3 Ways Federal Financial Aid Could Work Better for Student-Parents

A baby attends his mother's graduation ceremony at the Massachusetts Institute of Technology in Cambridge, Massachusetts, June 2017.

Student-parents are one of the most overlooked groups in higher education from a policy perspective. Data from the National Center for Education Statistics estimate that 22 percent of college students today have a dependent child, more than half of whom are single parents. The U.S. higher education system does a particularly poor job of serving these students. Just one-third of student-parents finish college within six years. And among student-parents who borrow, half default on their loans within 12 years of starting college.

There are also significant racial and gender implications in better serving student-parents. About one-third of Black or African American students have children, as do 30 percent of Native Hawaiian or Pacific Islander students. And more than two-thirds of student-parents across the largest racial and ethnic groups are women.

While colleges must do more to ensure that student-parents succeed, the federal financial aid and loan repayment systems also fail to properly account for the needs of this group. These shortcomings can leave individuals who are struggling with the costs of raising young children—including the high cost of child care—and who are working jobs that may not pay enough with insufficient financial support from the government.

This column presents three policy ideas aimed at improving the federal aid system for student-parents. These solutions focus on ways to better account for these individuals’ financial needs. The first and third ideas would need to come with special accountability provisions to ensure that institutions do not aggressively recruit student-parents to obtain more money from them without doing more to serve them well. Importantly, these ideas do not focus on improvements that institutions themselves can make—a key issue—but rather on what can be done at the federal level when allocating financial aid. This column also does not detail the absolute need for broader investments in making child care more affordable and accessible, such as increasing the Child Care and Development Block Grant and the Child Care Access Means Parents in School Program.

1. Award larger Pell Grants to student-parents

Many other countries structure their financial aid systems so that student-parents receive additional awards. For example, Canada provides up to $1,600 per child, or $200 per month, each academic year to full-time students who have dependents younger than age 12. In U.S. dollars, that’s the equivalent of about $1,200, or $150 a month. Finland, similarly, supplements its study grant with an additional 75 euros per month—about $84, or $672 over an eight-month academic year, while Germany provides 130 euros per month—about $145, or $1,160 per academic year—for each child under age 10.

Congress could create additional provisions in the Pell Grant program to similarly provide greater funds for student-parents. These funds would not be enough to cover anywhere close to the full cost of child care—nor would they address underlying structural issues related to the lack of available spots in high-quality child care options—but they would at least recognize that parents face larger costs than nonparents, including for things that go beyond child care, such as food or clothing.

For example, Congress could provide an additional $1,000 for each child of a Pell Grant recipient, capped at $3,000 per year. Given that about 2.2 million student-parents received a Pell Grant in the 2015-16 academic year, this increase would have an estimated additional cost of about $3.1 billion, assuming awards are ratably reduced for parents who do not attend full time. (see Methodology for an explanation behind this estimate) That may seem like a lot, but the roughly $1,000 increase in the maximum Pell award provided by mandatory money each year costs about $6 billion—and this provides some recipients with awards three times that amount.

2. Adjust IDR based on family composition

An increasing share of student loan borrowers use an income-driven repayment (IDR) plan for their student loans. These plans tie monthly payments to a borrower’s discretionary income—what their household earns above 150 percent of the federal poverty level.

The discretionary income exemption in IDR plans currently adjusts based on household size but not based on how the household is constructed. In other words, a family of two gets $25,365 exempted, while a single individual has an exemption of only $18,735, because the poverty level grows as family size increases. But the formula does not consider that a household of two comprising two adults is fundamentally different from a two-person household that includes one adult and one child. This holds true even if incomes are the same; in many cases, adults in a household have the potential to get a job at any moment, while a young child does not.

The IDR formulas could better reflect household composition by automatically increasing the discretionary exemption for each child. The simplest way to accomplish this would be to raise the exemption by 50 percentage points above the poverty line for each child, capped at an additional150 percentage points in the exemption. In other words, a family of two with one adult and one child would have 200 percent of their income exempted. If a household has two children, the exemption would increase to 250 percent and so on—up to a 300 percent exemption. For a two-person household, one of whom is a child, that means protecting almost $8,500 in additional income, with even greater benefits for larger families.

To be fair, this change would not have an effect on a very low-income family who does not make enough to require a loan payment. But it could provide a meaningful benefit for middle-income families. For example, a family of three making $50,000 per year would have their payments on IDR fall from $150 per month to $61 per month—savings of more than $1,000 annually.

3. Give student-parents special priority under the FSEOG

The Federal Supplemental Educational Opportunity Grant (FSEOG) is another college grant program distributed to colleges and then awarded to students. Because the federal money is allocated to institutions, financial aid offices have significant discretion in choosing who receives the funds and how much they get. The most restrictive legal requirement is that aid officials are must prioritize students with the lowest expected family contributions who also receive the Pell Grant; it has no requirements related to student-parents.

In the 2015-16 school year, about 10 percent of student-parents received the FSEOG, compared with 7 percent of nonparents. But the FSEOG could better support student-parents in two ways. The first step is rewriting the formula that determines how much money institutions receive; it has not meaningfully changed in decades and thus provides disproportionate help to Northeastern colleges and private institutions that serve fewer students and have higher prices. While a broader formula rewrite should consider factors such as how well a school serves Pell recipients, it should also include bonuses for institutions that successfully serve student-parents. Doing so would create incentives and rewards for placing a greater emphasis on this group.

The second FSEOG change involves rewriting the rules to require schools to prioritize undergraduate student-parents who receive the Pell Grant, followed by those with the lowest expected family contributions who also receive Pell. This would put student-parents first in line to get help.

Conclusion

America has a desperate need for greater investments in helping parents, particularly in making high-quality child care more widely available and making the tax code more generous for working families. Likewise, higher education must do its part to ensure it is better serving students who are parents and caregivers. These efforts should include innovations such as child care on campus and schedules and supports that work for parents. But it’s long past time for the formulas and calculations that drive the distribution of billions of federal aid dollars to recognize and account for the unique needs of student-parents.

Ben Miller is the vice president for Postsecondary Education at the Center for American Progress.

Author’s note: CAP uses “Black” and “African American” interchangeably throughout many of our products. We chose to capitalize “Black” in order to reflect that we are discussing a group of people and to be consistent with the capitalization of “African American.” 

Methodology

Many of the numbers in this column come from the author’s analysis of data from national sample surveys produced by the National Center for Education Statistics (NCES). The author used the online NCES tool Powerstats to generate these numbers. Because the tool does not provide for a way to directly link to these results, this piece includes table numbers that readers can input to look up the figures themselves. The statistic on the share of students who have dependent children can be found in Table bchbmded. The number of parents who are single parents can be found in Table bchbmdbb. The number of parents who are women, by race and ethnicity, can be found in Table ckhbmdpn04.

The estimate for the costs of the larger Pell award for student-parents comes from author’s analysis of data from the 2015-16 National Postsecondary Student Aid Study. The author calculated the breakdown of Pell recipients by the number of children they have, which can be found in Table bdhbmbh47. The author then multiplied this breakdown by the number of Pell recipients in 2015-16 to get the number of students with one, two, or three or more children. The author then used Table bchbmded to calculate the share of these students that attended full time, half time, three-quarter time, or less than half time. The author then calculated how award sizes would vary based on number of children and attendance intensity. For example, a full-time student with one child would receive $1,000, while one who attended half time would receive $500. This meant the maximum award was $3,000 for a full-time student with three or more children, while the minimum award was $250 for a student with one child who attended less than half time. The author then multiplied the award sizes by the number of students to get an overall cost estimate.