Most Americans would be shocked to realize that two-thirds of the federal student aid money allocated to students at public colleges and universities goes for things other than tuition and fees. These so-called indirect costs of attendance include food, lodging, books and supplies, transportation, health care and miscellaneous other expenses such as the purchase of a computer, clothing and even study abroad program charges.
Each college or university that participates in federal student aid programs develops a “cost of attendance” budget for each academic year. Separate budgets are designed for dependent and independent students, undergraduate and graduate students, and on-campus and off-campus residents. The National Association of Student Financial Aid Administrators has provided guidelines for institutions to use in developing their unique cost of attendance budgets.
The College Board lays out the rationale for including indirect costs of attendance in the student financial aid programs. They note that “people pay for housing, food and other living expenses whether or not they are in college. However, a significant cost of going to college is forgone earnings from the time devoted to school instead of the labor market.” Department of Education regulations attempt to control these expenses by prohibiting postsecondary institutions from awarding student aid in excess of costs of attendance. This all sounds well and good, but as is the case with all government programs, the devil is in the details.
Let us start with on-campus housing. A quick check on the websites of five major universities in Washington, D.C., reveals a wide disparity in the least and most expensive per-semester prices of a two-person dormitory room. The lowest price at Georgetown University ($5,390) is 62 percent higher than the $3,312 that Howard University charges. The remaining three institutions (American University, George Washington University and the University of the District of Columbia) cluster between $4,765 per semester and $5,002 per semester. Since the total amount of eligibility for federal student aid equals the cost of attendance minus expected family contribution, students at universities charging more for dormitory beds typically will trigger higher student grant and loan awards than those at institutions with comparable tuition costs that charge less for housing.
There is no limit to the total amount of grant and loan aid a student can receive to pay these charges. Even if a student reaches the full limit for Pell Grants and subsidized direct loans, there are other loans available to fill in any gaps, especially for graduate students.
An important factor in on-campus housing charges is the built-in profit margin for colleges and universities. Housing charges take into account building supplies, maintenance, utilities, depreciation, administration and occupancy rates, adding in a targeted margin of profit. In many instances, there is a double profit incurred because the university has contracted out its residency program to private corporations. As noted in a 2017 article in Forbes magazine, there are many benefits to having experienced housing developers build and efficiently manage modern campus housing facilities.
In 2015, the University of Georgia system entered into a $538 million contract with Corvias to run the state university system’s campus system. Nonetheless, from a federal taxpayer’s point of view, the federal budget for student aid is incurring double overhead for the profits earned by Corvias and other housing companies, and the university’s own profit margin. Students who borrow money to pay for such charges are incurring more debt.
A loophole exists for some undergraduates and all graduate students living with their parents. Normally, undergraduate students under age 24 are considered to be “dependent,” meaning that their parents’ income is factored into the financial aid eligibility formula. Exceptions are made for younger students who are veterans, married or legally emancipated. Undergraduates who are 24 or older, and all graduate students regardless of age, are considered to be “independent,” meaning that their aid eligibility is calculated without regard to parental income and resources.
For the original article click here: https://thehill.com/opinion/education/479140-welfare-for-college-students-why-we-need-to-rethink-student-aid-indirect
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