for the campus-based programs are presented in Table 4 for the past decade. Table 4. Campus-Based Program Funding: Appropriations for FY2002-FY2012 (in thousands of dollars) FWS OffCampus Community Service Perkins Loan FCCs Perkins Loan Cancellations Fiscal Year FSEOG FWS FY2002 725,000 1,011,000 — 100,000 67,500 FY2003 760,028 1,004,428 — 99,350 67,061 FY2004 770,455 998,502 — 98,764 66,665 FY2005 778,720 990,257 — 0 66,132 FY2006a 775,462 999,523 — 4,731 65,471 FY2007 770,933 980,354 — 0 65,471 FY2008 757,465 980,492 — 0 64,327 Congressional Research Service 17 Campus-Based Student Financial Aid Programs Under the Higher Education Act FWS OffCampus Community Service Perkins Loan FCCs Perkins Loan Cancellations Fiscal Year FSEOG FWS FY2009b 757,465 1,180,492 0 0 67,164 FY2010 757,465 980,492 750 0 0 FY2011 735,990 978,531 0 0 0 FY2012 734,599 976,682 0 0 0 Sources: U.S. Department of Education, Budget Service, “Department of Education Fiscal Year 2012 Congressional Action”; and historical tables. a. Amounts include a mandatory reappropriation of $28,429 million in expired FY2005 funds pursuant to the National Disaster Student Aid Fairness Act (P.L. 109-86 ): $4.5 million for FSEOG, $19.2 million for FWS, and $4.7 million for Perkins Loan FCCs. b. FWS includes a $200 million appropriation under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5). Under each of the campus-based programs, federal funds are generally required to be matched by the participating institution (or the employer under FWS, if other than the institution). As previously described, under each of the programs, the institutional match generally is one-third the amount of the federal share (however, in the FWS program, the required match can be as high as one-half of the federal share or as low as zero, depending on the type of employment). Because of the matching requirements, the campus-based programs leverage federal funding to provide an amount of student financial aid that is greater than the amount of federal funds appropriated for each program. Institutional Participation In AY2009-2010, 6,896 postsecondary institutions were participating in HEA Title IV financial aid programs.36 Approximately 56% of Title IV institutions awarded FSEOG aid, while approximately 50% employed students in FWS. However, only approximately 24% of Title IV institutions advanced loans under the Perkins Loan program. While fewer institutions of all types participate in the Perkins Loan program than in either FSEOG or FWS, far fewer two-year and proprietary participate in the Perkins Loan program than the other two programs.37 It is possible that these lower levels of participation are due to factors such as the administrative burden of administering a revolving loan fund and the generally higher cohort default rates of students who attend these types of institutions. Over the past decade, there has been a slight increase in the number of IHEs participating in the FSEOG and FWS programs. Institutional participation in the Perkins Loan program, however, has continued a pattern of decline that has occurred over the past quarter century. Figure 1 displays the number of institutions participating in each of the campus-based programs since the 19851986 award year. 36 L.G. Knapp, J.E. Kelly-Reid, and S.A. Ginder, Enrollment in Postsecondary Institutions, Fall 2009; Graduation Rates, 2003 & 2006 Cohorts; and Financial Statistics, Fiscal Year 2009, (NCES 2011-230), U.S. Department of Education, Washington, DC, National Center for Education Statistics, 2011, p. 1. 37 ED, Federal Campus-Based Programs Data Book, 2011. Congressional Research Service 18 Campus-Based Student Financial Aid Programs Under the Higher Education Act Figure 1. Institutions Participating in the Campus-Based Programs (AY1985-1986 through AY2011-2012) 5,000 4,500 4,000 3,500 Institutions 3,000 2,500 2,000 1,500 1,000 500 19 85 19 198 86 6 19 198 87 7 19 198 88 8 19 198 89 9 19 199 90 0 -1 19 99 91 1 19 199 92 2 19 199 93 3 19 199 94 4 -1 19 99 95 5 19 199 96 6 19 199 97 7 19 199 98 8 -1 19 99 99 9 20 200 00 0 20 200 01 1 20 200 02 2 20 200 03 3 20 200 04 4 -2 20 00 05 5 20 200 06 6 20 200 07 7 20 200 08 8 20 200 09 9 20 201 10 0 -2 20 01 11 1 -2 01 2 - Award Year FSEOG FWS Perkins Source: ED, Federal Campus-Based Programs Data Book, 2011; and prior editions. Students Served and Average Aid Amounts This section presents information on the number of students being served and the average award amounts for each of the three campus-based programs based on program data from ED. To facilitate comparison of student award amounts over time, these data have been adjusted to 2009 dollars according to the consumer price index for all urban consumers (CPI-U). FSEOG FSEOG program data on the number of students granted awards and the average award amount since the 1989-1990 award year (in constant 2009 dollars) are presented in Figure 2. Once the smallest of the three campus-based programs in terms of the number of students served, the FSEOG program has grown steadily since its inception in the 1967-1968 award year to become the largest today. Since AY1989-1990, it has served more students annually than either of the other two campus-based programs. The number of students receiving FSEOG awards increased considerably during the 1990s, and since AY2004-2005, more than 1.4 million students annually have received awards. The average amount of aid provided per student under the FSEOG program is the lowest among the three campus-based programs. Over the past two decades, increasing numbers of students have been served through the FSEOG program, and the average award amount has increased from $641 in AY1989-1990 to $669 in AY2009-2010. However, in constant dollars, award amounts have declined by 40%. Congressional Research Service 19 Campus-Based Student Financial Aid Programs Under the Higher Education Act Figure 2. FSEOG: Number of Students Receiving Awards and Average Award Amounts (AY1989-1990 through AY2009-2010) 1,600,000 $3,000 1,400,000 1,200,000 $2,000 1,000,000 800,000 $1,500 600,000 $1,000 400,000 Average FSEOG Award FSEOG Awards Granted $2,500 $500 200,000 $- 19 89 19 -19 90 90 19 -19 91 91 19 -19 92 92 19 -19 93 93 19 -19 94 94 19 -19 95 95 19 -19 96 96 19 -19 97 97 19 -19 98 98 19 -19 99 99 20 -20 00 00 20 -20 01 01 20 -20 02 02 20 -20 03 03 20 -20 04 04 20 -20 05 05 20 -20 06 06 20 -20 07 07 20 -20 08 08 20 -20 09 09 -2 01 0 - Students Served Avg. Award Avg. Award (2009 $s) Source: ED, Federal Campus Based Programs Data Book, 2011, and prior editions. FWS FWS program data are presented in Figure 3. For most of the past two decades, between 675,000 and 750,000 students were served annually through FWS, although more than 810,000 students received FWS aid in AY2004-2005. Over the past two decades, the average FWS award has increased from $980 in AY1989-1990 to $1,700 in AY2009-2010; however, in constant dollars, compensation amounts have remained level. From AY1994-1995 through AY1999-2000, institutions participating in the FWS program were required to expend at least 5% of their initial and supplemental FWS allocations to compensate students employed in community service jobs. Beginning with AY2000-2001, institutions must expend 7% of their FWS allotment on community service and operate at least one tutoring or family literacy project. Since the community service requirements have been in place, ED reports that the number of students employed in community service increased from 58,596 in AY1994-1995 to 132,424 in AY20092010. The darkly shaded portion of the bars in Figure 3 indicates the number of students employed in community service. Congressional Research Service 20 Campus-Based Student Financial Aid Programs Under the Higher Education Act Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts (AY1989-1990 through AY2009-2010) 1,600,000 $3,000 1,400,000 $2,500 $2,000 1,000,000 800,000 $1,500 600,000 $1,000 400,000 Average FWS Award FWS Awards Granted 1,200,000 $500 200,000 $- 19 89 19 -19 90 90 19 -19 91 91 19 -19 92 92 19 -19 93 93 19 -19 94 94 19 -19 95 95 19 -19 96 96 19 -19 97 97 19 -19 98 98 19 -19 99 99 20 -20 00 00 20 -20 01 01 20 -20 02 02 20 -20 03 03 20 -20 04 04 20 -20 05 05 20 -20 06 06 20 -20 07 07 20 -20 08 08 20 -20 09 09 -2 01 0 - Students Served Students in Community Service Avg. Award Avg. Award (2009 $s) Source: ED, Federal Campus Based Programs Data Book, 2011, and prior editions. Success in meeting the community service requirements is determined by dividing the total funds used to compensate students employed in community service jobs by the institution’s total FWS allocation; and by determining whether the institution expended part of its allocation to compensate students for community service employment as reading tutors or for family literacy activities. Institutions may apply to the Secretary for a waiver from either or both of the FWS community service requirements. There is no explicit penalty for failing to meet the requirement. Information on the expenditure of FWS funds for community service, by IHE for AY2006-2007, has been reported by the U.S. Department of Education and is available from the Corporation for National and Community Service. Overall, participating IHEs spent 15.75% of their allocations to compensate students employed in community service jobs. Of 3,329 IHEs reporting data for AY2006-2007, 3,025 (90.9%) either met the 7% expenditure requirement or received a waiver.38 Perkins Loans Historical data on the Perkins Loan program are provided in Figure 4. Between AY1989-1990 and AY2007-2008, the annual number of students served has ranged between approximately 38 Corporation for National and Community Service, Volunteering in America, The Role of the Federal Government, Federal Work-Study Program, at http://www.nationalservice.gov/for_organizations/highered/fws.asp. Note: data are not reported on tutoring and family literacy projects. Congressional Research Service 21 Campus-Based Student Financial Aid Programs Under the Higher Education Act 640,000 and 760,000. However, by AY2009-2010, the number of Perkins Loan borrowers had dropped to approximately 442,000. During most of the past two decades, average Perkins Loan amounts generally increased, reaching an average of $2,231 in AY2006-2007. However, by AY2009-2010, average Perkins Loan amounts had decreased to $1,852. Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award Amounts (AY1989-1990 through AY2009-2010) 1,600,000 $3,000 1,400,000 Perkins Loans Awarded 1,200,000 $2,000 1,000,000 800,000 $1,500 600,000 $1,000 400,000 Average Perkins Loan $2,500 $500 200,000 $- 19 89 19 -19 90 90 19 -19 91 91 19 -19 92 92 19 -19 93 93 19 -19 94 94 19 -19 95 95 19 -19 96 96 19 -19 97 97 19 -19 98 98 19 -19 99 99 20 -20 00 00 20 -20 01 01 20 -20 02 02 20 -20 03 03 20 -20 04 04 20 -20 05 05 20 -20 06 06 20 -20 07 07 20 -20 08 08 20 -20 09 09 -2 01 0 - Students Served Avg. Award Avg. Award (2009 $s) Source: ED, Federal Campus Based Programs Data Book, 2011, and prior editions. During AY2009-2010, $818 million in Perkins Loans were made to approximately 442,000 students. At the end of AY2009-2010, the total net worth of the Perkins Loan fund of the 1,929 institutions that participate in the Perkins Loan program was nearly $8.6 billion. (Some IHEs continue to service previously made Perkins Loans, but have stopped making new loans.) Perkins Loans cohort default rates declined from a high of 12.95% for the AY1995-1996 cohort to 7.81% for the AY2005-2006 cohort, before increasing again beginning with the AY2006-2007 cohort. (See Table 5.) Four-year institutions typically have the lowest cohort default rates, while those of two-year and proprietary institutions are much higher. Congressional Research Service 22 Campus-Based Student Financial Aid Programs Under the Higher Education Act Table 5. Perkins Loan Cohort Default Rates (AY1995-1996 through AY2008-2009) Year Borrowers Entered Repayment Cohort Default Rate AY1995-1996 12.95 AY1996-1997 12.48 AY1997-1998 11.54 AY1998-1999 10.61 AY1999-2000 9.99 AY2000-2001 8.35 AY2001-2002 8.85 AY2002-2003 8.29 AY2003-2004 8.12 AY2004-2005 8.10 AY2005-2006 7.81 AY2006-2007 8.32 AY2007-2008 10.04 AY2008-2009 10.08 Source: ED, Federal Campus-Based Programs Data Books, 2011, and prior editions. Author Contact Information David P. Smole Specialist in Education Policy dsmole@crs.loc.gov, 7-0624 Congressional Research Service 23