“Risk-Sharing” Plan Draws Concern

Community college officials may wish to pay attention to a proposal in a U.S. House bill to reauthorize the Higher Education Act (H.R. 4508, the “PROSPER” Act), which would require colleges to return substantial portions of federal financial aid received by students who do not complete a term or other academic period, as reported by David Baime in Community College Daily.

Several higher ed. commentators have noted that the proposed bill is another example of legislative stipulations that are unrealistic for open-admission institutions, who must admit any student regardless of academic preparation and life circumstances.

You can get abundant details from the article. The American Association of Community Colleges has stated its opposition to this provision, but “our ability to advocate Congress effectively is contingent upon receiving detailed campus information. We are asking members to provide us information on student withdrawals, as well as the amount of federal funds that the PROSPER Act might require colleges to return to the government. The burden of this data collection will fall primarily on student financial aid and registrar’s offices,” the article states.

The bill’s institutional refund/risk-sharing policies are driven by the concept of a student “earning” federal financial aid funds. All aid not “earned” by the student would need to be returned by the colleges. More specifically:

  • Students would “earn” their Title IV aid upon completion of each of four 25 percent increments of the period of enrollment. For example, students who complete less than 25 percent of an enrollment period would earn no federal student aid, and so the college would have to return all of their Title IV aid for that period. Students who complete 25 percent would earn 25 percent of the student aid, and 75 percent would be returned.
  • If students completed 49 percent of the term, they would earn only 25 percent of their aid, but students who complete half would earn half, with the other 50 percent returned to the federal government. Only students who complete the entire term would earn 100 percent of their aid. Under current law, students who complete 60 percent or more of the term receive the full amount, and students who leave prior to the 60-percent point earn a proportional share of their aid.
  • Finally, if a college cannot determine a formal date of withdrawal, the student can be assumed to have completed 50 percent of the enrollment, as under current law.

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