Unit 3: Fixing Financial Aid Formula

The Lumina Foundation for Education published a report in May 2006 called Fixing the Formula: A New Approach to Determining Independent Students' Ability to Pay for College. The report scrutinizes the current financial aid formula's precision for assessing need among independent students. It mentions independent students are less likely to receive financial assistance based on the current formula because of the reliance on past earnings and confiscatory income as an indicator of the student's financial capacity. The formula unfairly discriminates against those who are forced to work long hours since no other financial resources are available.

The proposed formula has four separate income components: 1.) Saving and Assets, 2.) Current Income, 3.) Future Income, and 4.) Parental Income. Savings and Assets is the first component. It looks at past income over two years for potential savings and assets such as home equity. Both are prorated over the number of years the student needs to complete the degree. Current Income is the second component. It is based on current earnings and unearned income such as spouse's income and financial responsibility for dependents. The third component to the new formula is Future Income. The component is designed to keep loan debt manageable based on what the student is expected to earn after completing the degree. Future Income looks at loan aid as a student contribution and future financial obligation. Parental income is the final component. Expected contributions (EC) are higher for students whose parents have financial resources. Based on a 2004 report from the U.S. Department of Education called Principle Indicators of Student Academic Histories on Postsecondary Education, a small proportion of independent undergraduate students have affluent parents, especially those who are part-time status students. Independent students are less likely to benefit from parental resources, but those who are above the age of 24 and receive parental support should not be given an automatic increase in aid either.

The Lumina Foundation for Education is a private, independent foundation that strives to help people achieve their potential be expanding access to and success in education beyond high school. The foundation seeks to address issues and indentify and promote practices that will increase the rate of entry and success for low-income, underrepresented populations into postsecondary education. The foundation's core belief is that postsecondary education remains one of the most beneficial investments an individual can make in his or her life and that society can make in its people.

The foundation's focus on idenifying access problems clearly guided the intent of this study. Adult learners, an underrepresented population, has difficulty receiving assistance to attend college based on the level of necessary income needed to support their household. The article identifies the target audience financial aid assists most and its limitations. Furthermore the piece offers a practical solution or best practice to increase the rate and success of adult learners. Without the pressures of financial burdern, the limitations to accessibility and affordability can be relieved.

Refernces:

Department of Education, Institute of Education Sciences (2004). Principle indicators of student academic histories in postsecondary education 1972 - 2000. Washington, DC.

Lumina Foundation for Education (2006, May). Fixing the formula: A new approach to determining independent students' ability to pay for college. Retrieved October 10, 2009, from http://www.luminafoundation.org/publications/researchreports.html

Lumina Foundation for Education (2009). About us. Retrieved October 10, 2009, from http://www.luminafoundation.org/about_us.