For the uninitiated, a staring contest is a game in which two people stare into each other's eyes and attempt to maintain eye contact for a longer period of time than their opponent. The game ends when one participant intentionally or unintentionally looks away.
Some people use different rules, where participants not only attempt to maintain eye contact, but also must resist the urge to blink. Others prohibiting virtually any action but staring (laughing, making a face, winking, nodding, talking, et cetera). In other words, any reaction at all, other than a blank stare, is a fail.
This battle is brewing over financial aid (the kind that comes from the State) between the Illinois Board of Higher Education (led by Chairwoman Carrie Hightman and the Illinois Student Assistance Commission (ISAC) on one side, and seemingly everyone else on the other. The suggestion, proposed by the Illinois Student Assistance Commission, is opposed by the Illinois Community College Board, the Illinois Community College Trustees Association, and the Illinois Council of Community College Presidents.
Some background:
The need-based Monetary Award Program (MAP), created in 1967, was designed to help low- and middle-income Illinois residents attend the colleges of their choice within the state and last year provided assistance to more than 140,000 students. About the same number of qualified students didn’t, though, because the money ran out in April, and the money is awarded on a “first-come, first-served” basis.
Unsurprisingly, the hardest-hit groups by the lack of funding were community college students, who we know typically register for classes and apply for financial aid much later than students at four-year schools.
The issue:
Selling "human capital investment bonds" to raise funds for MAP grants for community college students.
A what? Human capital bond? Sounds vaguely disturbing. Actually, the concept is quite simple. An investor's (in this case, the tax payers) total wealth typically consists of two parts. One is financial assets and the other is human capital. The latter is defined as the present value of an investor's future labor income. Although human capital isn't tradable, it is apparently bondable.
How it would work:
Under the initial proposal, up to $550 million in bonds would be issued through 2015. That borrowing would be repaid with interest. The bonds would be paid back by diverting the future income taxes paid by community college students who receive the grants. Income taxes of MAP grant-receiving community college students would be diverted from the state’s general fund to pay off the bonds for up to 10 years.
With approximately $100 million in bonds issued each year, ISAC could provide MAP grants for the 50,000 community college students who currently receive grants plus 50,000 more students who currently miss out because the Monetary Award Program has insufficient resources to meet growing needs.
The notes would carry no state guarantee, but are expected to have 1.85 times debt service coverage based on data that showed income growth for MAP recipients and that 90 percent of students who attended Illinois community colleges remained in the state for 10 years, according to ISAC Executive Director, Andy Davis.
Oh, and Grant recipients would not be required to stay in Illinois.
The opposition:
It seems a little strange that the organization directly representing community colleges and their students would oppose such a move, no?
Well, there are three main reasons. First, those of us that deal with the State of Illinois for portions of our revenue know that things are bad and likely to get worse with respect to timely payment (if at all). One of the most significant contributing factors is the consistent and long-term underfunding of state pension systems. We have borrowed against them for so long and for so much that the burden is unbearable. Adding another borrowing scheme of any sort is not only fiscally risky, but to borrow a line, "morally repugnant".
Secondly, why is it that we want community college students to receive funds from a borrowing program while all other students get MAP money from a cash-based program that comes directly from state funds? Is there something special happening?
I know that 64% (now 70% ?) of Illinois college students attend a community college yet receive just 14% of the higher education budget.
I know that 90% of our graduates stay in Illinois.
I know that 70% stay in our district.
Want more numbers? Here they are for Parkland College:
Financial Aid Program Disbursement Amounts (2007 – 2011) | |||||||||||||
Fiscal Year | PELL | SEOG | Work Study | Student Loans | Alternative Loans | MAP | IIA | Veterans Grants | Scholarships, Grants, Fellowships, Traineeships | Talent Waivers and Scholarships | Total Disbursed | Financial Aid Applications | |
2007 | 5,017,569 | 165,096 | 162,138 | 6,346,939 | 402,701 | 1,958,300 | 171,000 | 889,619 | 172,133 | 513,729 | 15,799,224 | 6,578 | |
2008 | 5,595,696 | 165,766 | 189,344 | 8,575,516 | 355,950 | 1,939,326 | 185,500 | 739,100 | 197,673 | 615,277 | 18,559,148 | 6,691 | |
2009 | 6,460,403 | 192,509 | 116,311 | 8,800,674 | 195,444 | 1,910,757 | 172,250 | 720,139 | 278,291 | 622,285 | 19,469,063 | 7,545 | |
2010 | 11,074,791 | 169,472 | 132,751 | 11,270,286 | 258,773 | 1,883,259 | 43,000 | 851,787 | 267,242 | 707,837 | 26,659,198 | 9,356 | |
* 2011 | 6,289,935 | 63,012 | 31,439 | 5,394,873 | 229,689 | 851,755 | 0 | 318,272 | 131,826 | 363,705 | 13,674,506 | 9,242 |
* One semester
MAP is in decline. PELL is on the rise. Student loans are way up. Total aid is up $11MM since 2007 and the number of student applying for aid after one semester is nearly equal to what it was for all of last year.
According to Financial Aid Director, Tim Wendt, there are several factors for the increases:
- Awareness of the importance of a college education in the workplace,
- Increased awareness of the availability of financial aid,
- Simplification of the financial aid application process,
- Increases in the amount of the (Federal) Pell Grant program (2007 – Maximum was $4,050 and in 2010 – Maximum was $5,350)
- Increase in the amount that a student may borrow (2007 – Dependent Freshman Maximum was $3,500 and in 2010 – Maximum was $5,500)
- And last, but not least, the “Great Recession” has impacted our students, and their parents, dramatically.
The third reason is a little more interesting. Recall that this bond proposal estimates that an additional 50,000 students would/could enroll in one of the 48 community colleges in Illinois. Someone should probably raise the question about capacity, both physical and financial.
If you understand how Illinois community colleges are funded, you will know that there are three sources; property taxes, tuition, and state funding.
Assume for a moment that property taxes and tuition are holding steady. They aren't, but I'm running out of room and you are likely running out of interest. The State's portion of public higher education for community colleges consists of a per credit hour reimbursement. Urban legend has it that 33% of the cost of delivering a credit hour was to come from the State. Today, it sits at around 12% for Parkland. It is not likely to go up anytime soon. Tuition, property taxes, and austerity make up the difference. Adding more students does not balance a budget when one of the three legs of the stool is short.
Physically, this proposal assumes that our colleges can absorb whatever percentage of the 50,000 additional students we will see. It assumes both classroom space, faculty, student support, and all the ancillary services can be scaled without additional costs. Some can, others can't. It will be an interesting problem to solve.
So, the stare-down begins. Despite objections, the Illinois Board of Higher Education announced that it formed a group to study the proposal. Director Davis from ISAC said his group has a "moral imperative" to ask the state to borrow for higher education for the state’s neediest residents.
“For us to get to the lowest-income group in our state, who have the most to gain by being educated, all of a sudden to get fiscal morality and say we have to draw the line someplace... I find that morally repugnant,” he said.
Sudden fiscal morality. So much to say...
The task force is due to make its recommendations on February 15. If the note plan is adopted, Davis said the Illinois General Assembly would need to vote to allow the student assistance commission to tap the students' income tax revenue to pay off the debt.
Remember that in a staring contest, if you blink, you fail.
What do you think?