In a country that spends hundreds of billions of dollars a year on student grants and loans it may surprise some, but not many, that there is room for enormous improvement in our overall financial aid program. Recently President Biden took decisive action to rectify some of the most egregious past failures of the Federal Student Financial Aid Programs. What remains unplanned and unstated is how we will address the ongoing strategic weaknesses of the current plan, as students continue to face financial challenge with an aid system that is fundamentally flawed.
There are three critical elements to a good financial aid system.
Students need the certainty of a full “start to finish” funding plan in order for them to make a commitment to a multi-year educational program.
Students deserve a risk-sharing agreement with the funders, schools, and society that does not place untenable down-side risk of failure solely on the student.
Students and their families require information about the outcomes of educational programs, so that they can make informed decisions when they weigh the costs and benefits of the degrees and schools they choose.
The current lending paradigm provides none of these three elements. With few exceptions, at the beginning of every year in a multi-year education program, students know only what that year will cost and what aid will be available that year. The remaining years remain TBD. Lower-income students, the ones who need aid the most, have the least ability to manage this uncertainty. Uncertainty keeps otherwise qualified lower-income students from starting programs that may serve them and society well with their attendance.
Risk of failure is borne solely by the students. If the degree program is not completed, or if it leads to lesser-paid employment than projected, students, not schools or funders, are asked to dig deeper. Students, who borrow because they do not have money, are asked to bear the financial risk of failure. Even if the “odds” of success are good, lower-income students’ rational risk aversion risk will stop many before they start.
The academy and governmental agencies are just beginning to make available the data on outcomes that are essential to making a well- informed decision. “Consumer Reports” provides more information to prospective buyers of kitchen appliances and cars than anyone currently provides to the students who may spend 10 times as much on education as they do on a car or refrigerator.
The Education Equity Fund of Chicago is implementing a funding program that will address these shortcomings and embrace students three fundamental requirements. EEF’s Lincoln Loan Program will demonstrate how these requirements can be met by providing best practices funding for up to twenty candidates at the University of Illinois at Chicago’s EdD in Urban Education Leadership.
Certainty: From the start, Lincoln Loan commitments will provide funding for the entire program on terms that will not change.
Risk: Over the course of the ten-year repayment there will be no monthly payment any time the student is earning less than $75,000 a year. Periods of non-payment due to sub-$75,000 income will not create carry forward accruals or capitalizations of debt.
Data-Cost: The Lincoln Loan is a ten-year loan that will charge NO interest. Students will pay back only the principal borrowed. This compares favorably with Government Plus Loans that charge over 7%.
Data-Benefit: UIC’s EdD program has a 90%+ rate of retention, graduation, and placement. The program was identified as a “model” program by the Illinois Board of Higher Education Commission on School Leader Preparation. Graduates typically earn over $100,000 per year upon graduation.
Beginning in October of 2023, EEF will accept applications from students who are nominated by their current school employers or other not for profit educational advocacy organizations for the EdD program that begins in January of 2023 at UIC.
For further details check the Education Equity Fund website at
Edequityfund.org
