STUDENT FINANCIAL AID LESSONS FOR THE UK FROM THE US Joseph Russo Director of Student Financial Strategies University of Notre Dame Notre Dame, Indiana USA OxCHEPS Fellow The Oxford Centre for Higher Education Policy Studies In the summer of 2006 the OxCHEPS Visiting Fellow was Joseph A. Russo, the Director of Student Financial Strategies at the University of Notre Dame, USA, where he has led the student aid operation since 1978. He holds an undergraduate degree in English and a Master’s in Higher Education Administration. He is the coauthor of two books published by Random House, one with a Notre Dame professor on financing graduate school, and the other with his counterpart at Duke University on saving for college. He has also served as the Editor of the Journal of Student Financial Aid since 1986 for the National Association of Student Financial Aid Administrators and has published numerous articles on student aid. His career of 42 years has involved three institutions, one of which was a two year community college in the State University of NY. He taught a graduate level course in student aid administration while at Notre Dame and has served in training capacities for the College Board and the US Department of Education. He has also testified before the US Congress. The author is grateful to the following: David Palfreyman for the invitation to undertake this project and the generous resources he provided through OxCHEPS; the University of Notre Dame for allowing the opportunity and the leave from campus; the National Association of Student Financial Aid Administrators (NASFAA) and The Student Loan Marketing Association (Sallie Mae) for the grant support each has offered; Janine Meersman, my administrative assistant at Notre Dame, for her reliable and expert word processing skills and all the typing; and my wife and best friend, Eileen, for her constant love and support throughout my career, including my time at Oxford. Finally, the warm welcome of Warden Alan Ryan, Bursar Secretary Kate Hunter, both of New College, and Jill Flitter, College Secretary at St. Antony’s College at Oxford, will all always be most appreciated and fondly remembered. Oxford Centre for Higher Education Policy Studies STUDENT FINANCIAL AID LESSONS FOR THE UK FROM THE US Joseph Russo MA MS Director of Student Financial Strategies University of Notre Dame Notre Dame, Indiana USA OxCHEPS Fellow OxCHEPS, Oxford 2007 Oxford Centre for Higher Education Policy Studies (OxCHEPS), New College, Oxford, OX1 3BN United Kingdom http://oxcheps.new.ox.ac.uk. Copyright © by Joseph A. Russo. Published by OxCHEPS. All rights reserved. ISBN Hardback ISBN Paperback Printed by Typeset by Cover design by Contents Preface ......................................................................................................................... i Chapter I History ............................................................................................................ 1 Chapter II Concept of Financial Need .............................................................................10 Chapter III Financial Aid..................................................................................................25 Chapter IV Current Dynamics ..........................................................................................36 Chapter V Tax Policies ...................................................................................................43 Chapter VI Issues .............................................................................................................48 Chapter VII Special Challenges .........................................................................................57 Chapter VIII Future Issues ..................................................................................................68 Chapter IX Lessons to be Learned ....................................................................................71 Chapter X Research.........................................................................................................79 Bibliography .......................................................................................................................88 Appendix I Comparing UK and US ..................................................................................90 Appendix II The Array of Higher Education Benefits.......................................................100 Appendix IIIa Legislative History .......................................................................................101 Appendix IIIb Need Analysis History..................................................................................102 Appendix IV Conundrum ..................................................................................................103 Appendix V Methodology................................................................................................105 Appendix VI Glossary of Terms........................................................................................125 Appendix VII UK Policies..................................................................................................129 Preface “To give away money is an easy matter and in any man’s power. But to decide to whom to give it, and how large and when, and for what purpose and how, is neither in every man’s power — nor an easy matter. Hence it is that such excellence is rare, praiseworthy and noble”. Aristotle The opportunity for one to share his lifelong work to help others is an extraordinary one. Being able to do this as an OxCHEPS Visiting Fellow is especially rewarding, as the support provided by such a scholarly and respected environment is truly inspiring. The time and effort involved in this exercise could not have been possible except for the generous support of David Palfreyman, Director of the OxCHEPS program at New College, Oxford, and the University of Notre Dame, the wonderful institution where I have spent the majority of my career as a student aid administrator. I am very grateful also to the National Association of Student Aid Administrators (NASFAA) and the Student Loan Marketing Association (Sallie Mae), for their significant assistance with some of the expenses. Finally, and perhaps most importantly, I acknowledge the constant love and critical support which my dear spouse, Eileen, has provided, not only for this special adventure but also virtually for all of my long career as a professional student aid administrator. Having been involved actively since 1965, coincidentally the birthdate of America’s Higher Education Act, as an aid administrator, and even earlier as a recipient of financial aid as an undergraduate and graduate student, I have literally grown up with our policies and programs. This has included acting as a campus practitioner: a teacher, trainer, and mentor; and serving very actively in helping to organize and develop our profession. Having led the student aid operation at two other institutions, including a public two-year institution, has also broadened the base of experience from which I attempt to shed some light on the American way. David Palfreyman has contributed immensely to these important discussions in the United Kingdom (UK), including identifying and reviewing the major issues and helping to inform policymakers. As the UK is “moving closer to the United States (US) mixed-economy model and further away from the free public economy of the European Union (EU) higher education system”, (Palfreyman, David. “The Economics of Higher Education”, OxCHEPS, 2004) the questions arise: What should be the price paid? Who should pay? When should they ii pay? How should they pay? Who should be helped and how are they to be identified? How much and what kind of help should be provided? Where do the funds needed come from? Who benefits? How long should they be supported? What if they are not successful? Answers to these questions lead to further questions. As the UK begins to move its pricing and student aid policies to meet the future needs and demands of its citizens as well as those of an increasingly global society, the American model and how it has come to be, with all of its trendsetting excellence as well as its many flaws, can hopefully be used as a helpful benchmark for those policymakers responsible for shaping the future for the financing of higher education in the UK. The goal of this publication is to map out in simple terms the policies and procedures by which student financial aid has evolved in the US and how it is administered today. There may be as many questions raised as there are answers provided in an effort to further inform the debate and adventure upon which the UK is now embarking under the prevailing winds provided by the higher education 2004 legislation now in effect with the £3,000 tuition fees from the 2006/07 academic year. Each chapter of this publication takes on an important topic and attempts to review and highlight the important aspects of the US experience which could serve as the basis for broad comparisons and even more robust debates expected in helping to shape UK policies and procedures. One of the most constant problems across all of our US experiences has been that of information. Whether it be for the consumer, i.e., student and family: or for the policymakers, either institutional or governmental; or the media, who surely play an important role in both countries. Providing good, accurate, simple, timely information about the cost of higher education and its affordability,