NEW JERSEY’S TUITION AID GRANT (TAG) PROGRAM April 2017

Summary

The current TAG program significantly disadvantages the tens of thousands of students who study in the State’s two-year and four-year public colleges and universities. This issue is extremely important because, in regard to public higher education, New Jersey functions on “a high tuition/high financial aid” model. That is, the State provides low operating and capital funding and expects the public institutions to rely on higher tuition charges, while the State provides a generous financial aid program to help students pay those higher public tuitions. Obviously, if the State’s TAG program is not providing adequate support to students in the public institutions, the model fails, and public higher education becomes less affordable. In New Jersey, the TAG program has been shaped to maintain high financial aid support to students attending private institutions, but it has declined in support for students in the public sector.

Key Points

• The identical student receives much larger TAG awards if they attend a private institution than if they attend a public institution. • Students who are eligible for substantial TAG awards if they attend a private institution, in many cases, are not eligible for any award at all at a public institution. • Governor Christie proposed the addition of $17.8 million in new money for TAG in FY ’17. The Legislature proposed language that would use the new money to take some initial steps to correct the current TAG methodology. The Governor vetoed that provision, and the new money was used in FY ’17 in a way that continued to increase the difference in the size of TAG awards for students at the private institutions over the public institutions. • Governor Christie has proposed an additional $15.7 million in new money for TAG in FY ’18. That new money should be used to decrease the inequities in TAG awards between students in the private and public sectors of higher education. • The current TAG awards even for the students with the greatest need in the public institutions do not come close to covering the costs of tuition and mandatory fees, and that fact is, in significant part, responsible for the debt burden of students attending the public institutions. Even students who also get the maximum federal Pell award struggle to afford their education, especially those who seek to live on campus, which is a very important component for success for students from challenged circumstances. • Instead of assessing the financial need of the student and providing that student with a defined TAG award that the student can then use at whichever institution best meets his or her needs, the current TAG system eccentrically and inequitably puts a different value on the size of the award it will give to a student depending on which institution he or she attends. • The TAG program, which would constitute a $420 million annual taxpayer-funded expenditure under the Governor’s proposed budget, is in serious need of reform.

Background

The TAG program, as we know it today, was established in 1978. As expressed in the legislative documents from the time, its primary purpose was to make general need-based grants available to students in both two-year and four-year public institutions. Previously, such grants had only been available to students in “non-tax-supported,” i.e., non-public, institutions. Eligibility for the award was based on the student’s estimated family contribution. The maximum award was $1,000, up to the amount of tuition, which, it was determined, would be enough to cover 100% of tuition at the community colleges (where tuition then was about $500), at the state colleges (where tuition then was $700), and at Rutgers (where tuition then was $760). At the non-public institutions, it was estimated that the $1,000 maximum would cover at least one-third of tuition at most non-public colleges. (For example, tuition at Rider in 1978 was $2,750; at Fairleigh Dickinson, it was $2,560.)

The 1978 legislation turned over the regulation of the TAG program and the determination of financial eligibility requirements for the future to the Student Assistance Board (now known as HESAA, the Higher Education Student Assistance Authority). Since that time, the TAG program has evolved significantly through legislation, regulation, and HESAA administration. Most noticeable between then and now is that there has been a dramatic shift away from covering 100% of the cost at public institutions. While the maximum TAG award still covers approximately one-third or more of the cost at the non-public institutions, a maximum TAG award no longer comes close to covering 100% of tuition and mandatory fees at the public institutions. For example: at Essex Community College, the cost for a full-time student is $4,785, and the maximum TAG award is $2,734 or only 57% of the cost; at the state colleges and universities on average, the TAG award covers only 55% of tuition and mandatory fees; at Rutgers three campuses and NJIT, between 65.9% and 66.9% .

Another important change that occurred since 1978 is that the eligibility of the non-public institutions was extended from independent institutions to also include certain religious and proprietary institutions. However, a much more significant change is that, whereas, in the past, the award amount available to public and non-public institutions was essentially the same, that is no longer the case. Today, the maximum award at non-public institutions is 75.3% higher than the average maximum award at the state colleges and universities ($12,438 compared to $7,096). In addition, the size of the awards from one public institution to another now varies very significantly. Today, the maximum Rutgers award is 33.4% higher than the average maximum award at the state colleges and universities ($9,468 compared to $7,096), and the maximum award at NJIT is 54.8% higher ($10,986 compared to $7,096). Even among the state colleges and universities, the awards differ significantly. For example, the maximum award at William Paterson University is $6,508, but $9,120 at The College of New Jersey. The same is true among the community colleges, with a maximum award of $2,192 at Rowan College at Gloucester County, but $3,144 at Bergen Community College.

The currently established award schedules were determined over the years through a methodology that was not favorable to students attending public institutions and that strongly responded to and incentivized the raising of tuition, rewarding institutions that increased their tuitions with larger awards and keeping awards lower at those institutions that tried to keep their tuitions low. Of particular note is the fact that, in recent decades, for a variety of reasons, the public institutions have typically split the cost of education between two numbers, tuition and

2 8 mandatory fees.1 So, when public institutions report their costs, they are presented as tuition + mandatory fees = total cost. The mandatory fees are a significant portion of the total cost, ranging from 17% to 36% and averaging 27.9% at New Jersey’s ten traditional four-year public institutions. In other words, at public institutions, about one-third of the cost is collected through mandatory fees. The private institutions, on the other hand, have traditionally rolled most of the costs of education into one tuition number. The mandatory fees in private institutions are a very small percentage of the total cost, generally in the range of 2% to 7%. Both publics and privates are charging for the same things; they are just presenting the costs differently. However, the HESAA award methodology has been based only on the tuition number and not mandatory fees, and, as a consequence, about one-third of the mandatory cost of education for students in the public institutions remains unsupported by TAG grants. That fact is one of the reasons why TAG awards at the private institutions have grown so much larger than those at the public institutions.

HESAA modified its approach, beginning with the 2014-15 year, by introducing a new procedure whereby, for any additional new monies applied to the TAG program, all schools would receive the same percentage increase. However, the baseline award for each school was established under the old system, so huge inequities continue to exist and are actually made even worse by the new procedure, because the same percentage applied to a school with a higher baseline will yield more dollars than it will when applied to a school with a lower baseline.2

And, finally, under the current TAG system, a student’s eligibility for a TAG award is based on an Eligibility Index which is tied to award tiers (see Attachment A). The more tiers an institution is permitted to have, the more students will be eligible for an award at that institution. Currently, the non-public independent, proprietary, and religious institutions have ten tiers in the award tables; Rutgers, NJIT and Rowan have nine tiers; the other public four-year institutions have seven tiers; and the community colleges have five tiers. In short, many of the students who would be eligible for a TAG award at a non-public institution would not be eligible for any award at a public institution. Worse yet, because of the inequitable way in which TAG awards were allocated to different institutions over the years, there are gross and unjustifiable differences in the tiers themselves. For example, at the non-public institutions, the TAG award for students on Tier 7 is equal to about 43% of the Tier 1 or maximum award. However, at the state colleges and universities, the Tier 7 award is equal to only about 29% of the Tier 1 or maximum award. Even more unfortunate for students at the state colleges and universities, HESAA provides fewer eligibility tiers for them than for the public institutions designated by the state as research institutions, even though HESAA makes no such damaging and irrelevant

1 For example, the Legislature from time to time will cap tuition increases at public institutions, without providing needed appropriations for things like state-negotiated salary increases, costs of facilities construction, renovation, and repair, and various programs that constitute unfunded mandates. In the face of those caps, the public institutions created and gradually raised mandatory fees. 2 For example, from FY 2016 to FY 2017, the maximum award at most of the non-public institutions increased by $242, but only by $184 at Rutgers, only $138 on average at the state colleges and universities, and only $52 on average at the community colleges, the unfortunate effect of which is to continue to disadvantage students in the public institutions and to increase, rather than decrease, the differential in the TAG awards available to students among the various institutions. If the $15.7 million in new money proposed for FY 2018 is applied in the same way, it will continue to provide significantly larger increases to the non-public institutions, further disadvantaging students in the public institutions.

3 8 distinction among the non-public institutions. The smaller, mostly undergraduate private institutions get the same number of tiers as the bigger research-oriented private institutions.

TAG Today

The end result of the evolution of the TAG program is that today, the very same student, who has the highest level of need, with an Eligibility Index under 1500, will receive very different TAG awards depending on which institution she attends:

$2,680 on average at a Community College (ranging from $2,192 to $3,144) - Public $4,140 to $4,970 at Thomas Edison State University – Public Non-traditional $6,224 at Kean University - Public $6,508 at William Paterson University - Public $6,608 at New Jersey City University - Public $7,186 at Montclair State University - Public $7,210 at Stockton University - Public $7,652 at Ramapo College of New Jersey - Public $7,736 at Eastwick College – For-Profit Proprietary $8,080 at Rowan University - Public $8,128 at Bais Medrash Toras Chesed – Non-Public Religious $8,784 at Eastern International College for the A.A.S. degree in Medical Assistant – For-Profit Proprietary $9,120 at The College of New Jersey - Public $9,468 at Rutgers University - Public $9,532 at Rabbinical College of America – Non-Public Religious $9,532 at Be’er Yitzchok – Non-Public Religious $9,538 at Rutgers in Biomedical and Health Sciences - Public $9,754 at Rutgers School of Business - Public $9,946 at Fairleigh Dickinson for A.A. degree in Korean Studies – Non-Public Independent Two- Year Degree $10,000 at Rabbi Jacob Joseph School – Non-Public Religious $10,046 at Talmudical Academy – Non-Public Religious $10,520 at Rutgers in Engineering, Pharmacy, Environmental, and Biological Sciences - Public $10,886 at Toras Chaim – Non-Public Religious $10,986 at New Jersey Institute of Technology - Public $12,438 at all the remaining Non-Public Independent, Religious, and For-Profit Proprietary institutions: Berkeley College, , Bloomfield College, Caldwell University, Centenary College, College of Saint Elizabeth, Devry University, , Eastern International College, Fairleigh Dickinson University, Felician College, Georgian Court University, Monmouth University, , Princeton University, Rider University, Saint Peter’s University, Seton Hall University, Stevens Institute of Technology

For the exact same student, there is close to a $10,000 differential in taxpayer-funded TAG assistance from the bottom of the chart to the top. Just looking at traditional four-year institutions, there is a $6,000 differential, with the same student attending Bloomfield College or Princeton University or Beth Medrash Govoha or Berkeley College getting almost double what she would get in a TAG award if she attends William Paterson University or Kean University.

4 8 Over four years of a college career, that is a $24,000 difference in available tax-payer funded aid for the student. At the same time, if a student with the highest level of need wants to pursue a degree full-time in Computer Science at a community college, her TAG award will not even cover the cost of her tuition at the community college. In addition, because of the different number of eligibility tiers allocated to different institutions (see Attachment A), a student who still has very significant financial need, but is at the other end of the Eligibility Index (9500 to 10499), will get:

$ -0- at any Public community college $ -0- at any Public Four-Year institution $1,330 at Eastwick College – For-Profit Proprietary $1,342 at Bais Medrash Toras Chesed – Non-Public Religious $1,576 at Yeshivas Be’er Yitzchok – Non-Public Religious $1,618 at Rabbi Joseph School – Non-Public Religious $1,626 at Rabbinical College of America – Non-Public Religious $1,680 at Talmudical Academy – Non-Public Religious $1,688 at Fairleigh Dickinson’s A.A. degree program in Korean Studies – Non-Public Independent Two-Year Degree $1,838 at Pillar College – Non-Public Religious $1,848 at – Non-Public Religious $1,996 at the remaining Non-Public Independent, Religious and For-Profit Proprietary institutions: Berkeley College, Beth Medrash Govoha, Bloomfield College, Caldwell University, Centenary College, College of Saint Elizabeth, Devry University, Drew University, Eastern International College, Fairleigh Dickinson University, Felician College, Georgian Court University, Monmouth University, Princeton University, Rider University, Saint Peter’s University, Seton Hall University, Stevens Institute of Technology

The exact same student will receive close to $2,000 in taxpayer-funded TAG support to study Biomedical Engineering at Stevens Institute of Technology, but not a penny to study Biomedical Engineering at the New Jersey Institute of Technology; he will receive close to $2,000 to undertake Talmudic Studies at Beth Medrash Govoha, but not a penny to study Mathematics at Rutgers University or Biochemistry at Montclair State University.

Proposed Future Policy Action

Ultimately, a permanent, long-term reform of the TAG program is urgently required. Specifically, legislation should be adopted to require that the same eligibility tiers be applicable to students at all institutions and that, once a student’s eligibility tier has been determined, the student should receive a specific dollar award which the student could then use, up to the cost of tuition and mandatory fees, at whatever institution he or she chooses to attend. Such a long-term reform would be a major step in assuring the affordability of higher education to the people of New Jersey, and it would give each student the opportunity to select the higher education option, whether public or private, two-year or four-year, which best meets his or her educational objectives and financial circumstances.

5 8 Immediate Short-Term Action – FY 2018 Budget

In the short term, for FY 2018, while keeping the current TAG program fully in place at its current appropriation level of $403.7 million, a Public Equalization TAG Fund should be created, using the $15.7 million in new funding for TAG proposed by the Governor, to begin the process of correcting the inequities that are disadvantaging tens of thousands of students in the public sector of higher education. The Public Equalization TAG Fund will be used specifically and only for the purpose of equitably increasing the value of the TAG grant awarded to each TAG recipient attending a public institution of higher education to an amount closer to the amount that student would receive if he/she attended an independent non-public institution as set forth on HESAA’s Full-Time Tuition Aid Grant (TAG) Award Table for 2016-17.

Conclusion

While it is perfectly sound and good public policy to provide TAG awards to students who attend the State’s private institutions, it is not sound or good public policy to disadvantage the students in the public institutions, especially when those institutions have struggled to keep their tuitions lower and more affordable in spite of declining state support. The current structure of the TAG program has created a system where the very same student gets widely and unjustifiably different awards based on which school she/he attends. Over the years, the current system has incentivized higher tuition generally and the practice of institutions, particularly in the private sector, having significant differences in published tuition rates, on which the TAG awards are based, versus actual discounted rates.3 More important, it has disadvantaged and substantially added to the debt burden of the tens of thousands of low-income and middle class students attending the state’s two-year and four-year public institutions. If New Jersey cares about higher education access and affordability, it must reform the TAG program.

3 The TAG awards for private institutions were based over the years on their published tuition rates. However, National Association of College and University Business Officers (NACUBO) data show that about 88.2% of freshmen at private institutions do not pay the published rate and get an average tuition discount of 55.5%. In New Jersey, the TAG process has essentially subsidized that discounting practice. While there is some modest discounting among some public institutions, the practice is much more limited because declining state operating support and the effort to keep overall tuition as low as possible has made every tuition dollar consequential.

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