How Minority Students Finance Their Higher Education (page 2)
All types of financial aid have been shown to have a positive influence on college enrollment, regardless of the students race or ethnicity (St. John & Noell, 1989). Today, financial aid is central to the successful enrollment and retention of low-income students. For the majority of these students (90 percent), receiving financial assistance is critical in paying for college. Moreover, the availability of funds to meet tuition and other college-going costs not only impacts students decisions on whether to attend college, but it also greatly influences their choice of college. Surveys indicate that student loans, specifically, play an enormous role in all student decisions regarding college (e.g., Baum & Saunders, 1998). For minority students, whose financial aid does not meet college costs, the difference can be problematic. Having sufficient funds enhances college students academic performance, facilitates their social integration on campus, and increases their chances of persistence to graduation (Nora & Cabrera, 1996).
This digest examines the various financial sources minority students use to meet the costs of a higher education, some of which were created with the specific goal of promoting their college attendance. It concludes with recommendations for public policy to increase the availability of aid for college attendance based on student experiences with existing practices.
Sources of Financial Aid
Federal Student Loans. It has been estimated that more than 50 percent of students earning degrees have had their education at least partially financed through Federal student loans (American Council on Education, 1997). That figure has been confirmed in a study reporting rapidly escalating financial aid awards as the major source of financial assistance, which also confirms a strategy of emphasizing grants in the early year packages and shifting to loans in the later years (Fenske, Porter, & DuBrock, 2000). Among borrowers, students (mostly minorities) attending community colleges and other two- and three-year colleges have relied heavily on Federal Stafford loan programs, available to those from lower-income families. Many of these students are also able to meet their costs through Federal Pell grants and some additional resources (e.g., family savings, current income). Pell grants are a resource for students whose annual family income is no more than $40,000 enrolled in, or accepted for enrollment in a college. Student loans are the most common source of aid for low-income students, as 73 percent received Federal student loans, and 35 percent had loans from other sources (O'Brien & Shedd, 2001).
Pre-College Programs and Grants
A study conducted by The Institute for Higher Education Policy on the impact of pre-college programs on student success found that for those who participated in pre-college programs such as the Federal TRIO programs or institution-sponsored programs the impact was positive with regard to several performance indicators (O'Brien & Shedd, 2001). Minority students and Pell Grant recipients, both largely low income, had some of the highest participation rates in pre-college programs. Study findings were consistent with other national data indicating that 49 percent of low-income students nationwide receive a Pell Grant. Approximately 66 percent of financial aid recipients reported that their financial aid met the cost of attending college. However, for those whose financial aid did not meet the costs of attending college, the financial gap was a hardship.
College Prepaid Plans
As of October 1999, 20 states offered a new mechanism for financing a students college education: College Prepaid Plans (Olivas, 1999). These programs work on a very straightforward principle: parents place a lump sum in a contract (or make monthly payments) that guarantees the money will be sufficient for an equivalent of tuition and fees in a set period of time in the future. Some states have now also established similar programs--savings program trust funds (SPTF)--which have gained tax exempt status in recent years and make it possible for individuals to invest in a state-operated investment fund for college tuition and related expenses such as room and board. The funds permit parents to defer the gains made from their investments and to delay and transfer the earnings to the beneficiary children, who are taxed at lower rates than are wage-earners.
Olivas (1999) underscores the fact that it is very unlikely that middle- and low-income families will profit from such ventures, however. Even as early as 1990 evidence indicated that not all sectors of society (and specifically those most in need of financial assistance) were benefiting from prepaid plans or savings program trust funds; it was, in fact, the richest population with children that purchased the majority of monthly payment option contracts (Lehman, 1990).
Reprinted with the permission of the Education Resources Information Center.
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