Rep. Marcello suggests eliminating student grants
Says money might have more impact at colleges
Does a state grant of up to $750 really help a college student faced with annual costs of $40,000 or more?
Rep. Michael J. Marcello, chair of the House Committee on Oversight, thinks the state would be better off dissolving the grant program that will cost $12.4 million this year and allocating the funds to the University of Rhode Island, Rhode Island College and the Community College of Rhode Island.
“The money would be better spent giving it to the universities,” Marcello said recently, as the committee listened to presentations from the Rhode Island Student Loan Authority (RISLA) and the Rhode Island Higher Education Assistance Authority (RIHEAA). RIHEAA administers the program that has qualified grants ranging from $250 to $750 for 21,854 qualified students so far this academic year. Grants are based on need determined by the Free Application for Federal Student Aid (FAFSA).
With today’s high cost of a college education, Marcello said the state grants could do little more than pay for books, if even that.
“Seven hundred and fifty dollars, does that really help everybody?” Marcello asked. “Given the limited resources we have, does is really make sense to give $750 to every student?”
Faith LaSalle, RIHEAA chair, observed that the program does not distinguish between students attending state institutions or public or private institutions out of state. She said the RIHEAA board is looking to build a better future for Rhode Island.
Marcello’s suggestion comes at a time when state funding of the grant program is shrinking and the number of eligible students is growing.
The grant program is funded by two sources; state funds and an allocation from Alliance Bernstein that runs the CollegeBoundfund under a contract with RIHEAA.
In his budget, Gov. Lincoln Chafee recommends level funding with an added $8 million coming from RIHEAA reserves and the CollegeBoundfund.
Marcello foresees the state share of the grant program, now at $4.1 million, being further reduced, meaning, if the numbers of eligible students remained the same or increased, grants would be even smaller. The balance of this year’s money comes from the Tuition Saving Program, or another word for the revenues generated by the CollegeBoundfund.
The average award is $636, according to Michael Joyce, director of the scholarship and grant division for RIHEAA. Of the 21,854 grant offers made this year, he said, 16,915 students attend in-state institutions. Of that number, 11,928 attend the three state institutions. He expects 20,000 will have received awards by the end of the academic year, about 1,000 more from last year.
The fact the state does not discriminate between students attending in-state and out-of-state institutions or public and private is critical, says Daniel Egan, president of the Association of Independent Colleges and Universities of Rhode Island. Egan also serves on the RIHEAA board.
“The intent [of the grant program] is to impact students going to college … any amount is helpful to a student,” he said.
He observed that $750 awards are most likely going to those who receive the maximum Pell grant of $5,645 and, for them, that is a significant amount.
If the state were to limit funding to grants for the state’s three institutions, Egan said it would be “disenfranchising all the students who go to private schools.” If it restricted funding to students attending in-state institutions, it would revoke reciprocity agreements with other states that allow their students receiving grants to use the money at Rhode Island institutions.
Egan has concerns about the elimination of the grant program entirely.
In a bigger picture, Marcello and the committee questioned the future of RIHEAA, which was created as a student loan guaranty agency. RIHEAA does not receive state funding but is financed by fees generated in its role as a loan guaranty agency. With the federal government now administrating its own loans, RIHEAA’s portfolio of defaulted loans is dwindling and, so too, is its source of revenue. At current levels of operation, RIHEAA was on track to run into the red in three to five years until, in a surprise to loan guaranty agencies across the country, the federal government changed the game. Under the Ryan-Murray budget bill, the revenues generated by loan rehabilitations will be severely cut as of July 1. With this change, the agency would be in the red as soon as next January, according to the RIHEAA’s chief finance officer.
The accelerated loss of revenues, with the phase out of the guaranty business, has Marcello asking what the agency will do, not only with the student grant program, but its operation of Way to Go, an online portal used by elementary and secondary students throughout the state and oversight of the CollegeBoundfund.
“What’s going to be the plan?” he asked.
He said the alternative to no plan is “a slow death” for the agency. Marcello agreed that no one saw the dramatic cut in funding coming.
Nonetheless, LaSalle sees a future for the agency. She called RIHEAA “a model agency” that, for more than 20 years, has brought millions of dollars into the state for the benefit of students. She envisions the expansion of RIHEAA’s work with the creation of a 529 college saving plan for every newborn that would be completely funded through the CollegeBoundfund. She said she has talked with Alliance Bernstein and they have agreed to funding of $1.2 million.
She asked that RIHEAA “be given a reasonable amount of time to reinvent itself.” To do that, operating funds would come from RIHEAA reserves and reductions in operating costs.
Marcello didn’t warm to the plan for a universal savings account, or the agency using reserves while it comes up with a plan. In remarks to LaSalle following the committee meeting, he said, “If you don’t come up with a plan, then we will.”
The committee is scheduled to meet this afternoon after the rise of the House at about 5 p.m. to consider information provided by RIHEAA as well as RISLA last Thursday.
John Howell, who wrote this story, is a member of the RIHEAA board.