Michigan must invest further in postsecondary education and financial aid to improve economic security for all

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May 2017
Peter Ruark, Senior Policy Analyst

Budget Brief JPG USE THIS ONEMichigan’s economy and job market continue to demand skilled workers with a postsecondary credential. Yet today’s university students face increasingly high tuition as huge cuts in state funding require universities to meet operational costs by charging students more, in turn producing an unprecedented level of student loan debt. At the same time, Michigan’s state-funded financial aid hasn’t kept up with tuition costs, and older students currently cannot get any state financial aid at all.

Michigan’s budget over the past several years has made significant investments in financial aid for “traditional” college students (age 18-24 and not raising families), but has neglected financial aid for the growing number of students who are “nontraditional” and make up the majority at community colleges. Michigan has also taken important steps to keep already high university tuition from rising further too quickly, but has not made investments in restoring funding to universities that would enable them to actually reduce tuition. Finally, Michigan continues to fund postsecondary institutions and financial aid from restricted sources that are primarily intended for other purposes and populations in order to free up state General Fund dollars.

FINANCIAL AIDBB postsecondary ed budget graphic 1

Part-Time Independent Student Grant: Currently, there is no state financial aid for students who have been out of high school more than 10 years. The Part-Time Independent Student Grant helps this population, but has not been funded since the 2009-10 school year. The governor’s budget provides $2 million for the Part-Time Independent Student Grant, with added language that it can only be used at community colleges.

  • The Senate agrees with the governor’s appropriation of $2 million to reinstate the grant. It adds the restriction that only students who have completed at least 15 credit hours at a community college are eligible, eliminates the grant limit of $600 and raises the two-year limit on receiving grants to three years.
  • The House does not include funding for the grant.

The League supports reinstating the Part-Time Independent Student Grant and eliminating the $600 limit. Because tuition costs even at lower-priced community colleges can sometimes be prohibitive for students with very low incomes, the League is concerned that making students with fewer than 15 credit hours ineligible will not encourage students to go to college for the first time or facilitate their success. However, making the grant available even with this added restriction is far better than the current absence of a grant for this population. Given that the two grants previously available for this population were funded at a total of more than $4.7 million during the most recent years prior to their elimination, we encourage an appropriation of $4.7 million to meet the true need for financial assistance of older students and workers.

Tuition Incentive Program: The Tuition Incentive Program (TIP) serves students from households that are eligible for Medicaid, and is Michigan’s only needs-based student aid grant in which eligibility is based on household income rather than estimated family contribution. The governor recommends $5.3 million in new federal Temporary Assistance for Needy Families (TANF) funding for the grant, bringing the total funding for the program to $58.3 million (a 10% increase). This is expected to support 18,500 students in the upcoming school year. In addition, the governor replaces $4.7 million in General Fund funding with TANF funding, making TIP 100% funded by TANF.

  • The Senate and House both concur with the governor’s spending level and the decision to make TIP fully funded by TANF.

The League believes that having a financial aid grant that specifically targets students from families with very low incomes is important, and supports the increase for this grant to keep up with increased need.

Michigan Competitive Scholarship and Michigan Tuition Grant: The Michigan Competitive Scholarship is currently 100% TANF-funded and the Michigan Tuition Grant 90% TANF-funded, but all new funding recommended by the governor comes from the General Fund. For the Competitive Scholarship, a merit- and need-based grant based on ACT/SAT score and estimated family contribution, the governor recommends an increase of $8 million from the General Fund. The governor also recommends an increase of $3 million from the General Fund for the Tuition Grant, which helps students attend private not-for-profit institutions and is based on estimated family contribution.

  • The Senate concurs with the governor’s recommended General Fund increases for both grants.
  • The House increases each of the two grants by only half the amount recommended by the governor, $4 million for the Competitive Scholarship and $1.5 million for the Tuition Grant, both using General Fund dollars.

Because tuition costs can be prohibitive for students from middle-income families as well as those who are financially struggling, the League supports keeping these two grant programs strong and accessible. The League questions the use of federal TANF funds to pay for these grants, however, because while technically acceptable to give middle- and upper middle-class students the grants under the purpose of “preventing out-of-wedlock pregnancies,” the League believes TANF funds should be targeted primarily to families near or below the poverty level and that the state should use General Fund dollars or other sources to pay for these grants.

TUITION RESTRAINT

The huge tuition increases during the past two decades, along with decreased regulation of student loans, have made postsecondary education less affordable and resulted in greater student debt. Tuition restraint is a cap on the amount a university may increase its tuition “sticker price” in order to receive full funding from the state, which in turn helps keep net tuition (the cost after financial aid, scholarships and family assistance are applied) from increasing significantly. Because community colleges remain affordable, their funding is not subject to tuition restraint requirements. The governor recommends lowering the tuition restraint cap from 4.2% to 3.8% or $475 per student, whichever is greater. While the lower cap is welcome, it remains higher than the cap of 3.2% in the 2015 and 2016 budget years. Adding a numerical cap as well as a percentage cap helps provide fairness to universities that have kept tuition lower than their peer universities over the years and who should not be “punished for having done the right thing” when they need to raise tuition.

  • The Senate and House agree with the governor’s tuition restraint cap of 3.8% or $475, whichever is greater.

Because tuition has risen at such a fast pace over the past 15 years, many students have either been discouraged from attending college, have to work more hours while in college (hence jeopardizing their academic performance), or have to take out loans which often carry high interest and result in a high amount of debt. The League supports tuition restraint as one way to address this problem; however, the League would like to see Michigan go further and restore the funding to universities that has been cut over the years, coupling some of the new funding with tuition reduction requirements rather than just tuition restraint.

USE OF SCHOOL AID FUND FOR POSTSECONDARY EDUCATION

The primary purpose of the School Aid Fund (SAF) is to fund K-12 public schools in Michigan. The governor’s 2018 budget continues the practice started in the 2000s, and which became regular practice in the 2012 budget year, of using a portion of SAF dollars to fund Michigan’s universities and community colleges. What is significant in the current proposed budget is that it appropriates nearly all total state funding for community colleges from the School Aid Fund. The governor’s budget uses $235.6 million in SAF dollars for universities and $395.1 million in SAF dollars for community colleges, thus taking a record amount of $630.8 million out of the funding meant for K-12 schools and using it for postsecondary education.

  • The Senate and House concur with the governor’s postsecondary appropriations out of the School Aid Fund.

The League believes that K-12 public schools, community colleges and universities should all receive adequate funding, but objects to the annual practice of using School Aid Fund money to fund postsecondary education. Every dollar going to postsecondary institutions is a dollar not going to K-12 schools, setting up a zero-sum game among equally worthy public educational institutions. When the dollars in the SAF exceed expected levels, the “surplus” should go toward increasing per-pupil funding or other funding that directly benefits K-12 students and the schools that serve them.

BB postsecondary ed budget graphic 2