Shift eyed in aid for N.E. colleges

WASHINGTON -- The Bush administration is proposing to redirect three financial aid programs that disproportionately benefit some of the wealthiest private colleges in New England. The move would shift tens of millions of dollars away from the region and toward the Sun Belt.

As Congress prepares to renew the 1965 Higher Education Act, it is coming under pressure from campuses in the West and some student-aid administrators to adjust a federal formula adopted 25 years ago, which, critics say, short-changes fast-growing, low-cost colleges with many minority students in the Sun Belt, and which favors older, elite private colleges in the Northeast and the Midwest.

"The institutions that serve the lowest-income students are not getting their fair share," said Sally L. Stroup, the Education Department's assistant secretary for postsecondary education. "Granted, the political dynamics are amazingly difficult to overcome. Nobody wants to give up any money."

At issue is a $1.7 billon pot of money known as campus-based aid. Unlike federal Pell Grants, which are awarded directly to low-income students, campus-based aid goes to the colleges, which add their own money and then offer it to needy students as Supplemental Educational Opportunity Grants, low-interest Perkins Loans, and Work-Study jobs.

This year, Harvard, Northeastern, and Boston University each got $7 million in campus-based aid, while MIT and Boston College received about $4 million, according to the Education Department. What has put campus-based aid in the administration's budget crosshairs is the complex funding formula that Congress -- in particular some influential senators from the Northeast -- established in 1980, and has been maintained, insuring that private, four-year colleges and long-established public universities are guaranteed a lion's share of the money earmarked for those three programs.

Massachusetts, with 80 private two- and four-year private colleges that annually award about 70 percent of all degrees in the state, received $80 million in campus-based aid for the 2002-03 academic year. Only New York, California, and Texas got more.

Some of the fast-growing states, with college enrollments predicted to climb rapidly over the next decade, received less. Florida got $71 million, Arizona got $24 million, New Mexico $11.5 million, and Nevada $4 million.

The allocation to individual colleges is a sore point to many administrators west of the Mississippi. The share for California State University at Monterey Bay, a 10-year old campus with 3,700 students, many of them minorities and 60 percent first generation in higher education, was $250,000. The University of Nevada at Las Vegas, with 26,000 students and enrollment growing by 5 percent a year, got $1.2 million.

"This is just a patently, politically jury-rigged allocation," said Peter Smith, the founder and president of Cal State at Monterey Bay. "I understand how it happened, but you literally have kids in California who are not going to school as a result of it."

As a former congressman from Vermont, Smith saw what he says was the dominance of lawmakers from the Northeast over higher-education policy. Pell Grants and Stafford Loans, the two largest federal financial-aid instruments, were named for the late Claiborne Pell, a Democratic senator from Rhode Island, and a retired Vermont Republican senator, Robert Stafford.

Senator Edward M. Kennedy, Democrat of Massachusetts, was the chairman of the committee that authorized funds for higher education until Republicans took control of the Senate in 1995. He was replaced first by Senator James M. Jeffords of Vermont and then by Senator Judd Gregg of New Hampshire.

Pell and Kennedy were key to creating the current campus-based formula, which provides colleges the same share of the money they received in the 1970s -- the "base guarantee" -- regardless of whether they have more or fewer needy students today. What's left over is distributed to all campuses on a "fair share" basis.

Some college lobbyists and financial-aid officers say the formula issue is exacerbated by severe underfunding of the campus-based aid programs, and they assert that the Bush administration, which has proposed no increases for supplemental grants and work-study and a cut in Perkins loans in 2005, should be adding resources instead of reallocating them. Nationally, the average campus-aid grant is $770.

For the first time, the National Association of Student Financial Aid Administrators is urging Congress to end the base guarantee, reducing it by 20 percent a year until 2009, because the current formula is unfair to newer institutions and doesn't reflect changing demographics or the financial needs of students. Both the California state university system, the largest senior higher-education system in the country, and the 15-member Western Interstate Commission for Higher Education, are lobbying for the formula change, telling Congress it is one of their top priorities.

"The formula needs to reflect the economy, which is in the tank in the West, and where we will be tomorrow. By 2008, the majority of the college population in the 15 states I represent will be minority, and it is growing very rapidly," said David Longanecker, executive director of the Western Interstate Commission.

Stroup called a gradual phase-out of the guarantee "a fine idea." She said the administration wants to work with House Republicans, who are expected to propose changes in the formula when they introduce reauthorization legislation in the coming weeks.

"This issue has been teed up, and Congress will have to confront it soon, whether we want to or not," said Dave Schnittger, a spokesman for Republicans on the House education committee.

Gregg, who is in charge of the reauthorizing $55 billion in financial aid programs in the Senate, said in an interview last week that he will not support the White House or agree to a change in the formula that now "significantly benefits New England." Kennedy also opposes a reallocation, said Jim Manley, his press secretary.

"The formula has worked for years. To adjust it just reslices the pie when we should be looking at how to grow the pie, and it gets to be a counterproductive exercise," said Gregg, adding that changing formulas "are, by definition, messy fights that don't involve policy but do involve who is a winner and a loser."

Gregg said he sees no need to level the national playing field. "We've got better schools" in New England, he said.

That argument may irritate some members of the House, where the makeup of the Education and the Workforce Committee doesn't reflect New England. The GOP chairman of its higher-education subcommittee and the ranking Democrat on the full committee are from California; other members come from Texas, Georgia, New York, and border states that would all be winners if the base guarantee were eliminated, according to an analysis by the American Council on Education, a college advocacy group. Every state in New England would lose funds, the analysis found.

By institution, two-year community colleges and for-profit technical and professional schools would gain most if the base guarantee ended, and private and public four-year institutions would see the their share of campus-based aid shrink by millions.

Clare Cotton, president of the Association of Independent Colleges and Universities in Massaschusetts, estimates that ending the guarantee would cost institutions in New England $50 million in financial aid and penalize their students, who would have to borrow more or choose a less expensive school.

"Of course, it's unfair" to younger colleges, Cotton said, adding that often happens when new players take the field against more savvy and experienced teams. "The main thing is, you're talking about money that goes to students, and if you change the allocation, students in Massachusetts will pay more and students in California will appear to benefit."

A well-endowed college like MIT, which funds $44 million a year in financial aid, might adjust more easily to the loss of some federal funds that now go to about 2,400 students than Northeastern, where 6,600 students last year received some campus-based aid.

"We're trying to spend all our budgeted dollars on the students. It's not like we have a pocket of money that we haven't spent," said Seamus Harreys,dean of student financial services at Northeastern. "For some students, it will mean the difference between enrolling and not enrolling."

Elizabeth Hicks, MIT's executive director for student financial services, said it is appropriate for Congress to examine not only the formula for campus-based aid, but also its funding, which does not come close to meeting the need. "The longer you go with the federal funding levels not keeping pace, the less important the base guarantee becomes," Hicks said.

Washington lobbyists for colleges and universities are bracing for a formula battle that could extend into next year. While Republican leaders are vowing to renew the huge higher-education act, there is no guarantee it will get done in an election year.

But even some groups that would stand to benefit are reluctant to push lawmakers too hard on an issue that goes directly to the interests of their districts and represents a small piece of the financial aid.

"The system now is blatantly unfair and wrong. You can't say enough bad things about it," said David Baime, vice president for government relations at the American Association of Community Colleges. Baime estimates that community colleges enroll about 44 percent of all students in nonprofit higher education and get between 3 and 15 percent of the federal campus-based aid.

"We're also aware of the intense political dynamics of this issue," said Baime, who's focusing on increasing Pell Grants, "and we're not interested in thoroughly upsetting the apple cart."

Mary Leonard can be reached at mleonard@globe.com