Financial aid report (University System of Georgia)

University System of Georgia
Financial Aid Report
Summer 2000 Office of Planning and Policy Analysis
270 Washington St., SW Atlanta, Georgia 30334

Executive Summary
University System of Georgia colleges and universities provided financial aid data for the 1997-98 award year (AY) to the Regents' Central Office. These data were compared with aggregate System data collected in 1993 and with national data where appropriate.
Among the significant findings of this report:
Nearly $648 million was awarded to USG students in AY 1998, representing a real dollar increase of 122 percent over AY 1993 awards. Much of this increase is attributable to the inception of HOPE.
The average amount awarded to USG students who received financial aid was $4,564 in AY 1998.
Systemwide, 54 percent of students received some form of financial aid in AY 1998. Nationally, about 45 percent of students attending public institutions received some form of financial assistance in AY 1998.
As a result of the HOPE program, the State of Georgia has become the primary source of scholarships and grants for USG students.
In accord with national trends, the growth of student loans as the primary type of student aid continues in the USG notwithstanding the enormous amount of funding produced by HOPE. Student loans constituted 60 percent of total aid disbursed in AY 1998, an increase from 55 percent in AY 1993. In the same period, grants and scholarships decreased from 42 percent to 39 percent of total dollars awarded.
The amount of unsubsidized student loans has skyrocketed both nationally and in Georgia. In the USG, federal unsubsidized loans increased 727 percent (in constant dollars) from AY 1993 to AY 1998. Federal subsidized loans to USG students increased by only 83 percent during the same period.
Despite the growth of student indebtedness, loan default rates are decreasing at most institutions. The 1997 cohort default rate for the University System of Georgia was 9.6 percent. This figure is down from 11.3 percent in 1996, but higher than the 8.8 percent national average in 1997.
i

Introduction
Numerous studies have demonstrated the increased earning potential of those with post-secondary degrees over those with only high school diplomas. It is hardly an exaggeration to say that in today's society, economic attainment is synonymous with educational attainment. However, the cost of attending college has risen dramatically, putting higher education increasingly out of reach for many. Financial aid plays a critical role in bridging this gap for the majority of students attending post-secondary institutions. In the last few decades, a massive federal program of grants and loans has been implemented to provide need-based aid to students pursuing postsecondary studies. Recently, Georgia has pioneered an equally ambitious and innovative merit-based aid program in the HOPE scholarships.
Given the close relationship between the availability of financial aid and the ability to attend post-secondary institutions, it is incumbent upon system and institutional planners to monitor trends in student financial aid. This report analyzes the current picture of financial aid in the University System of Georgia and attempts to place it in the context of national developments.
Data Sources and Comparability
In both 1993 and 1998, the Central Office collected aggregate data on financial aid from University System of Georgia institutions via survey. The 1993 data represented the last collection of financial aid data from a survey that changed little from the mid-1960s until 1993.1 In 1998, data collection at the Central Office was renewed in a slightly different format. Due to changes both in financial aid programs and in the manner in which data were reported by institutions, 1998 data are not directly comparable to previously collected data at the institutional level. However, selected aggregate data from 1993 are presented here for comparison.
Student level data on financial aid are not currently available in the University System. The collection process for financial aid data is currently being revised with the intention of receiving student level data directly through the Student Information Reporting System (SIRS) database beginning in Fall 2001. Future data collections by this office will allow a richer presentation and analysis of financial aid at USG institutions.
Types of Aid and Number of Recipients
Traditionally, the federal government has been the major supplier of financial aid, while states have underwritten the costs of college attendance by keeping tuition low at public institutions. Federal programs such as the Pell Grants and Supplemental Educational Opportunity Grants (SEOG) provide need-based aid to undergraduates. The federal government also administers several loan programs to students and parents. The federal government subsidizes the interest on some of these loans while the student
1 Data were not collected for AY 1994 through AY 1997.
1

remains enrolled. Finally, the federal government provides aid through a work-study program that pays the wages of students working on-campus jobs2 (Linsley, 1997). In
addition to federal programs, the State of Georgia administers the HOPE scholarship
programs, providing free tuition and a book allowance to eligible students. A summary
of the major types of aid available to students is presented in Table 1.

Figure 1: Student Aid by Program: AY 1998

HOPE Scholarships
17%

Other 5%

Institutional Grants &
Scholarships 3%

Federal Grants & Scholarships 14%

Federal WorkStudy 1%

Federal Loans 60%

A breakdown of the different financial aid programs for AY 1998 is presented in Figure 1. Federal loan programs account for 60 percent of aid, while the HOPE scholarship programs are the second largest aid source, providing almost 18 percent of total aid. Federal grants and scholarships such as Pell and SEOG make up 14 percent of total aid, while the Federal Work-Study program accounts for only one percent of financial aid awarded.
Table 2 shows the number of recipients and the amounts awarded for various scholarship, grant, loan and work-study programs in the University System. Nearly $648 million in financial aid was awarded to students attending USG institutions in fiscal year 1998. This represents a real dollar increase of 122 percent over AY 1993 awards. The average award per unduplicated recipient was $4,564.

2 Some of these federal aid programs require state matching funds. For example, the Federal Work-Study program requires states to provide twenty-five percent of the wages paid to student workers. The Student Incentive Grants have generally been allocated on a 50/50 basis between federal and state governments. (Carol B. Linsley, "The Underpinnings of Student Aid" in Researching Student Aid: Creating an Action Agenda, Richard A. Voorhees, ed. San Francisco, CA: Jossey-Bass Publishers, 1997.)
2

Table 3 breaks out selected financial aid data by institution. The percentage of students receiving financial aid was calculated by dividing the number of unduplicated recipients of aid in AY 1998 by the total unduplicated headcount for the same twelvemonth period. Both full- and part-time students are included in the latter figure. While certain types of financial aid are available to part-time students, many forms of aid are not. Consequently, institutions with higher than average part-time enrollments tend to show lower percentages of students receiving some form of financial aid. The percentage of students receiving aid ranged from about 35 percent at Georgia Perimeter College to nearly 90 percent at Fort Valley State University. Systemwide, 54 percent of enrolled students (undergraduate and post-baccalaureate) received some form of financial assistance in 1998.
In 1993, about 36 percent of students received financial aid. As previously stated, the financial aid survey categories differed between 1993 and 1998, and direct comparisons between 1993 and 1998 reports cannot be made. However, it is likely that the growth in the number of students served between 1993 and 1998 is probably even more dramatic. Student employment, such as teaching or research assistantships that were not part of the federal work-study program, was reported as student aid in 1993, but that category was not reported in 1998. Consequently, the percentage of students receiving financial aid in 1993 is probably less than the reported figure of 36 percent, and the growth is likely to be greater than the observed growth from 36 percent to 54 percent in AY1998.
The percentage of students receiving aid in USG is higher than the comparable figure nationally, even though the percentage of students across the nation who receive financial aid increased in the 1990s. In 1995-96, the latest year for which national data are available, the number of students at public institutions receiving some form of financial assistance was about 45 percent.3 Both the increase from AY1993 to AY1998 and the higher percentage of USG students who receive aid than in the nation are largely attributable to the inception of HOPE.
Scholarships and Grants
Some notable changes have occurred in the financial aid landscape since 1993. While states have traditionally relied upon the federal government for student financial aid, Georgia's HOPE scholarship program represents an important shift in the division of support between federal and state governments. Figure 2 shows the shift in sources of support from 1993 to 1998. In AY 1993, Georgia was responsible for only 1.6 percent of financial aid expenditures. By AY 1998, this figure had increased to 17.9 percent. In the meantime, the federal share of financial aid declined from 82.2 percent in AY 1993 to 74.1 percent in AY 1998. This major shift in resources is due entirely to the HOPE scholarships. Figure 3 shows that in AY 1998 HOPE programs constituted the majority of all scholarships and grants awarded.
3U.S. Department of Education. National Center for Education Statistics. Digest of Education Statistics 1998, NCES 1999-036, by Thomas D. Snyder. Production Manager, Charlene M. Hoffman. Program Analyst, Claire M. Geddes. Washington, DC: 1999. The figure was calculated using data reported in Tables 317 and 319.
3

Figure 2: Sources of Financial Aid AY 1993 and 1998

90% 80% 70%

82.2% 74.1%

60%

50%

40%

30% 20% 10%
0%

17.9% 1.6%

9.3% 5.3%

6.9% 2.7%

Federal

State

Institution

Other

Note: Athletic scholarships were included in Other category in 1993 and in Institution category in 1998.

AY1993 AY1998

Figure 3: Financial Aid Expenditures: Scholarships and Grants AY 1998
Federal Pell Grants 43%
HOPE 54%

Federal Supplemental Grants 3%
The HOPE program4 represents a major innovation in government funding of higher education, and the effects of this program are being watched across the nation. Many of the policies governing HOPE have been revised, and the results of these changes need to be monitored. One result of HOPE is the consolidation of other state-sponsored scholarships. For instance, the Regents Scholarships--which provided aid to 385
4 HOPE program includes the HOPE Scholarship, HOPE PROMISE Scholarships, HOPE Teacher Scholarships, and HOPE GED Scholarships.
4

students in 1998--have been discontinued. A change to be implemented in 2000 is the elimination of the Pell reduction for the HOPE scholarship. Previously, any monies awarded through Pell Grants were deducted from HOPE awards. While this policy allowed HOPE funds to be spread further, it had the effect of keeping HOPE funds out of the hands of the most economically disadvantaged students. The Pell exclusion may have amplified any redistributive effects of the Georgia Lottery.5 By eliminating the Pell exclusion, eligible students will be able to receive both Pell and HOPE funds. The effects of such a change, if they occur, need to be studied.
Loans
As Figure 4 demonstrates, the reliance on student loans has increased nationally, a trend begun in the late 1970s. Georgia is no exception to this trend. The average loan awarded to a USG student has increased from $1,772 in AY 1975 to $3,247 in AY 1998 (in constant 1996 dollars).
Figure 4: Average Loan Amount
4500 4000 3500 3000 2500 2000 1500 1000
500 0
Year
Source: U.S. Department of Education
5 Mortenson (1997) states: "While we do not know who plays the Georgia Lottery...in other states poor people play the lotteries at greater rates than do people from higher incomes." (Postsecondary Education Opportunity, Thomas Mortenson, ed. "Georgia's HOPE Scholarship Program: Good Intentions, Strong Funding, Bad Design," February 1997.)
5

Figure 5 breaks down the types of financial aid available to students in 1993 and 1998 in the USG. Student loans as a percentage of total aid disbursed increased from 55 percent in AY 1993 to 60 percent in AY 1998. During the same period, grants and scholarships decreased from 42 percent to 39 percent. This decrease occurred despite the inauguration of the HOPE scholarship program in AY 1994 and the dramatic shifts in financial aid because of HOPE.

Figure 5: Types of Financial Aid: Total Dollars Awarded AY 1993 and AY 1998

70% 60% 50% 40% 30% 20% 10%
0%

2.3% 1.3% Federal Work-Study

59.4% 55.5%

42.1% 39.3%

AY 1993 AY 1998

Loans

Grants & Scholarships

Nationally, the amount loaned to students and parents through the Federal Direct Loan (FDL) and Federal Family Education Loan (FFELP) programs increased 93 percent between AY 1993 and 1998.6 Federal loans accounted for 51 percent of financial aid in AY 1993 and 54 percent in AY 1998. Georgia has kept pace with this trend. Federal loans for USG students accounted for 56 percent of total aid in AY 1998 and 59 percent in AY 1998.
Accompanying the increasing reliance on student loans is the enormous increase in unsubsidized loans. The federal government does not subsidize the interest on this type of loan. Consequently, borrowers must either make interest payments on the loans immediately after disbursement or have the interest capitalized into the principal while enrolled as a student. Figure 6 shows the growth in student lending for USG students. Federal unsubsidized loans exhibited a constant dollar increase of 727 percent from $16,773,524 in AY 1993 to $138,635,383 in AY 1998. Federal subsidized loans increased by only 83 percent during the same time frame.

6 Measured in constant dollars, using AY 1998 estimated data. ("Trends in Student Aid 1999," The College Board. Report #23612.)
6

$250,000,000 $200,000,000 $150,000,000 $100,000,000

Figure 6: Growth in Student Loans for USG Students
$211,906,414

$115,780,831

$138,635,383

AY 1993 AY 1998

$50,000,000 $0

$16,773,524

Federal Subsidized FDL/FFEL

Federal Unsubsidized FDL/FFEL

Figures expressed in constant 1998 dollars

With a rising debt load the risk of default on student loans increases. The issue of default has been of particular concern to the federal Department of Education, and both federal and state agencies have undertaken policies to reduce overall default rates.7 Due to these policies, loan default rates have actually declined over the last several years. Table 3 and Figure 7 present student loan default rates for USG institutions from 1994 to 1997.8 The average default rate was 9.6 percent in 1997, down from 11.3 percent in 1996, and 12.4 percent in 1995. Nationally, the average default rate was 8.8 percent. Institutions with a default rate above twenty-five percent for three consecutive years can lose their eligibility to participate in federal loan programs. The 1998 amendments to the Higher Education Act have removed exemptions that shielded historically black colleges and universities with traditionally high default rates from these sanctions.

7 In Georgia, obtaining or renewing a professional license (with the exception of a law license) is contingent on being in good standing with one's student loans. In addition, the federal government can garnish both wages and tax refunds of defaulters in order to ensure compliance. Student loans are usually not forgivable in bankruptcy proceedings. 8 The cohort default rate is the percentage of borrowers who enter repayment in a given year and default before the end of the following year. A borrower is considered in default if he or she has made no payments on the loan for nine consecutive months.
7

Figure 7: Federal Loan Default Rates USG Borrowers and National Borrowers

14.0 12.0 10.0
8.0 6.0 4.0 2.0 0.0
1994

1995

Year

1996

USG Borrowers National Borrowers
1997

This report represents an effort on the part of the Board of Regents Central Office to resume the collection of System financial aid data. In the next several months, the Office of Planning and Policy Analysis and the Office of Student Services will be working with financial aid officers at USG institutions to create new data elements that may be collected for the first time into the SIRS database. Subsequent data collections will produce more detailed reports containing breakdowns by instructional level, demographic information, and comparisons with previous years, other state systems, and national trends.

8

Table 1: University System of Georgia Major Student Financial Aid Programs

Program

Aid Source Objective

Level of Study

Pell Grant

Federal Provides non-repayable funds Undergraduate

to students for education.

Supplemental Educational

Federal Provides non-repayable funds Undergraduate

Opportunity Grant (SEOG)

to students for education--

exceptional need is required.

Federal Direct Loan Program Federal Provides low-interest repay- Undergraduate/

(FDL)/Federal Family Education Loan Program (FFELP)9-

able funds to students for edu- Graduate cational expenses; government

Subsidized

pays interest while student

remains enrolled.

Federal Direct Loan Program Federal Provides low-interest repay- Undergraduate/

(FDL)/Federal Family Education

able funds to students for edu- Graduate

Loan Program (FFELP)-

cational expenses; student

Unsubsidized

makes interest payments (or

has interest capitalized) while

enrolled.

Federal PLUS Loan

Federal Provides repayable funds to Undergraduate

parents of dependent under-

graduate students.

Perkins Loan

Federal/ Provides low-interest repay- Undergraduate/ Institution10 able funds primarily to stu- Graduate

dents in math or science.

Federal Work-Study

Federal/ Provides jobs for students al- Undergraduate/ Institution11 lowing them to earn their aid. Graduate

HOPE Scholarships

State

Provides scholarships and Undergraduate

grants to recent high school

graduates and non-traditional

students attending public and

eligible private institutions in

Georgia.

PROMISE Teacher Scholarships State

Assists undergraduate majors Undergraduate

in education.

HOPE Teacher Scholarships State

Assists graduate level educa- Graduate

tion students concentrating in

critical shortage teaching

fields.

NeedBased
Yes Yes Yes
No
No Yes Yes No
No No

9 Schools have the choice of participating in the Federal Direct Loan Program (FDL) or the Federal Family Education Program (FFELP). Under FDL, the federal government acts as a direct lender, guarantor and servicer of the student loan. Under FFELP, the government guarantees the loan against default, but the loan is financed through private capital (i.e. banks) and serviced by other entities (such as the Georgia Student Finance Commission). Some schools have chosen to participate in both FDL and FFELP. 10 Perkins loans are made from a revolving fund at the institution, and the institution is expected to act as both lender and collector. Institutions are also expected to provide a 25 percent match to additional federal appropriations for the program (Linsley, 1997: 9). 11 The federal government provides 75 percent of a student's wages under the work-study program, while the institution is expected to contribute the remainder.
9

Table 2: Financial Aid by Type: System Totals, AY 1998

Scholarships & Grants Athletic Scholarships Federal Pell Grants Federal Supplemental Grants HOPE Scholarships HOPE PROMISE Scholarships HOPE Teacher Scholarships HOPE GED Institutional Grants/Scholarships Outside Grants/Scholarships Regents Opportunity Scholarships Regents Scholarships Student Incentive Grant

Number of Recipients

Total Average Awarded Award

3,288 54,937 10,307 85,085
236 2,197 1,203 15,206 10,415
219 385 2,151

$12,940,946 $87,947,233 $5,363,815 $107,761,058
$610,816 $4,022,433
$588,142 $19,692,884 $14,206,992
$575,703 $202,357 $741,418

$3,936 $1,601
$520 $1,267 $2,588 $1,831
$489 $1,295 $1,364 $2,629
$526 $345

Total Scholarships and Grants

185,629 $254,653,797 $1,372

Loans Federal Perkins Loans Federal Parent Loans Federal Sub FDL FFEL (Stafford) Federal Unsubsidized FDL FFEL (Supplemental) Health Professions Loans Institutional Loans Outside Loans

3,702 6,221 62,835

$5,973,972 $22,940,407 $211,906,414

41,791 343
2,981 709

$138,635,383 $589,478
$1,688,629 $3,278,158

$1,614 $3,688 $3,372
$3,317 $1,719
$566 $4,624

Total Loans

118,582 $385,012,441 $3,247

Federal Work Study

5,907 $8,155,688 $1,381

Unduplicated Recipients

141,931

Total Awarded Average Award per Unduplicated Recipient

$647,821,926

$4,564

10

Table 3: Selected Financial Aid Statistics, AY 1998

Institution Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia

Total Students 15,080 31,552 2,148 34,252

Total Recipients 8,261
12,760 1,915
20,740

Total Awarded $47,755,308 $90,009,102 $18,209,361
$128,289,423

Avg. Award per Recipient $5,780.81 $7,054.00 $9,508.80 $6,185.60

% Students Receiving Aid
54.8% 40.4% 89.2% 60.6%

Universities

83,032

43,676 $284,263,194

$6,508.45

52.6%

Georgia Southern University Valdosta State University
Regional Universities

16,391 11,856
28,247

10,524 6,582
17,106

$54,407,829 $38,372,215
$92,780,044

$5,169.88 $5,829.87
$5,423.83

64.2% 55.5%
60.6%

Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State University Kennesaw State University North Georgia College & State University Savannah State University Southern Polytechnic State University State University of West Georgia
State Universities

4,012 7,029 6,637 6,638 7,525 3,411 7,197 3,544 16,966 4,003 3,279 5,057 10,378
85,676

3,307 4,955 3,823 4,116 4,778 3,056 4,056 2,300 7,136 2,334 2,087 1,786 6,647

$16,710,156 $17,647,898 $14,800,335 $16,156,139 $20,573,422 $18,372,144 $16,205,658
$8,084,427 $26,488,310
$8,470,459 $10,816,156
$7,582,586 $23,352,871

50,381 $205,260,561

$5,052.97 $3,561.63 $3,871.39 $3,925.20 $4,305.86 $6,011.83 $3,995.48 $3,514.97 $3,711.93 $3,629.16 $5,182.63 $4,245.57 $3,513.29
$4,074.17

82.4% 70.5% 57.6% 62.0% 63.5% 89.6% 56.4% 64.9% 42.1% 58.3% 63.6% 35.3% 64.0%
58.8%

Dalton State College Macon State College
State Colleges

4,312 5,440
9,752

2,329 2,492
4,821

$3,425,817 $5,424,954
$8,850,771

$1,470.94 $2,176.95
$1,835.88

54.0% 45.8%
49.4%

Abraham Baldwin Agricultural College Atlanta Metropolitan College Bainbridge College Coastal Georgia Community College Darton College East Georgia College Floyd College Gainesville College Georgia Perimeter College Gordon College Middle Georgia College South Georgia College Waycross College
Two-Year Colleges
UNIVERSITY SYSTEM TOTAL

3,517 3,219 1,587 2,737 3,690 1,161 3,873 3,971 22,443 3,136 2,833 1,558 1,328
55,053
261,760

2,229 1,350
981 1,594 2,214
654 2,149 1,831 7,774 1,697 1,721
892 861
25,947

$7,465,800 $4,303,893 $1,490,489 $2,496,453 $4,216,042 $1,276,634 $3,387,231 $2,866,805 $18,147,924 $3,368,373 $3,931,861 $2,123,992 $1,591,859
$56,667,356

141,931 $647,821,926

$3,349.39 $3,188.07 $1,519.36 $1,566.16 $1,904.26 $1,952.04 $1,576.19 $1,565.70 $2,334.44 $1,984.90 $2,284.64 $2,381.16 $1,848.85
$2,183.97
$4,564.34

63.4% 41.9% 61.8% 58.2% 60.0% 56.3% 55.5% 46.1% 34.6% 54.1% 60.7% 57.3% 64.8%
47.1%
54.2%

11

Table 4: Student Loan Default Rates for USG Institutions, 1994-1997 (in percent)

Universities Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Average

1994
3.3 5.3 1.8 4.0 3.6

1995
4.6 6.9 1.1 5.4 4.5

1996
4.3 4.6 0.6 4.1 3.4

1997
2.7 5.9 0.9 4.5 3.5

Regional Universities Georgia Southern University Valdosta State University Average

8.3

9.1

4.8

8.1

11.2

14.1

10.8

11.0

9.8

11.6

7.8

9.6

State Universities Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State University Kennesaw State University North Georgia College & State University Savannah State University Southern Polytechnic State University State University of West Georgia Average

21.9

21.5

22.8

14.9

8.6

11.5

12.3

9.9

8.1

10.2

10.8

7.4

6.6

13.3

11.9

9.3

9.8

10.9

9.6

9.7

18.6

21.8

21.8

17.1

7.3

8.4

8.5

6.2

7.8

10.4

8.7

6.7

9.2

6.4

4.7

5.6

3.6

2.8

3.4

2.8

24.2

23.1

27.6

15.7

5.2

7.9

11.3

4.1

8.6

10.7

10.2

8.7

12.7

13.9

16.4

9.5

State Colleges Dalton State College Macon State College Average

6.3

12.5

9.1

9.5

11.5

13.0

13.8

12.1

10.2

13.1

13.1

10.4

Two-Year Colleges Abraham Baldwin Agricultural College Atlanta Metropolitan College Bainbridge College Coastal Georgia Community College Darton College East Georgia College Floyd College Gainesville College Georgia Perimeter College Gordon College Middle Georgia College South Georgia College Waycross College Average

18.6

15.7

16.6

14.4

16.3

16.8

18.5

9.1

11.4

26.4

14.3

16.7

10.9

15.6

9.6

7.4

19.8

10.9

15.9

12.1

14.3

10.5

7.7

8.9

7.4

12.5

12.9

10.4

9.6

7.6

6.6

9.2

12.2

10.2

13.2

12.6

10.6

11.9

14.6

8.4

14.3

18.6

17.8

19.0

18.3

19.5

9.0

5.4

18.8

18.2

13.4

20.0

15.5

17.1

13.7

13.2

SYSTEM TOTAL Source: U.S. Department of Education

11.0

12.4

11.3

9.6

12