oversight

Federal Student Aid: Expanding Eligibility for Less Than Halftime Students Could Increase Program Costs, But Benefits Uncertain

Published by the Government Accountability Office on 2003-09-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              Report to Congressional Requesters




September 2003
                 FEDERAL STUDENT
                 AID
                 Expanding Eligibility
                 for Less Than
                 Halftime Students
                 Could Increase
                 Program Costs, But
                 Benefits Uncertain




GAO-03-905 

                                                September 2003


                                                FEDERAL STUDENT AID

                                                Expanding Eligibility for Less Than
Highlights of GAO-03-905, a report to the
                                                Halftime Students Could Increase
Chairman, Committee on Education and
the Workforce, and Chairman,
                                                Program Costs, But Benefits Uncertain
Subcommittee on 21st Century
Competitiveness, Committee on Education
and the Workforce, House of
Representatives



Despite the availability of federal,            In the 1999-2000 school year, 2.3 million adults enrolled in undergraduate
state, and other sources of student             education on a less-than-halftime basis, many seeking to balance school with
aid, concerns have been raised that             other responsibilities. Compared with other adult students, the typical less-
adult undergraduates—those 24                   than-halftime adult student was more likely to work fulltime, be married, and
and older—receive inadequate                    have a household income over $30,000. Though 3 out of 4 less-than-halftime
assistance in meeting the costs of
postsecondary education,
                                                adult students expect to complete a degree or certificate program when they
particularly those adults who take              begin their education, most leave school without completing one.
one to five credits per term (or less
than halftime). These concerns                  Household Income of Adult Undergraduate Students, 1999-2000
have been raised because less-than-             Percentage of adult students
halftime adult students are unable              25
                                                                               23
to participate in the largest federal           20             20
student loan programs, the Stafford                                                            18
                                                                                                         16
Loan programs, and they are                     15                                       15                                                                                                 14
eligible to receive only one of the                                      11                                   11        11             11
                                                10                                                                                                       9
two federal higher education tax                          7
                                                                                                                             8
                                                                                                                                               6                           6                      6
credits, the Lifetime Learning tax               5                                                                                                               5
                                                                                                                                                                                   3
credit.
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To better understand the needs of
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asked to identify (1) the extent to
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                                                                                                                                                                                   O
which adults enroll less than                     Income
halftime, the characteristics and
factors associated with less-than-                                  Less-than-halftime adult students                             All other adult students
halftime enrollment, and the rates
                                                Source: GAO calculations from National Postsecondary Student Aid Study, 1999-2000.
of completion among these
students; (2) the extent to which
adult students enrolled less than               About 70 percent of less-than-halftime adult students received some
halftime receive federal, state, and            assistance—about 44 percent of their schooling costs—typically from
other assistance to help them meet              sources other than federal or state student aid. The sources of assistance
the cost of postsecondary                       they received varied by household income: lower-income adult students
education; and (3) the implications,            enrolled less than halftime relied primarily upon student financial aid in
including the budgetary impact, of              meeting school costs, while higher-income households were assisted
changing the Pell Grant Program to
                                                primarily by work-related sources such as the Lifetime Learning tax credit or
allow less-than-halftime students to
count room and board costs and                  employer assistance.
personal expenses in their
application for federal financial aid,          We estimate that proposed changes to the Pell Grant programs would cost
and changing the Stafford loan                  the federal government a minimum of $25 million for the 2003-2004 school
programs to permit participation by             year. Allowing less-than-halftime students to participate in the Stafford Loan
less-than-halftime students.                    programs would cost about $113 million per year. College administrators
                                                expressed reservations about expanding Stafford Loan eligibility due to
                                                concerns about increasing default rates.
www.gao.gov/cgi-bin/getrpt?GAO-03-905.
                                                In commenting on our draft report, Education noted that they found it to be
To view the full product, including the scope
and methodology, click on the link above.
                                                thorough and useful.
For more information, contact Cornelia Ashby
at (202) 512-8403 or ashbyc@gao.gov.
Contents 



Letter           
                                                                           1
                 Results In Brief 
                                                          3
                 Background
                                                                 5
                 Most of the 2.3 Million Adult Undergraduate Students Who 

                   Enrolled Less Than Halftime Needed to Balance School and 

                   Other Responsibilities, and Many Were Unable to Complete 

                   Their Programs 
                                                        11
                 Most Less-Than-Halftime Adult Students Received Some 

                   Assistance with Postsecondary Costs, Typically from Work-

                   Related Sources 
                                                       19
                 Changing the Pell and Stafford Programs Would Provide More 

                   Students With Additional Aid, but Result in Increased Federal 

                   Budget Costs and, Potentially, Undesirable Effects for Students 

                   and Institutions 
                                                      25
                 Concluding Observations 
                                                 29
                 Agency Comments 
                                                         30

Appendix I       Objectives, Scope, and Methodology                                        31



Appendix II      Estimates and Associated Confidence Intervals                             38



Appendix III 	   Budgetary Impact of Possible Behavioral Response to
                 Cost of Attendance Changes in the Pell Program      48



Appendix IV      Comments from the Department of Education                                 51



Appendix V       GAO Contacts and Staff Acknowledgments                                    52 

                 GAO Contacts                                                              52

                 Staff Acknowledgments                                                     52



Tables
                 Table 1: Differences Between Students Under 24 Years of Age and 

                          Age 24 And Older                                                   6



                 Page i                                         GAO-03-905 Federal Student Aid
Table 2: Elements Included in Cost of Attendance for Pell Awards           8
Table 3: Differences Between Less-than-Halftime Adult Students
         and Other Adult Students                                        13
Table 4: Estimated Effects of Changes to Pell Grant Program              26
Table 5: Estimated Effects of Changes to Stafford Loan Programs          27
Table 6: Site Visit States and Institutions Contacted                    34
Table 7: Age of All Undergraduate Students, 1999-2000                    38
Table 8: Age of All Adult Undergraduate Students, 1999-2000              38
Table 9: Differences Between Students 18-23 and Adult Students
         (24 or older) 1999-2000                                         38
Table 10: Type of Institution Attended by Adult Students, 1999-2000      39
Table 11: Type of Degree Sought by Adult Undergraduates, 1999-
         2000                                                            39
Table 12: Amount of Assistance Received by All Adult Students,
         1999-2000                                                       39
Table 13: Enrollment Intensity among Adult Undergraduates, 1999-
         2000                                                            40
Table 14: Differences between Less Than Halftime, Halftime, and
         Fulltime Adult Students                                         40
Table 15: Type of Institution At Which Adult Students Enrolled,
         1999-2000                                                       41
Table 16: Estimated Costs for Less Than Halftime Adult Students,
         1999-2000                                                       41
Table 17: Percent of Costs Covered by All Sources of Assistance,
         1999-2000                                                       41
Table 18: Mean Assistance Received by Less Than Halftime
         Students, 1999-2000                                             42
Table 19: Mean Amount of Assistance Received by Less Than
         Halftime Students, By Source, 1999-2000                         42
Table 20: Type of Aid Received by Less Than Halftime Students,
         1999-2000                                                       42
Table 21: Percent Receiving Pell Grants, by Income, 1999-2000            43
Table 22: Percent Receiving State Aid, by Income, 1999-2000              43
Table 23: Percent Receiving Employer Aid, by Income, 1999-2000           43
Table 24: Percent Receiving Lifetime Learning Tax Credit, By
         Income, 1999-2000                                               44
Table 25: Percent Receiving Institutional Aid, by Income, 1999-2000      44
Table 26: Percent Receiving Other Aid, by Income, 1999-2000              44
Table 27: Percent of Less Than Halftime Adults below 150 Percent
         of 1998 Federal Poverty Guideline, 1999-2000                    45
Table 28: Type of Aid Received by Less Than Halftime Students, by
         Income, 1999-2000                                               45



Page ii                                       GAO-03-905 Federal Student Aid
          Table 29: Average Costs and Amount of Aid Received by Less Than
                  Half-time Students, by Income, 1999-2000                        46
          Table 30: Grade Point Average of Adult Undergraduates, 1999-2000        46
          Table 31: Degree Or Certificate Expectation Among Adults Who
                  Enrolled Less Than Halftime During First Year                   46
          Table 32: National 6-Year Completion Rate Among Adult
                  Undergraduates With A Degree Or Certificate Expectation         47
          Table 33: Household Income Distribution of Adult Students, 1999-
                  2000                                                            47


Figures
          Figure 1: Enrollment Distribution of All 7.1 Million Adult
                   Undergraduate Students, 1999-2000                              12
          Figure 2: Income Levels of Adult Students—Comparison between
                   Those Attending Less- Than-Halftime and Other Adult
                   Students                                                       14
          Figure 3: Terms of Less-Than-Halftime Enrollment among Students
                   Who Began as Adults and Completed Baccalaureate
                   Degrees at Selected 4-Year Institutions in 2001-2002           18
          Figure 4: Terms of Less-Than-Halftime Enrollment among Students
                   Who Began as Adults and Completed Associate Degrees at
                   Selected 2-Year Institutions, 2001-2002.                       19
          Figure 5: Percent of Less-Than-Halftime Students Receiving Each
                   Type of Assistance, 1999-2000                                  21
          Figure 6: Proportion of Less-Than-Halftime Adults Who Received
                   Assistance, by Household Income, 1999-2000                     22




          Page iii                                     GAO-03-905 Federal Student Aid
Abbreviations

BPS               Beginning Postsecondary Students Longitudinal Study 

COA               cost of attendance 

EFC               expected family contribution 

FAFSA             Free Application for Federal Student Aid 

FDLP              Federal Direct Loan Program 

FFELP             Federal Family Education Loan Program 

FSA               Federal Student Aid 

GED               General Educational Development 

NCES              National Center for Education Statistics 

NPSAS             National Postsecondary Student Aid Study 

PRWORA            Personal Responsibility and Work Opportunity 

                  Reconciliation Act
TANF              Temporary Assistance to Needy Families
WIA               Workforce Investment Act



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Page iv                                                 GAO-03-905 Federal Student Aid
United States General Accounting Office
Washington, DC 20548




                                   September 10, 2003 


                                   The Honorable John A. Boehner 

                                   Chairman, Committee on Education and the Workforce 

                                   House of Representatives 


                                   The Honorable Howard P. “Buck” McKeon 

                                   Chairman, Subcommittee on 21st Century Competitiveness 

                                   Committee on Education and the Workforce 

                                   House of Representatives 


                                   To help them meet the costs of higher education, the nation’s 

                                   postsecondary students received approximately $85 billion in grant and 

                                   loan assistance from federal student aid programs, state student aid 

                                   programs, and postsecondary institutions in academic year 2001-2002. 

                                   Additional assistance in meeting the costs of postsecondary education was 

                                   available from work-related sources of support, such as the Lifetime 

                                   Learning tax credit and employer assistance. Despite these sources of 

                                   assistance, some suggest that nontraditional students—particularly adult 

                                   students—receive inadequate support to help them meet the costs of 

                                   undergraduate postsecondary education. There is particular concern 

                                   about low-income adult students, who may be enrolled with the hope of 

                                   improving their prospects for higher wages and career advancement. 


                                   Advocates for adult students note that many adults enroll on a less-than-

                                   halftime basis and are consequently disadvantaged in obtaining financial 

                                   support. For example, less-than-halftime students, those taking one to five 

                                   credits, are not eligible to participate in the federal Stafford student loan 

                                   programs.1 Moreover, though they are eligible to participate in the largest 

                                   federal student grant program, the Pell Grant program, no allowances are 

                                   made for their room, board, and miscellaneous personal expenses in the 

                                   calculation of grant amounts, as is done for students enrolled halftime or

                                   more. Furthermore, less-than-halftime students who are tax filers may 

                                   reduce their federal income tax liability through the use of the Lifetime 

                                   Learning tax credit, but they are ineligible to claim the other federal higher 

                                   education tax credit, the HOPE credit. And, although less-than-halftime 




                                   1
                                   Stafford loans are offered under the Federal Family Education Loan Program and the
                                   William D. Ford Direct Loan Program.



                                   Page 1                                                GAO-03-905 Federal Student Aid
students are eligible to participate in the federal campus-based aid
programs—Supplemental Educational Opportunity grants, Perkins loans,
and federal work-study aid—the institutions they most often attend
receive a small share of these funds. Finally, advocates suggest, the
Workforce Investment Act (WIA) of 1998 and the Temporary Assistance to
Needy Families (TANF) program authorized by the Personal
Responsibility and Work Opportunity Reconciliation Act (PRWORA) of
1996 chiefly focus on immediate employment or short-term training and,
therefore, provide little assistance to adults who seek to obtain a
postsecondary credential.

In preparation for the upcoming reauthorization of the Higher Education
Act of 1965, you asked us to examine issues concerning adult students,
which, for the purposes of this report, are those who are 24 years or older.
In particular, you asked us to determine (1) the extent to which adults
enroll less than halftime, the characteristics and factors associated with
less-than-halftime enrollment, and the rates of completion among these
students; (2) the extent to which adult students enrolled less than halftime
receive federal, state, and other assistance to help them meet the costs of
postsecondary education; and (3) the implications, including the
budgetary impact, of changing the Pell Grant program to allow room and
board and miscellaneous personal expenses to be considered in the
calculation of grant amounts for less-than-halftime students, and changing
the Stafford loan programs to permit participation by less-than-halftime
students.

To answer question one, we analyzed two datasets created by the
Department of Education’s National Center for Education Statistics: the
1999-2000 National Postsecondary Student Aid Study (NPSAS), and the
2001 Beginning Postsecondary Students Longitudinal Study (BPS). The
two datasets contain a nationally representative sample of students
enrolled at postsecondary institutions participating in federal student aid
programs and provide information on financial assistance they received,
hours they worked, and a wide range of other characteristics. We also
interviewed administrators of 19 postsecondary institutions, 18 of which
we visited. These included both public and private institutions and 2-year
and 4-year institutions located in four states: California, Maryland, Ohio,
and Virginia. We met with a range of administrators at these institutions.
We discussed with them the factors associated with less-than-halftime
enrollment among adult students, and from 10 of these institutions we
obtained data on less-than-halftime enrollment and completion among
adult students. To answer question two, we analyzed data from the
NPSAS, surveyed states about financial aid for less-than-halftime students,


Page 2                                         GAO-03-905 Federal Student Aid
                     and interviewed postsecondary administrators. To answer question three,
                     we reviewed the Federal Student Aid Handbook, and used data from
                     NPSAS. Education officials provided us with information on federal
                     subsidy rates for Stafford loans and reviewed our estimation methodology.
                     Appendix I provides details on the study’s scope and methodology.
                     Because NPSAS and BPS are samples, there is sampling error associated
                     with estimates obtained from them. These sampling errors are reported in
                     appendix II. We did our work from October 2002 to August 2003 in
                     accordance with generally accepted government auditing standards.


                     In school year 1999-2000, most of the nation’s 2.3 million adult
Results In Brief 
   undergraduates who enrolled less than halftime were fulltime workers
                     needing to balance the demands of school with other responsibilities, and
                     few who aimed to complete a certificate or degree could be expected to do
                     so. Compared with other adult students, those enrolled less than halftime
                     had higher family incomes, were more often full-time workers, and more
                     likely to be married. Adults enrolled on a less-than-halftime basis chiefly
                     attended 2-year public institutions and often used less-than-halftime
                     enrollment to balance school, work, and family. Less-than-halftime
                     enrollment may have also enabled adults to address other challenges they
                     faced, including financial constraints, scheduling conflicts, and limited
                     readiness for postsecondary education. For example, during site visits to
                     postsecondary institutions, administrators said that adults who have been
                     away from school find the prospect of returning to school intimidating,
                     both socially and academically, and less-than-halftime enrollment may
                     allow adult students to take the steps necessary to adjust to academic life.
                     National data indicate that while most adults who enrolled on a less-than-
                     halftime basis during their first year of postsecondary education expected
                     to complete a degree or certificate, few did. Moreover, data provided by
                     postsecondary institutions indicate that few adults who completed a
                     certificate or degree consistently enrolled on a less-than-halftime basis.

                     In 1999-2000, about 7 in 10 of the nation’s less-than-halftime adult students
                     received an average of $462 in assistance with their school attendance
                     costs of slightly more than $1,000, typically from sources other than
                     federal or state student aid. Though less-than-halftime adult students had a
                     range of household incomes, their school attendance costs and the amount
                     of assistance they received did not vary widely. However, the sources of
                     support they received did vary by household income. For the less-than-




                     Page 3                                          GAO-03-905 Federal Student Aid
halftime adult students with a household income below 150 percent of the
federal poverty guideline,2 student financial aid—rather than work-related
sources of support—was the primary source of assistance. For the less-
than-halftime adult students with household incomes above this level,
assistance was most often received from one of two work-related sources
of support: the Lifetime Learning tax credit or employer-provided
assistance. WIA and TANF may also provide assistance to less than
halftime adult students. However, WIA block grant funds have generally
been used by states to support employment-related assistance or skills
training, and few less than halftime students received WIA assistance. Very
few less-than-halftime adult students received TANF assistance, and
NPSAS collected no data on the extent to which TANF assistance was
used to meet their costs of postsecondary education.

Changing the Pell and Stafford programs could provide some less-than-
halftime students with additional aid, increase program costs for the
federal government, and, potentially, pose loan default problems for some
institutions and students. Permitting less-than-halftime students to include
the same costs as other students in their aid calculations is estimated to
provide 150,000 Pell recipients with additional grant aid averaging $110 per
year, and another 13,000 less-than-halftime students who otherwise would
not receive a Pell award with an average award of $630. The federal
budget cost of this change in Pell Grant policy for less-than-halftime
students would be, at a minimum, $25 million for the 2003-2004 academic
year.3 Permitting less-than-halftime students to participate in the Stafford
Loan programs would result in more than two million additional
borrowers, according to our estimates. If federal costs per loan dollar
remained the same, this change would cost roughly $113 million per year.
Site visits to postsecondary institutions in four states revealed that college
administrators are concerned about the potential disadvantages of
permitting less-than-halftime students to participate in the Stafford Loan
program. They anticipate that less-than-halftime students who borrow
might be unlikely to complete their studies, and, as a consequence, more


2
 Issued annually by the Department of Health and Human Services, the poverty guidelines
are a simplification of the Census Bureau’s poverty thresholds, and they are used to
determine financial eligibility for certain federal programs. NPSAS 2000 reports 1998
income data, since these served as the basis for financial aid applications in the 1999-2000
school year, when its data were collected. The 1998 poverty guideline for a three-person
household was $13,650.
3
 This cost estimate assumes that adults who are not enrolled in school will not choose to
enroll in response to the policy change.




Page 4                                                    GAO-03-905 Federal Student Aid
                           likely to default on their loans. Because institutional eligibility to
                           participate in federal student aid programs is linked to an institution’s
                           cohort default rate,4 permitting borrowing by less-than-halftime students
                           may have the unintended consequence of jeopardizing the eligibility of
                           some institutions.

                           We provided Education with a copy of our draft report for review and
                           comment. In written comments on our draft report, Education noted that
                           they found our report to be thorough and useful. Education’s written
                           comments appear in appendix IV. Education also provided technical
                           comments, which we incorporated where appropriate.


                           Each year millions of adults participate in organized learning in the United
Background 	               States, in a wide range of venues. In 1999, an estimated 90 million persons
                           16 and older5 reported that they had participated in some sort of formal
                           learning activity, ranging from personal development courses—such as
                           family genealogy or cooking classes—to apprenticeship and advanced
                           degree programs. Much of this learning takes place outside of formal
                           credential programs that confer a certificate or degree—-most often in the
                           workplace, where employers offer classes for job-specific skills, or in the
                           many courses offered by postsecondary institutions that are not part of a
                           credential program, such as a continuing education class. Enrolling in a
                           certificate or degree program at a postsecondary institution is an
                           important opportunity, however, for millions of adults who seek personal
                           growth, or advancement in their working lives.


Characteristics of Adult   In the 1999-2000 academic year, an estimated 7.1 million adults were
Undergraduate Students 	   enrolled as undergraduates in the nation’s postsecondary institutions,
                           comprising about 40 percent of all undergraduate students. About three-
                           quarters of these adult undergraduates were between the ages of 24 to 40,
                           while about one-quarter were 41 or older. Compared with undergraduate


                           4
                            A cohort default rate is the percentage of a school’s borrowers who enter repayment
                           status on certain Federal Family Education Loan Program and/or William D. Ford Federal
                           Direct Loan Program loans during one federal fiscal year and default prior to the end of the
                           next fiscal year.
                           5
                            The 1999 Adult Education Survey of the National Household Education Survey surveys
                           “formal learning activity” among all civilian, noninstitutionalized individuals age 16 and
                           older who were not enrolled in elementary or secondary school at the time of the
                           interview.




                           Page 5                                                     GAO-03-905 Federal Student Aid
                                  students under the age of 24, adult students enrolled in 1999-2000 were
                                  more likely to be working full time (35 or more hours per week), to be
                                  married, to have dependents, and to lack a conventional high school
                                  diploma. (See table 1.)

                                  Table 1: Differences Between Students Under 24 Years of Age and Age 24 And
                                  Older

                                   Numbers in percent
                                   Student Characteristics                    Students Under 24             Students 24 and Older
                                   Work fulltime                                                  24                          59
                                   Married                                                         5                          50
                                   Have dependents                                                 8                          54
                                   GED/No diploma                                                  4                           9
                                  Source: NPSAS 1999-2000.

                                  Note: See appendix II for confidence intervals associated with these estimates.


                                  While the majority of undergraduates under the age of 24 were enrolled in
                                  baccalaureate programs, adult undergraduate students were primarily
                                  enrolled in certificate or associate programs in 1999-2000. Most adult
                                  students (55 percent) were enrolled at 2-year public institutions, while
                                  another 22 percent were enrolled in a public 4-year institution, and 10
                                  percent were enrolled in private 4-year institutions. The remaining adult
                                  students were enrolled at proprietary schools, such as culinary or beauty
                                  schools, or a combination of different types of institutions.


A Range Of Public And             A range of public and private funding sources is available to adults to
Private Funding Sources           assist them in meeting the costs sometimes associated with formal
Assist Adults In Meeting          learning, including employer-provided educational assistance, federal
                                  student aid programs authorized under Title IV of the Higher Education
Educational Costs                 Act, higher education tax credits, and federal WIA and TANF funds.

Federal Financial Aid Available   In the 1999-2000 academic year, adult students received about $3.3 billion
to Adult Undergraduate            in grant assistance and $8.5 billion in loan assistance from programs
Students under Title IV of the    authorized under Title IV of the Higher Education Act. To receive federal
Higher Education Act              financial aid, students must meet several eligibility requirements, including
                                  being enrolled in a degree or certificate program, and maintaining
                                  satisfactory academic progress. Institutions are required to establish
                                  qualitative and quantitative criteria of satisfactory progress, and to




                                  Page 6                                                         GAO-03-905 Federal Student Aid
monitor student progress.6 Taken together, these requirements help to
ensure that Title IV funds are used in ways that benefit both students and
the larger public, rather than purely recreational or leisure activities.
Postsecondary institutions must also meet eligibility requirements to
participate in Title IV programs, including legal authorization by the state
in which they offer postsecondary education, accreditation by a nationally
recognized accrediting agency,7 and limiting regular admission to
individuals with a high school diploma or its recognized equivalent.8
Institutional eligibility requirements help to ensure that participating
institutions provide students with quality education or training.

Programs authorized under Title IV include Pell Grants for low-income
students and Stafford Loans. Stafford loans may be either subsidized or
unsubsidized. If the loan is subsidized, the federal government pays the
interest cost of the loan for the time a student is enrolled in school. If the
loan is unsubsidized, the borrower is responsible for paying interest during
the life of the loan. Title IV also authorizes programs funded by the federal
government and administered by participating higher education
institutions, commonly known as campus-based aid—Supplemental
Educational Opportunity grants, Perkins loans, and federal work-study aid.

Students who apply for Title IV aid must do so using the Free Application
for Federal Student Aid (FAFSA). Information from the FAFSA is used to
determine the amount of money that the adult student is expected to
contribute to his or her own education, called the expected family
contribution (EFC). Statutory definitions establish the criteria that
students must meet to be considered independent of their parents for




6
 Qualitative measures include grades or work projects that are used against an established
standard to assess academic progress. Quantitative measures are standards used to
establish the maximum time frame in which students are expected to complete their
academic programs.
7
 Institutions may also meet this requirement by being preaccredited by an agency or
association approved by Education to grant preaccreditation. Public postsecondary
vocational institutions may be accredited by a state agency that Education recognizes to be
a reliable authority.
8
 Institutions may also admit home-schooled students, or individuals beyond the age of
compulsory school attendance in the state where it is located.




Page 7                                                   GAO-03-905 Federal Student Aid
purposes of financial aid,9 and statutory formulas establish the share of
income and assets that are expected to be available for the student’s
education. Once the EFC is established, it is compared to the cost of
attendance at the institution chosen by the student. As table 2 indicates,
the elements included in the student’s cost of attendance for the purpose
of calculating the Pell Grant award vary according to the extent of their
enrollment.

Table 2: Elements Included in Cost of Attendance for Pell Awards

                                                    Fulltime or Halftime
    Elements in cost of                             students (6 or more         Less-than-halftime
    attendance                                                  credits)     students (1-5 credits)
    Tuition and fees                                      √                          √
    Books and supplies                                    √                          √
    Transportation                                        √                          √
    Miscellaneous personal                                √                    Not included
    expenses
    Room and board                                        √                    Not included
    Child care                                            √                          √
    Other expensesa                                       √                          √
Source: 1999-2000 Student Financial Aid Handbook.
a
Such as supportive services for disabled students.


If the EFC is greater than the cost of attendance, the student is not
considered to have financial need for federal Title IV aid programs. If the
cost of attendance is greater than the EFC, then the student is considered
to have financial need. Pell Grant awards are calculated by subtracting the
student’s EFC from the maximum Pell Grant award. Maximum Pell Grant
awards are prorated by the student’s enrollment intensity: students
attending less than halftime are eligible to receive one-quarter of the
maximum Pell Grant award. In 1999-2000, the maximum Pell Grant award
was $3,125 for fulltime students, while the maximum award for a less-than-
halftime student was $781. The maximum subsidized Stafford loan award


9
 To be classified as an independent student for the purpose of receiving Title IV financial
aid, students must meet one of the following criteria: (1) veteran of armed services; (2) age
24 years or older by December 31st of the award year; (3) married; (4) enrolled in a
graduate or professional educational program; (5) have legal dependents other than a
spouse; or (6) be an orphan or ward of the court. Financial aid administrators may also
classify students as independent through the exercise of their professional judgment. In
1999-2000, 87 percent of students classified as independent were 24 or older.




Page 8                                                             GAO-03-905 Federal Student Aid
                                  is equal to the student’s calculated financial need, subject to statutory
                                  limits on annual and cumulative borrowing. The maximum unsubsidized
                                  Stafford loan award is equal to the student’s cost of attendance, subject to
                                  statutory limits on annual and cumulative borrowing.

State, Institutional, and Other   Adult students also received financial aid from states, postsecondary
Federal Sources of Financial      institutions, and other federal sources.10 In 1999-2000, states awarded a
Assistance Available to Adult     total of $975 million to adult students enrolled in undergraduate education,
Undergraduate Students            typically on the basis of estimated financial need. However, about half of
                                  the states did not have aid programs in which adults enrolled less than
                                  halftime were eligible to participate. Postsecondary institutions awarded
                                  $941 million in aid to adult undergraduate students in 1999-2000, often on
                                  the basis of considerations other than financial need. Sources of federal
                                  assistance other than Title IV aid were available to adult undergraduates,
                                  the largest of which was Montgomery GI Bill assistance. About $1 billion
                                  was available to the nation’s veterans and eligible service members
                                  through the Montgomery GI Bill.

Work-Related Financial            Financial assistance was also available to adult students from work-
Assistance Available to Adult     related sources—through two federal higher education tax credits and
Undergraduate Students            from employer-provided educational assistance. Employers may pay
                                  postsecondary educational expenses directly, or indirectly through
                                  employee reimbursement, and they are encouraged to do so by the federal
                                  tax code, which provides favorable tax treatment for these benefits. In
                                  1999-2000, employers provided $1.28 billion in assistance to adult students
                                  enrolled in undergraduate postsecondary education, most often to those
                                  workers who were most likely to increase company productivity or
                                  profitability as a result of their education, such as high-skill, high-demand
                                  workers and managers.11 Employees were usually required by employers
                                  to meet a number of conditions to obtain this educational assistance—
                                  such as a minimum length of service—but were not obligated to enroll in
                                  degree or certificate programs, or to complete their studies.12 Assistance



                                  10
                                   These sources include, for example, vocational rehabilitation financial assistance, which
                                  an estimated 0.3 percent of the nation’s adult students enrolled in postsecondary students
                                  received in 1999-2000.
                                  11
                                    National Academy Press, Knowledge Economy and Postsecondary Education: Report of
                                  a Workshop, 2002; National Center for Education Statistics, Employer Aid for
                                  Postsecondary Education, 1999.
                                  12
                                   International Foundation of Employee Benefit Plans, The Many Faces of Employee
                                  Benefits, http://www.ifebp.org/knowledge/reedubn1.asp.




                                  Page 9                                                   GAO-03-905 Federal Student Aid
                               was also available to students through two federal higher education tax
                               credits, the HOPE and Lifetime Learning tax credits.13 Tax filers on their
                               own behalf, or on behalf of a spouse or dependent may claim both credits,
                               and both are nonrefundable: if the filer has no tax liability, they cannot
                               receive the credit. Eligibility for the HOPE credit is limited to students
                               who are enrolled halftime or more in a degree or certificate program, and
                               in their first 2 years of postsecondary education. In contrast to both the
                               HOPE tax credit and the Stafford student loan programs, the Lifetime
                               Learning tax credit may be used by tax filers who enroll for any number of
                               credits, and for any course that aids in learning new or improving existing
                               job skills, including those that are not part of a degree or certificate
                               program. Additionally, tax filers may use the credit for as many years as
                               they are enrolled, without regard to degree progress or completion. Tax
                               filers use all qualified tuition and fees—minus any tax-free educational
                               assistance14 received—to compute the credits. In 1999-2000, all of the first
                               $1,000 and half of the next $1,000 of qualified education expenses per
                               student could be used to compute the HOPE credit, for a maximum credit
                               of $1,500. In 1999-2000, each tax filer could use 20 percent of the first
                               $5,000 in qualified educational expenses to compute the Lifetime Learning
                               credit for a maximum credit of $1,000. The Lifetime Learning credit
                               permits tax filers to combine their own expenses and those of their spouse
                               and dependents. For taxpayers filing jointly, both credits were initially
                               phased out at $80,000 adjusted gross income,15 and fully phased out at
                               $100,000.16

Assistance to Adult            Federal programs authorized by WIA and PRWORA may also provide
Undergraduate Students Under   some adults with assistance in meeting the costs of postsecondary
WIA and PRWORA                 education. Under WIA, adults and dislocated workers may be eligible to
                               receive job training after it is determined that they are unlikely to get a job
                               leading to self-sufficiency without such training. WIA funds may be used
                               for postsecondary training only for expenses remaining after the receipt of


                               13
                                For additional information concerning the credits, see U.S. General Accounting Office,
                               Student Aid and Tax Benefits: Better Research and Guidance Will Facilitate Comparison
                               of Effectiveness and Student Use, GAO-02-751 (Washington, D. C.: Sept. 13, 2002).
                               14
                                Tax-free educational assistance includes scholarships, Pell Grants, employer-provided
                               educational assistance, and veterans’ educational assistance.
                               15
                                 Adjusted gross income is total income reduced by certain amounts, such as for an
                               individual retirement account or student loan interest.
                               16
                                These phase-out limits apply to returns filed in 2000. Under the Taxpayer Relief Act of
                               1997, these amounts are indexed to inflation.




                               Page 10                                                  GAO-03-905 Federal Student Aid
                          Pell Grant and other sources of assistance. Furthermore, state and local
                          workforce investment boards are authorized to establish limits on the
                          amount of time or the amount of WIA funds that may be used to meet
                          training expenses. Under PRWORA, block grants are made to states, which
                          may use these funds to assist TANF recipients in meeting costs associated
                          with vocational training or education, including postsecondary education.
                          These costs may include tuition and fees, childcare, and transportation.


                          In 1999-2000, one-third of adult undergraduate students, about 2.3 million,
Most of the 2.3 Million   enrolled less than halftime, and most worked fulltime and needed to
Adult Undergraduate       balance the demands of school with other responsibilities. Most adults
                          who enroll as less than halftime students intend to complete a degree or
Students Who              certificate, but few do. Compared with adult students enrolled halftime or
Enrolled Less Than        more, the typical less-than-halftime adult student was older, more likely to
                          be working and married, and had a higher household income. In addition,
Halftime Needed to        less-than-halftime students more often enrolled without being in a degree
Balance School and        program, and less often pursued a baccalaureate degree. Although less-
Other                     than-halftime enrollment may permit adults to complete one or two
                          courses helpful to their employment prospects, such enrollment appears
Responsibilities, and     to be an ineffective long-term strategy for the majority of less-than-
Many Were Unable to       halftime adult students who intend to complete a degree. Of those adults
                          who expected to complete a certificate or degree and enrolled on a less
Complete Their            than halftime basis during their first year of school, most had not
Programs                  completed a degree or certificate, and were no longer enrolled in school.


One-Third of Adult        In 1999-2000, one-third, about 2.3 million, of adult undergraduate students
Undergraduate Students    were enrolled less than halftime. As shown in figure 1, other adult students
Enrolled Less Than        were either enrolled fulltime (12 or more credits), half- or three-quarters
                          time (6-11 credits), or were in a combination of different enrollment types
Halftime, and Those Who   (mixed).
Did Differed from Other
Adult Students




                          Page 11                                         GAO-03-905 Federal Student Aid
Figure 1: Enrollment Distribution of All 7.1 Million Adult Undergraduate Students,
1999-2000

                                                    Less than halftime

                                                    Mixed enrollment



                               10%

           33%
                                        26%         Half or three-quarters time




                        31%



                                                    Fulltime
Source: GAO calculations from NPSAS 1999-2000.

Note: See appendix II for confidence intervals associated with these estimates.


Compared with adult students enrolled halftime or more, less-than-
halftime adult students were older, and more likely to be working fulltime,
be married, and have dependents. In addition, less-than-halftime adult
students more often enrolled in 2-year postsecondary institutions, and less
often pursued a baccalaureate degree. Less-than-halftime adult students
had, on average, higher household incomes than did other adult students.
(See table 3.)




Page 12                                                        GAO-03-905 Federal Student Aid
Table 3: Differences Between Less-than-Halftime Adult Students and Other Adult
Students

                                                                           Halftime or
                                                       Less than        Three-Quarter
 Characteristics of adult students                      Halftime                 Time Fulltime
 Median age                                                     37                    32        28
 Percentage of students working fulltime                        77                    70        34
 Median household income (1998)                           $42,000                 $31,000   $18,000
 Percentage of students married                                 57                    50        42
 Percentage of students having
 dependents                                                     57                    55        51
 Percentage of students enrolled at 2-year
 institution                                                    73                    58        35
Source: GAO calculations from NPSAS, 1999-2000.

Note: See appendix II for confidence intervals associated with these estimates.


A substantially larger proportion of adults who enrolled on a less-than-
halftime basis had household incomes over $30,000 than did adults
enrolled halftime or more. (see figure 2).

An estimated 7 percent of all adult students enrolled less than halftime in
1999-2000 had household incomes at or below 100 percent of the federal
poverty guideline, which for a three-person household in 1998 was $13,650.
An estimated 14 percent had household incomes at or below 150 percent
of the federal poverty guideline, or $20,475 for a three-person household.




Page 13                                                        GAO-03-905 Federal Student Aid
Figure 2: Income Levels of Adult Students—Comparison between Those Attending Less- Than-Halftime and Other Adult
Students

Percentage of adult students
25
                                    23


                20
20
                                                        18

                                                                    16
                                                 15
15                                                                                                                                                    14


                           11                                               11         11                    11
10                                                                                                                      9
                                                                                                    8
        7
                                                                                                                  6                    6                      6
                                                                                                                               5
 5
                                                                                                                                                 3


 0
        $0-$9,999         $10-$19,999            $20-$29,999       $30-$39,999         $40-$49,999       $50-$59,999   $60-$69,999    $70-$79,999    Over $80,000
     Income


                                                                         Less-than-halftime adult students

                                                                         All other adult students

Source: GAO calculations from NPSAS 1999-2000.


                                                               Note: See appendix II for confidence intervals associated with these estimates.




                                                               Page 14                                                          GAO-03-905 Federal Student Aid
School Administrators      Adult students choose to enroll on a less-than-halftime basis for many
Believe Students May       reasons, the most important of which, most school administrators told us,
Choose Less-Than-          is their need to balance school requirements with the competing demands
                           of work and family. This closely reflects the findings of studies that
Halftime Enrollment for    examine postsecondary enrollment among adults.17 School administrators
Many Reasons—Most          explained that the balancing act required of many adult students, in which
Commonly to Balance        they attempt simultaneously to meet family responsibilities and work
Work, Family, and School   obligations, left many adults with too little time to be a fulltime student.
                           The routines of adult life—from caring for sick children to meeting
                           unexpected job demands—compete with class attendance and the
                           completion of course assignments, according to these administrators.
                           Faced with this “juggling act” some adult students may have to pursue
                           postsecondary education on a less-than-halftime basis.

                           College administrators we contacted also identified several other
                           significant reasons why adult students may enroll on a less-than-halftime
                           basis, including the difficulty meeting the direct costs of school,
                           scheduling conflicts, and students’ limited readiness for postsecondary
                           education. Virtually all administrators identified these as important, but
                           secondary, reasons. While many adult students receive some financial
                           support towards postsecondary costs, most students pay the majority of
                           school costs from their own resources. Because adult students may find it
                           difficult to economize on housing costs by searching for less expensive
                           accommodations or group housing, enrolling less than halftime can
                           provides them with a way to reduce out-of-pocket costs associated with
                           tuition and fees—as well as transportation, childcare, and books.

                           Scheduling conflicts also played a role, according to college
                           administrators, in influencing enrollment decisions. Officials noted that
                           adult students, especially working students, may be unable to enroll on a
                           halftime or fulltime basis due to the inflexibility of course and program
                           options made available by postsecondary institutions, or a lack of
                           flexibility in work schedules on the part of employers. While some
                           postsecondary institutions offered the majority of their classes during



                           17
                             We identified only one study examining less-than-halftime adult students, Illinois Student
                           Assistance Commission Research Reports, Summer 2001. Others, however, examined
                           similar student populations, such as working adults or part-time adult students. The
                           findings of these studies point to broadly similar factors influencing adults’ enrollment
                           decisions. See, for example, Work First, Study Second: Adult Undergraduates Who
                           Combine Employment and Postsecondary Enrollment, NCES, June 2003; Opening Doors:
                           Students’ Perspectives on Juggling Work, Family, and College, MDRC, July 2002.




                           Page 15                                                   GAO-03-905 Federal Student Aid
                            nontraditional hours, such as evenings or weekends, others did not. For
                            example, administrators at one 4-year school estimated that only 10
                            percent of the undergraduate courses were offered during evening hours.
                            Adults may find it easier to plan and manage their schedules over 5 to 7
                            weeks than they do over longer time periods, such as a traditional 10 or 15-
                            week semester. At another institution, administrators noted that 3,000
                            course sections were offered each semester, but only 10 were available to
                            adults in a shorter 5 to 7 week format, owing to reluctance of faculty to
                            teach in alternative times and formats. Administrators at one community
                            college pointed to a lack of flexibility in employer work schedules, noting
                            that adult students often withdraw from class when their employer
                            changes their work schedule, preventing them from attending class.

                            School administrators explained that some adults might not be ready—
                            academically or socially—for postsecondary education, and that this may
                            contribute to their decision to enroll less than halftime. Adult students
                            often need to refresh or develop college-level skills, they noted,
                            particularly in mathematics. Adult students may also lack confidence in
                            themselves or their abilities, or feel out of place in a college setting. One
                            administrator noted that some adult students at her institution
                            experienced stress-related illnesses after they had begun their coursework
                            and needed to leave mid-semester. National data indicate that adults
                            enrolled on a less than halftime basis are more likely to be encountering
                            academic difficulties than other adult students, as reflected in their lower
                            grade point averages.


Most Adults Who Enrolled    National data indicate that most adults who enrolled on a less-than-
as Less-Than-Halftime       halftime basis during their first year of postsecondary education expected
Students Expected to        to complete a degree or certificate, but six years later the majority had left
                            school with no credential. Moreover, data provided by postsecondary
Complete a Certificate or   institutions included in our review show that few adults who succeeded in
Degree, But Did Not         completing a certificate or degree consistently enrolled on a less-than-
                            halftime basis. Some adults who enroll in credit-bearing courses at
                            postsecondary institutions may not intend to complete a degree or
                            certificate; rather, they may choose to complete only a few courses,
                            finding this sufficient to acquire the skills that help them gain employment,
                            obtain a promotion, or find personal satisfaction. Data from Education’s
                            1995-1996 Beginning Postsecondary Students (BPS) study, which tracked
                            the academic progress and degree completion of students over a 6-year
                            period from 1995-1996 to 2001-2002, show that 25 percent of adults who
                            enrolled on a less than halftime basis during their first year of



                            Page 16                                         GAO-03-905 Federal Student Aid
postsecondary education did not expect to complete a degree or
certificate. The remaining 75 percent, however, did.

Most adults who intended to complete a degree or certificate and enrolled
on a less-than-halftime basis during their first year of postsecondary
education left school without completing a degree or certificate. Using the
BPS study, we analyzed completion among those students who first
enrolled at age 24 or older, who expected to complete a certificate,
associate’s degree, or baccalaureate degree, and who enrolled on a less
than halftime basis one or more times during their first year of
postsecondary education. We estimate that about two-thirds (66 percent)
of adults who began in 1995-1996 did not complete a certificate or degree
by 2001-2002, and were no longer enrolled in postsecondary education. In
comparison, only about 30 percent of adults who enrolled as halftime or
fulltime students in their first year of school had left school without
completing a degree or certificate.

At those institutions that provided completion data to us, adult graduates’
reliance upon less than halftime enrollment varied with program length. Of
the 1,830 baccalaureate graduates who completed their degrees in 2001-
2002 at four 4-year institutions we visited, and who when they first
enrolled were age 24 or older, slightly more than one-half never enrolled
on a less-than-halftime basis, and another 36 percent did so for only one or
two terms. No graduates relied exclusively upon less-than-halftime
enrollment to complete their degree. (See fig. 3.)




Page 17                                        GAO-03-905 Federal Student Aid
Figure 3: Terms of Less-Than-Halftime Enrollment among Students Who Began as
Adults and Completed Baccalaureate Degrees at Selected 4-Year Institutions in
2001-2002

Percent of adult students
60


         51
50



40
                      36


30



20



10                                  7
                                                 5

                                                              0
 0
     0 terms          1-2          3-5          6+           All
                    terms        terms        terms        terms
     Number of terms enrolled less than halftime
Source: Data provided by four baccalaureate institutions visited by GAO.



Of the 1,927 students who completed an associate degree in 2001-2002 at
four 2-year institutions we visited and who first enrolled at age 24 or older,
almost one-half never enrolled as less-than-halftime students, or did so for
one or two terms. Only 3 percent consistently enrolled on a less-than-
halftime basis. (See fig. 4.) This pattern of enrollment was similar for the
348 students who completed a certificate program at three of the 2-year
institutions we visited.




Page 18                                                                    GAO-03-905 Federal Student Aid
                       Figure 4: Terms of Less-Than-Halftime Enrollment among Students Who Began as
                       Adults and Completed Associate Degrees at Selected 2-Year Institutions, 2001-
                       2002.

                       Percent of adult students
                       30
                                             28

                                                                        25
                       25
                                                          23

                                20
                       20



                       15



                       10



                        5
                                                                                      3


                        0
                            0 terms          1-2          3-5          6+            All
                                           terms        terms        terms         terms
                            Number of terms enrolled less than halftime
                       Source: Data provided by four 2-year institutions visited by GAO.




                       In 1999-2000, about 7 in 10 of the nation’s less-than-halftime adult students
Most Less-Than-        received assistance equaling about 44 percent of their school costs,
Halftime Adult         typically from sources other than federal and state student aid. Though
                       less-than-halftime adult students had a range of household incomes, their
Students Received      school costs and the amount of assistance they received did not vary
Some Assistance with   widely; however, the sources of assistance they received did vary by
                       household income. Student financial aid from federal, state, and
Postsecondary Costs,   institutional sources comprised the majority of assistance received by
Typically from Work-   lower-income adults, while most assistance received by higher- income
Related Sources        households was provided by work-related sources. Very few adults
                       enrolled on a less-than-halftime basis seldom received assistance from
                       either federal WIA or TANF sources.




                       Page 19                                                             GAO-03-905 Federal Student Aid
Seven in 10 Less-Than-       In 1999-2000, most less-than-halftime adult students received some
Halftime Adult Students      assistance with their postsecondary education or training costs, typically
Received Assistance for      from sources other than student financial aid. An estimated 70 percent of
                             less-than-halftime adults received assistance from federal, state, or other
School Costs—Most Often      sources with their postsecondary education or training costs, which are
from Lifetime Learning Tax   estimated to have been, on average, $1,058 for all less-than-halftime adult
Credit and Employer          students in 1999-2000. About one-half of these costs were comprised of
Assistance                   tuition and fees ($480), while the remaining amount was comprised of
                             books, equipment, childcare, and transportation costs.

                             For those less-than-halftime adults who received assistance in 1999-2000,
                             the average amount was $462, or approximately 44 percent of their school
                             costs. Though the Lifetime Learning tax credit was the source of
                             assistance most widely received by less-than-halftime adult students, the
                             average Lifetime Learning tax credit ($74) was significantly smaller than
                             the average Pell Grant award ($465) or the average level of employer
                             support ($784).




                             Page 20                                         GAO-03-905 Federal Student Aid
                            Figure 5: Percent of Less-Than-Halftime Students Receiving Each Type of
                            Assistance, 1999-2000

                               Percentage receiving each type of assistance
                               50
                                        46


                               40




                               30

                                                   23

                               20




                               10
                                                                 5                4
                                                                                               3         2
                                                                                                                        <1
                                 0




                                                                                                                       A
                                               ce
                                          cre g




                                                                id



                                                                                 id




                                                                                              t



                                                                                                     aid
                                        sis er
                                              dit




                                                                                          an




                                                                                                                       WI
                                      tax rnin




                                                            ra




                                                                             la
                                     as ploy
                                           tan




                                                                                         Gr



                                                                                                    te



                                                                                                                  nd
                                                                            na
                                                           he
                                         ea




                                                                                                   Sta
                                                                                         ll
                                      Em




                                                                                                                   a
                                                                           tio
                                                           Ot




                                                                                      Pe
                                  L




                                                                                                                NF
                                                                      titu
                               me




                                                                                                             TA
                               eti




                                                                     Ins
                            Lif




                                      Type of assistance
                            Source: GAO calculations from NPSAS, 1999-2000.

                            Notes: Students may receive more than one source of assistance. Other aid consists chiefly of
                            Montgomery GI Bill assistance. See appendix II for confidence intervals associated with these
                            estimates.


Sources of Assistance       Few adults who enrolled less-than-halftime in 1999-2000 had incomes
Received by Less-Than-      below 150 percent of the federal poverty guideline, and those who did
Halftime Adults Varied by   received the bulk of assistance with their school costs from student
                            financial aid—in contrast to the majority of less-than-halftime adult
Household Income, but       students who had incomes well above federal poverty guidelines and who
Their School Costs and      relied chiefly upon work-related sources of assistance to meet school
Amount of Assistance        costs. Although the sources of assistance received by lower- and higher-
Were Similar                income students were different, both groups had about the same school
                            costs and levels of assistance and, therefore, similar shares of their school
                            costs met through federal, state, or work-related assistance. In 1999-2000,
                            15 percent of less-than-halftime adults had a household income below 150
                            percent of the 1998 federal poverty guideline, while the vast majority of
                            these students had incomes above this level. Less-than-halftime adult
                            students with household incomes below 150 percent of the 1998 federal


                            Page 21                                                                              GAO-03-905 Federal Student Aid
poverty guideline had approximately 43 percent of their estimated $1,121
in school costs met through all forms of assistance, while those with
incomes above 150 percent of the federal poverty guideline had
approximately 44 percent of their estimated $1,048 in costs met through
assistance.

As figure 6 shows, a larger percentage of lower income less-than-halftime
adult students received Pell Grants than did students with incomes above
150 percent of the federal poverty guideline, while a smaller proportion
received work-related assistance, either from their employer or the
Lifetime Learning tax credit.

Figure 6: Proportion of Less-Than-Halftime Adults Who Received Assistance, by
Household Income, 1999-2000

Percentage receiving assistance
60



50               49



40



30      29
                                         25

20
                                                    14

10                              9


                                                             1
 0
     Lifetime Learning          Employer            Pell Grant
          tax credit           assistance
     Type of assistance

               Less-than-halftime adult students with household income at or below 150% of the federal poverty
               guideline
               Less-than-halftime adult students with household income above 150% of the federal poverty guideline

Source: GAO calculations from NPSAS, 1999-2000.

Note: Sample sizes for state, institutional, and other aid do not permit reliable estimates. See
appendix II for confidence intervals associated with these estimates.


Among low-income, less-than-halftime adult students, educational costs
averaged just over $1,100, and about 14 percent of these students received
federal Pell Grants to assist them in meeting these costs. Adults who work


Page 22                                                                 GAO-03-905 Federal Student Aid
                            part-time receive employer financial assistance for enrollment in
                            credential programs less often than those who work fulltime.18 Compared
                            with higher-income less-than-halftime adult students, fewer low-income
                            students worked, and, if they worked, fewer were employed fulltime.
                            Consequently, a smaller percentage of low-income students received
                            employer assistance (9 percent) than did higher-income students (25
                            percent). Finally, about half of these low-income adult students had no
                            federal income tax liability and were, therefore, ineligible to receive a
                            Lifetime Learning tax credit. As a result, an estimated 29 percent of those
                            below 150 percent of the federal poverty guideline received a Lifetime
                            Learning tax credit.

                            While lower-income adult students received about two-thirds of their
                            assistance (66 percent) from federal, state, institutional, and other aid, the
                            opposite was true of higher-income adult students, who received 71
                            percent of their support from work-related sources assistance. In 1999-
                            2000, most adult students (85 percent) had incomes above 150 percent of
                            the federal poverty guideline. According to federal and state financial aid
                            rules, these adult students typically had incomes and assets that were
                            sufficient to meet their postsecondary costs and, therefore, only 1 percent
                            received either federal or state student aid. Most who had incomes above
                            this level were fulltime workers, and a larger share received both
                            employer assistance and Lifetime Learning tax credits than did their
                            lower-income counterparts.


WIA and TANF Assistance     We estimate that less than 1 percent of all less-than-halftime adult students
Was Rarely Received by      received either WIA or TANF assistance with the cost of postsecondary
Less-Than-Halftime Adults   education in 1999-2000. The population of less-than-halftime adult students
                            that received WIA funds for vocational training was too small to reliably
                            estimate the average amount of assistance they received in 1999-2000.

                            Very few less-than-halftime adult students received WIA assistance
                            because the WIA program focuses on employment-related assistance or
                            skills training, and generally does not support extended training of adult
                            students pursuing a postsecondary credential. At some of our visits to
                            postsecondary institutions, school officials informed us that they were
                            unfamiliar with WIA. However, those familiar with the program reported



                            18
                             National Center for Education Statistics, Employer Aid for Postsecondary Education,
                            1999.




                            Page 23                                                GAO-03-905 Federal Student Aid
that very few adult students were WIA recipients, and that the number of
adult students enrolled with assistance from WIA was lower than the
number enrolled with assistance under the previous federal workforce
policy, the Job Training Partnership Act. The time and dollar limits
established by local workforce investment boards may make it difficult for
adult students to use WIA funds for the extended training that may be
required for the completion of a postsecondary vocational credential, even
for those who are enrolled on a fulltime basis. As officials at one 2-year
postsecondary institution reported, many adult students entering
certificate programs needed 1 year of remedial coursework before
beginning their program and were, therefore, unable to complete their
coursework within the 1-year time limit established by the local workforce
investment board.

Less than 1 percent of less-than-halftime adult students received TANF
assistance in 1999-2000, and NPSAS collected no data on the extent to
which TANF funds assisted these students in meeting costs associated
with their training or education. Moreover, school officials at the
institutions we visited were generally unaware of the extent to which adult
students were TANF recipients. One school, however, had created a
program to enable TANF recipients to attend school fulltime. In Maryland,
the Baltimore City Community College and city and state officials
established the School Counts Program, through which selected TANF
recipients who enroll at the community college are provided with advising,
assistance with transportation and childcare expenses, and federal work
study assistance that permits them to maintain a full credit load
throughout the entire calendar year. These supports permit a relatively
large proportion of program participants to complete a certificate or
degree.19




19
 University of Maryland School of Social Work, School Counts I Report, 2000.




Page 24                                                 GAO-03-905 Federal Student Aid
                            Changing how the Pell and Stafford programs treat less-than-halftime
Changing the Pell and       attendance would provide some less-than-halftime students with
Stafford Programs           additional aid, but it would likely increase program costs for the federal
                            government and administrative complexity for postsecondary institutions.
Would Provide More          Proposed changes to the Pell Grant program include allowing, for less-
Students With               than-halftime students, the inclusion of room and board and miscellaneous
                            personal expenses, as is done for fulltime students. Another proposed
Additional Aid, but         change would be to allow less-than-halftime students to participate in the
Result in Increased         Stafford Loan programs. Administrators of postsecondary institutions in
Federal Budget Costs        the four states we visited expressed concern about potential negative
                            consequences of the Stafford loan proposal.
and, Potentially,
Undesirable Effects
for Students and
Institutions
Changes to the Pell Grant   Allowing, for all less-than-halftime students ,20 the inclusion of room and
Program Will Increase       board and miscellaneous personal expenses in their cost of attendance, as
Program Costs—Most          is done for other students, would increase the number of less-than-
                            halftime students who receive a Pell grant and increase Pell award
Often Assisting Students    amounts for those who already receive a grant. We estimate that about
Currently Receiving Pell    13,000 less-than-halftime students who do not receive a Pell award under
Awards                      current law would receive an average award of $630 under this alternative
                            in the 2003-2004 academic year. In addition, about 150,000 less-than-
                            halftime students would receive a Pell Grant award increase of $111 per
                            year in 2003-2004. (See table 4.) The total federal budget cost of changing
                            Pell Grant policy for less-than-halftime students would be approximately
                            $25 million for the 2003-2004 academic year. This cost estimate assumes
                            that adults who are not enrolled in school will not choose to enroll in
                            response to the policy change. If about 35,000 individuals who are not in
                            school respond to this change in policy by enrolling less than halftime, an
                            estimate implied, in part, by some research, there could be an additional
                            federal budget cost of about $10 million in addition to the $25 million
                            associated with already enrolled students. (See app. III.)




                            20
                             The federal financial aid methodology provides that dependent and independent students
                            use the same cost elements in calculating their cost of attendance. Therefore, our analysis
                            assumes that all less-than-halftime students, dependent and independent, would be
                            affected by a change to the cost of attendance.




                            Page 25                                                  GAO-03-905 Federal Student Aid
                            Table 4: Estimated Effects of Changes to Pell Grant Program

                                                              Number of Estimated increase                  Estimated federal 

                                                       students receiving in Pell award under                budgetary cost, 

                             Students affected          new/larger award       alternative law                     2003-2004 

                             Currently enrolled 

                             and no Pell 

                             received, newly 

                             eligible                                 13,000                     $630                $8,190,000
                             Currently enrolled 

                             and receiving Pell, 

                             eligible for larger 

                             Pell                                   150,000                      $111              $16,650,000
                             Total cost                                                                            $24,840,000
                            Source: GAO analysis.

                            Note: Estimate assumes adults who are not in school will not enroll in response to the policy change
                            and that cost of attendance elements for both dependent and independent students would be
                            changed. See appendix I for estimation methodology.


Changes to the Stafford     While current law does not permit less-than-halftime students to
Loan Program Will           participate in the Stafford loan programs, some have proposed that these
Increase Program Costs      students be allowed to participate. This change to the loan program would
                            increase federal subsidy costs21 associated with the Stafford programs.
and May Result in           Moreover, campus administrators anticipate that the change could have
Disadvantages to Students   undesirable effects on postsecondary institutions and on students.
and Institutions
                            Permitting all less-than-halftime students to participate in the Stafford loan
                            programs would increase federal subsidy costs associated with the
                            Stafford loan programs by approximately $113 million in fiscal year 2004.22




                            21
                              For budgetary purposes, loan subsidy cost—the portion of cost paid by the federal
                            government—is calculated for each loan cohort. Subsidy costs represent the estimated
                            lifetime costs, excluding administration costs, to the federal government of FFELP and
                            FDLP loans calculated on a net present value basis. Net present value is the future stream
                            of benefits and costs converted into equivalent values today, using an appropriate discount
                            rate.
                            22
                             The federal financial aid methodology provides that dependent and independent students
                            use the same cost elements in calculating their cost of attendance. Therefore, our analysis
                            assumes that all less-than-halftime students, dependent and independent, would be
                            affected by a change to the cost of attendance.




                            Page 26                                                        GAO-03-905 Federal Student Aid
We estimate that the average unsubsidized Stafford loan23 taken out by
adult students enrolled less-than-halftime would be approximately $680,
while the average subsidized loan would be about $1,200. Federal subsidy
costs in subsequent fiscal years would change depending upon the number
of students enrolled at eligible institutions, loan amounts per student, and
federal subsidy costs per loan dollar.

Table 5: Estimated Effects of Changes to Stafford Loan Programs

                          Expected loan       Estimated number               Estimated federal
    Stafford program            amount             of borrowersa       subsidy cost, 2003-2004b
    Unsubsidized Loan                $680                  550,000                     $34,000,000
    Subsidized Loan                $1,200                1,900,000                     $79,000,000
    Total                                                                            $113,000,000
Source: GAO analysis.
a
Estimate assumes that dependent and independent students are allowed to participate in the
Stafford programs and that all who are eligible borrow. See appendix I for estimation methodology.
b
 Estimated federal subsidy cost is less than estimated loan volume (expected loan amount multiplied
by estimated number of borrowers) because, unlike grants, borrowers must repay loans.


While administrators pointed to several potential benefits of providing
Stafford eligibility for less-than-halftime students, they far more often
pointed to a larger set of disadvantages—for both postsecondary
institutions and student borrowers—that might accompany this change.
Discussing potential benefits of expanding eligibility to include less-than-
halftime students, they noted that changing the Stafford loan program
might permit less-than-halftime students to reduce their reliance on more
costly types of borrowing, or to reduce the extent to which they work to
finance their education. Additionally, some students might prefer—or
better cope with—enrollment as a less-than-halftime student, but are
encouraged by Stafford eligibility rules to take six or more credits. If
eligibility for the program were extended to less-than-halftime students,
this incentive for students to enroll for more credits would be removed.




23
  Stafford loans may be either subsidized or unsubsidized. If the loan is subsidized, the
federal government pays the interest cost of the loan for the time a student is enrolled in
school. If the loan is unsubsidized, the borrower is responsible for paying interest during
the life of the loan. While called “unsubsidized,” the federal government can still incur costs
on such loans, including costs associated with borrowers who default on their loans and,
under the FFELP, costs of making certain interest subsidy payments to lenders.




Page 27                                                        GAO-03-905 Federal Student Aid
Administrators, particularly those at public 2-year postsecondary
institutions, expressed the potential disadvantages associated with
expanding eligibility. They observed that expanding eligibility to less-than-
halftime students might increase their institution's cohort default rate.
Students who do not complete a certificate or degree, research indicates,
are especially likely to default on their loans.24 In light of the low rates of
completion among less-than-halftime students, they reasoned, this
population might be at particular risk of defaulting on Stafford loans.
Institutional eligibility to participate in federal student aid programs is
linked to an institution's cohort default rate, and permitting borrowing by
less-than-halftime students could result in some institutions losing Title IV
eligibility. In addition, changing Stafford eligibility to include borrowers
enrolled less than halftime would, they anticipate, result in a large
expansion in the number of students participating in the Stafford loan
programs, increasing the administrative burden faced by campus financial
aid offices. Furthermore, at some postsecondary institutions, policies on
satisfactory academic progress may need to be revised in response to
changing Stafford eligibility.

Administrators also noted potential disadvantages to less-than-halftime
student borrowers. They expressed concern that Stafford borrowing by
lower-income adults enrolled less than halftime—few of whom might have
a certificate or degree and higher earnings as a result of their enrollment—
might burden these students with unmanageable debt. Allowing less-than-
halftime students to borrow in the Stafford loan programs, they noted,
may also increase the number of students who reach their overall
borrowing limits before the completion of a degree. Finally, they indicated,
changing program eligibility may encourage protracted less-than-halftime
enrollment as a means by which to postpone repayment. Students with
outstanding subsidized Stafford loans must now enter repayment if they
enroll for fewer than six credits. However, if students were permitted to
defer repayment while enrolled for one to five credits, some might choose
to enroll for a few credits each term as a way to delay repayment.




24
  Research on the characteristics of student loan defaulters indicates that current wages
are inversely associated with the probability of default, while withdrawing from school is
positively associated with the probability of default. Research findings are based on
student borrowers who were enrolled halftime or more, and may not be applicable to a
less-than-halftime borrowing population. See, for example, Clearing Accounts: The Causes
of Student Loan Default, EdFund, 2002; State of Student Aid in Texas, TG Research and
Analytical Services, April 2003.




Page 28                                                 GAO-03-905 Federal Student Aid
               There are a variety of formal learning opportunities open to adults, and a
Concluding     range of funding sources that support participation in them. Some sources
Observations   of funding available to adult learners, particularly work-related assistance
               provided by employers or the Lifetime Learning tax credit, permit short-
               term study that does not lead to the completion of a degree or certificate.
               Both employers and employees may benefit as skills, productivity, and
               earnings increase. In contrast to these funding streams, the federal student
               assistance programs authorized under Title IV of the Higher Education Act
               provide assistance for adult learning that takes place in eligible
               postsecondary institutions, and is intended to result in the completion of a
               postsecondary credential: a certificate, associate’s degree, or
               baccalaureate degree. The Higher Education Act’s provisions concerning
               institutional eligibility help to ensure billions of dollars in federal student
               assistance is available only to those institutions that provide students with
               quality education or training worth the time, energy, and money that
               they—and the nation’s taxpayers—invest.25 Requiring that students enroll
               in—and make progress toward—a postsecondary credential ensures that
               the federal investment in Title IV programs is used to support learning that
               is broadly beneficial to the public, rather than students’ recreational or
               leisure activities.

               Some adults who begin postsecondary education on a less than halftime
               basis do not intend to complete a degree, and many others expect to do so,
               but are unable to continue to completion. If less than halftime adults who
               do not complete a credential nonetheless benefit from completing a few
               postsecondary courses,26 then federal policy tools designed to support
               shorter-term and non-credential adult learning—such as tax incentives for
               employer-provided educational assistance and the Lifetime Learning tax
               credit—can better assist these learners than can Title IV programs. The
               potential costs—to the federal government, institutions, and students—of
               proposed changes to the Pell Grant and Stafford Loan programs,
               particularly the latter, may outweigh their potential benefits for less-than-
               halftime adult students. Permitting less-than-halftime students to


               25
                Higher Education: Ensuring Quality Education From Proprietary Institutions,
               GAO/T-HEHS-96-158.
               26
                 There is not a consensus among those who study the economic returns to education or
               training whether the completion of a credential results in additional economic gains to
               students. See, for example, Labor Market Returns to Two- and Four-Year College: Is a
               Credit Really a Credit and Do Degrees Matter? Kane, T.J., and Rouse, C.E. (1993); Credits
               and Attainment: Returns to Postsecondary Education Ten Years After High School,
               NCES, 2001-168.




               Page 29                                                 GAO-03-905 Federal Student Aid
                    participate in the Stafford student loan programs would provide a new
                    source of borrowing for these students, but it may be accompanied by
                    unintended and unwanted consequences, including increasing the volume
                    of loans at risk of default. Allowing less-than-halftime students to include
                    room, board, and personal expenses in calculating their Pell Grant cost of
                    attendance would most often assist less-than-halftime students who are
                    currently receiving a Pell grant, providing them with an estimated $100
                    annual increase in assistance, rather than providing a widely available
                    source of assistance to adults who are not currently receiving Pell Grants.


                    In written comments on our draft report, Education stated that it 

Agency Comments 
   appreciated our thorough review and examination of the financial, and 

                    other, impediments that are often unique to adult learners as they pursue 

                    postsecondary education and training opportunities and found useful the 

                    concerns raised by postsecondary institutions. In addition, Education 

                    noted that the report would complement a recent report of its own and 

                    that it would assist Education in achieving one of its departmental 

                    strategic goals. Education also provided technical comments, which we 

                    incorporated where appropriate. Education’s written comments appear in

                    appendix IV.


                    As agreed with your offices, unless you publicly announce its contents 

                    earlier, we plan no further distribution of this report until 30 days from its 

                    date. At that time we will send copies to the Secretary of Education and

                    other interested parties. We will also make copies available to others on 

                    request. In addition, the report will be available at no charge on the GAO 

                    Web site at http://www.gao.gov. 


                    If you or your staff have any questions or wish to discuss this material 

                    further, please call me at (202) 512-8403, or Jeff Appel at (202) 512-9915. 

                    Other contacts and staff acknowledgments are listed in appendix V. 





                    Cornelia M. Ashby 

                    Director, Education, Workforce, 

                     and Income Security Issues 





                    Page 30                                           GAO-03-905 Federal Student Aid
Appendix I: Objectives, Scope, and
Methodology

              We were asked to determine: (1) the extent to which adults enroll less
              than halftime, the characteristics and factors associated with less-than-
              halftime enrollment, and the rates of completion among these students;
              (2) the extent to which adult students enrolled less than halftime receive
              federal, state, and other assistance to help them meet the costs of
              postsecondary education; and (3) the implications, including the
              budgetary impact, of changing the Pell Grant Program to allow room and
              board and miscellaneous personal expenses to be considered in the
              calculation of grant amounts for less-than-halftime students and changing
              the Stafford loan programs to permit participation by less-than-halftime
              students. For the purposes of this report, adult students are those who are
              24 years or older.

              In designing our study, we reviewed data and literature pertaining to
              financial aid for adult students and part-time students, and we analyzed
              focus group findings examining the barriers to enrollment and persistence
              faced by low-income adults. We interviewed officials at the Department of
              Education, researchers, and representatives of higher education
              organizations, such as the American Association of Community Colleges
              and the National Association of Student Financial Administrators; and we
              interviewed administrators of two institutions of higher education not
              included in our four sample states: the City University of New York and
              Kaplan College. We also reviewed studies and surveys of employer-
              provided educational assistance.

              To determine the extent of less-than-halftime enrollment among adult
              students and the characteristics, completion rates, and financial support
              they received, we analyzed national data and visited selected
              postsecondary institutions. We analyzed two datasets created by the
              National Center for Education Statistics: the 1999-2000 National
              Postsecondary Student Aid Study (NPSAS), and the 2001 Beginning
              Postsecondary Students Study (BPS). Both datasets—NPSAS and BPS—
              contained a nationally representative sample of students enrolled at
              postsecondary institutions participating in federal student aid programs
              and provided information on financial assistance they received, hours they
              worked, and a wide range of other characteristics. We computed estimates
              of the Lifetime Learning credits received by less-than-halftime adult
              students using data from NPSAS. NPSAS data are collected at the
              individual student level, and cannot be aggregated into families or linked




              Page 31                                        GAO-03-905 Federal Student Aid
Appendix I: Objectives, Scope, and
Methodology




to tax filing status. Therefore, our analysis treated individual students as if
they were credit claimants and recipients.1

To assess the reliability of the NPSAS and BPS sample data, we reviewed
existing information about the sample, including the documentation
produced by NCES, and performed electronic testing of the required data
elements to detect obvious problems in accuracy and completeness. We
determined that the NPSAS and BPS data were sufficiently reliable for this
report. Because both surveys are samples of a larger student population,
there is some sampling error associated with them. Sampling errors are
often represented as a 95-percent confidence interval: an interval that
95 times out of 100 will contain the true population value. The upper and
lower bounds of the 95-percent confidence intervals for each estimate are
presented in the tables in appendix II.

National datasets provide valuable but limited information. For example,
NPSAS is a cross-sectional rather than longitudinal study, and it, therefore,
cannot be used to identify the duration for which students enrolled on a
less-than-halftime basis. Some student characteristics or factors that may
be associated with less-than-halftime enrollment, such as course
scheduling problems, are not contained in these datasets. Consequently,
we augmented national datasets with information collected from
postsecondary institutions.

We interviewed school administrators from 19 postsecondary institutions,
including public and private schools and 2-year and 4-year institutions.
These institutions were located in four states—California, Maryland, Ohio,
and Virginia—in which the costs for resident tuition and fees at public
2-year institutions and the amount of available state aid varied.2 For
example, in California the cost for resident 2-year tuition was lower than
for all other states ($330), but no state aid is available to students pursuing
their postsecondary credentials on a less-than-halftime basis. Maryland
ranked 9th among states in tuition and fees at public 2-year institutions
($2,564) and, like California, did not have state financial aid available to



1
 Additional details of the methodology are described in appendix I of U.S. General
Accounting Office, Student Aid and Tax Benefits: Better Research and Guidance Will
Facilitate Comparison of Effectiveness and Student Use, GAO-02-751, Washington, D.C.:
Sept. 13, 2002.
2
 Two-year tuition and fees were selected because nearly three out of four less-than-halftime
adult students are enrolled at public 2-year institutions.




Page 32                                                  GAO-03-905 Federal Student Aid
Appendix I: Objectives, Scope, and
Methodology




less-than-halftime students. Both Virginia and Ohio had state aid available
for less-than-halftime students; however, Virginia’s 2-year tuition ($1,304)
was lower than that of Ohio ($2,300).

Within each state, we contacted three to six institutions (see table 1).
Because most less-than-halftime adult students are enrolled at 2-year
public institutions, we visited more of this type than other postsecondary
schools. In addition, we selected institutions with large proportions of
adult students in their overall student body. We met with a range of school
administrators at these institutions, including financial aid officers,
student affairs officers, directors of institutional research, and other
administrative officers. We discussed with them their less-than-halftime
adult student population and the implications of changing the Pell Grant
and Stafford Loan Programs. We also collected institutional data on spells
on less than halftime enrollment among students graduating from 10 of the
19 we visited. We solicited information from each institutional research
officer about the reliability of these data and reviewed the data for obvious
problems of accuracy and completeness. Because these are not samples of
a larger student population, there are no confidence intervals associated
with them.




Page 33                                         GAO-03-905 Federal Student Aid
                      Appendix I: Objectives, Scope, and
                      Methodology




                      Table 6: Site Visit States and Institutions Contacted

                       State                    Name (type)
                       California 	             City College of San Francisco, San Francisco (2-year public)
                                                Contra Costa College, San Pablo (2-year public)
                                                Holy Names College, Oakland (4-year private)
                                                Sierra College, Rocklin (2-year public)
                                                San Francisco State University, San Francisco (4-year public)
                       Maryland	                Allegany College, Cumberland (2-year public)
                                                Baltimore City Community College, Baltimore (2-year public)
                                                Montgomery College, Rockville (2-year public)
                       Ohio 	                   Capital University, Columbus (4-year private)
                                                Cleveland State University, Cleveland (4-year public)
                                                Columbus State Community College, Columbus (2-year public)
                                                Cuyahoga Community College, Highland Hills (2-year public)
                                                University of Akron Wayne College, Orrville (2- and 4-year
                                                public)
                       Virginia 	               Germanna Community College, Fredericksburg (2-year public)
                                                Northern Virginia Community College, Annandale (2-year
                                                public)
                                                Old Dominion University, Norfolk (4-year public)
                                                Tidewater Community College, Norfolk (2-year public)
                                                Applied Career Training, Arlington (Proprietary)
                                                Stratford University, Falls Church (Proprietary)
                      Source: GAO.




Cost Estimation
Methodology

Pell Grant Analysis   The following steps were taken to estimate the additional federal budget
                      costs associated with permitting degree-seeking students enrolled less
                      than halftime to include room, board, and miscellaneous personal
                      expenses in calculating their cost of attendance (alternative COA) for the
                      purpose of receiving a Pell Grant.

                      Using the 1999-2000 National Postsecondary Student Aid Study, we
                      estimated a Pell Grant for all students in the sample who were less-than-
                      halftime students seeking a certificate or undergraduate degree. We
                      estimated Pell Grant awards under the current law, and under an
                      alternative COA for the 1999-2000 school year. The estimated total federal
                      costs under current law and the alternative COA were calculated by
                      summing the estimated individual grants. The federal cost associated with
                      changing the Pell Grant policy was calculated as the difference between
                      the estimated federal cost under current law and the estimated federal


                      Page 34                                                 GAO-03-905 Federal Student Aid
                         Appendix I: Objectives, Scope, and
                         Methodology




                         cost under the alternative COA. Federal costs for school year 1999-2000
                         were projected to school year 2003-04 by assuming that the ratio of these
                         estimated federal costs to the total cost of the Pell grant program in school
                         year 2003-04 were the same as in school year 1999-2000. To estimate the
                         average Pell grant in school year 2003-04, we projected the estimated
                         number of Pell grant recipients in school year 1999-2000 who are less than
                         halftime students seeking a certificate or undergraduate degree to school
                         year 2003-04. We did this by assuming that the proportion of this estimated
                         number of recipients to the total number of recipients in school year 1999-
                         2000 equals this proportion in school year 2003-04. The average Pell Grant
                         in school year 2003-04 equals the estimated federal cost in school year
                         2003-04 divided by the estimated number of recipients in school year 2003-
                         04. Federal costs other than the amounts of the Pell Grants were not
                         considered in our analysis.

                         Our estimate of students’ Pell Grant awards is based upon the federal
                         needs analysis methodology for calculating the Pell Grant and the Regular
                         Disbursement Schedule for Determining Less than Halftime Awards (FSA
                         Handbook 1999-2000, Pell Reference).3 If the student did not apply for
                         financial aid, or the institution they attended did not have any Pell
                         recipients in 1999-2000, we assumed that the student’s estimated Pell
                         Grant to be $0. The same steps were taken in estimating a student’s Pell
                         Grant under the alternative COA except that the Pell cost of attendance
                         was estimated to include room and board and personal expenses. To
                         receive a Pell Grant under the alternative COA, the individual must have
                         applied for financial aid. Inherent in this assumption is that an alternative
                         Pell cost of attendance will not affect students’ decisions to apply for
                         financial aid.

Stafford Loan Analysis   We undertook the following analysis to estimate the federal subsidy cost
                         of allowing degree-seeking students who enroll less than halftime to be
                         eligible for subsidized and unsubsidized Stafford loans.

                         Using the 1999-2000 National Postsecondary Student Aid Study, we
                         estimated the Stafford subsidized and unsubsidized loans for all students
                         in the sample who were less-than-halftime students seeking a certificate or
                         undergraduate degree would receive if the law were changed to allow less
                         than halftime students to receive these loans. The total loan volumes



                         3
                          The estimated cost of attendance and the expected family contribution were rounded to
                         the middle of the ranges reported in the Disbursement Schedule.




                         Page 35                                                GAO-03-905 Federal Student Aid
Appendix I: Objectives, Scope, and
Methodology




summed and weighted over all students by FFELP/FDLP, school type, and
class year were projected from school year 1999-2000 to school year
2003-04 by assuming that the proportion of this estimated loan volume to
the total loan volume in fiscal year 1999-2000 would equal the proportion
of the estimated loan volume in school year 2003-04 to the total loan
volume in FY 2003-04. The federal cost of this policy change equals the
projected loan volume times the applicable subsidy rate in 2003-04,
summed over FFELP/FDLP, school type, and class year.4 Federal costs
other than the subsidy costs of the loans were not considered.

To estimate the average loan awards in school year 2003-04, we projected
the estimated number of Stafford subsidized and unsubsidized recipients
in school year 1999-2000 who are less than halftime students seeking a
certificate or undergraduate degree to school year 2003-04. We did this by
assuming that the proportion of this estimated number of recipients to the
total number of recipients in fiscal year 1999-2000 would equal the
proportion of recipients in school year 2003-04 to the total number of
recipients in fiscal year 2003-04. The average loan award in school year
2003-04 equals the estimated loan volume in school year 2003-04 divided
by the estimated number of recipients in school year 2003-04.

Our estimate of students’ subsidized loan awards is based upon the federal
needs analysis methodology for subsidized Stafford loans. For each
student we estimated a cost of attendance (minus room and board and
personal expenses) for the period enrolled in school (loan COA). We
calculated and prorated the expected family contribution for the number
of months the student attended school. We also calculated each student’s
estimated financial assistance, adding federal, state, private, and
institutional aid. The estimated subsidized loan award was calculated as
the loan COA, minus the prorated expected family contribution and
estimated financial assistance. Estimated subsidized loans, if above the
loan limit level, were set at the maximum amount allowed by law. For the
students attending institutions for which no Stafford loan recipients were
reported, we assumed that estimated subsidized loan was $0.


4
 Subsidy rates represent the federal portion of non-administrative costs—principally
interest subsidies and defaults—associated with each borrowed dollar over the life of the
loan. Subsidy rates are estimated by Education for FFELP and FDLP by loan type
(subsidized and unsubsidized), borrower characteristics (class year), and by institution
attended (2 year, 4 year, and proprietary). While called “unsubsidized,” the federal
government can still incur costs on such loans, including costs associated with borrowers
who default on their loans and, under the FFELP, costs of making certain interest subsidy
payments to lenders.




Page 36                                                  GAO-03-905 Federal Student Aid
Appendix I: Objectives, Scope, and
Methodology




For each student in the NPSAS sample, we also estimated an unsubsidized
award. This amount was calculated as the prorated expected family
contribution plus unmet need. Unmet need was estimated to be the loan
COA, minus prorated expected family contribution and federal, state,
private, and institutional aid. If the estimated unsubsidized award was
greater than the loan limit minus the estimated subsidized award, we
replaced the estimated unsubsidized award with the loan limit minus the
estimated subsidized award. For the students attending institutions for
which no Stafford loan recipients were reported, we assumed that
estimated unsubsidized loans was $0.

All students were assumed to borrow the Stafford loan amounts for which
they qualify. Inherent in this assumption is that all students who are
eligible will apply for Stafford loans.

Education officials provided information on federal subsidy rates for
Stafford loans, budget estimates for the Pell Grant program, and reviewed
our estimation methodology.




Page 37                                       GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals

              Tables 7-31 contain the sample-based estimates and associated confidence
              intervals for our reported results.

              Table 7: Age of All Undergraduate Students, 1999-2000

                                                                                         Lower and upper bounds of 95
                                                                          Percent          percent confidence interval
               24 and older (adult)                                         42.87                            42.17-43.58
               23 and under (non-adult)                                     57.13                            56.42-57.83
              Source: GAO calculations based upon NPSAS 1999-2000 data.



              Table 8: Age of All Adult Undergraduate Students, 1999-2000

                                                                                         Lower and upper bounds of 95
                                                                          Percent          percent confidence interval
               24-30                                                        43.29                            42.13-44.45
               31-40                                                        30.80                            29.70-31.90
               41 and older                                                 25.91                            24.86-26.97
              Source: GAO calculations based upon NPSAS 1999-2000 data.



              Table 9: Differences Between Students 18-23 and Adult Students (24 or older) 1999-
              2000

                                                            Lower and
                                                        upper bounds
                                                         of 95 percent                          Lower and upper bounds
                                           Adult           confidence               Non-adult   of 95 percent confidence
                                        students               interval              students                    interval
               Work fulltime                 59.33          58.18-60.48                 24.12                23.26-24.98
               Married                       49.68          48.51-50.86                  4.53                   4.14-4.94
               Have
               dependents                    54.96          53.76-56.15                  7.87                   7.33-8.43
               GED/no
               diploma                         9.36           8.66-10.09                 3.60                   3.21-4.02
              Source: GAO calculations based upon NPSAS 1999-2000 data.




              Page 38                                                                   GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 10: Type of Institution Attended by Adult Students, 1999-2000

                                                                    Lower and upper bounds of 95
                                                      Percent         percent confidence interval
 Public 4-year                                              22.44                      21.78-23.10
 Private 4-year                                             10.33                        9.90-10.75
 Public 2 year                                              55.51                      54.62-56.40
 Private-for profit                                          6.47                         6.18-6.77
 Multiple institutions                                       5.26                         4.90-5.64
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 11: Type of Degree Sought by Adult Undergraduates, 1999-2000

                                                                     Lower and upper bounds of 95
                                                      Percent          percent confidence interval
 Certificate                                                13.77                       13.01-14.52
 Associate                                                  39.80                       38.69-40.92
 Bachelor                                                   27.97                       27.21-28.68
 No degree                                                   6.97                         6.32-7.67
 Transition                                                 11.52                       10.77-12.26
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 12: Amount of Assistance Received by All Adult Students, 1999-2000

                                                                    Lower and upper bounds of 95
                                               Total dollars          percent confidence interval
 Federal title IV
 grants                                     $3,320,761,399           $3,174,289,967-$3,467,232,830
 Federal title IV loans                     $8,526,918,039           $8,181,580,018-$8,872,256,059
 Employer assistance                        $1,280,758,192           $1,188,008,227-$1,373,508,157
 State aid                                     $975,120,393            $900,963,408-$1,049,277,377
 Institutional aid                             $940,596,062            $855,535,763-$1,025,656,360
 Veterans assistance                        $1,036,349,868             $902,790,140-$1,169,909,595
 WIA                                           $274,756,812             $221,029,425-$328,484,198
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 39                                                             GAO-03-905 Federal Student Aid
                                                            Appendix II: Estimates and Associated
                                                            Confidence Intervals




                                                            Table 13: Enrollment Intensity among Adult Undergraduates, 1999-2000

                                                                                                                                      Lower and upper bounds of 95
                                                                                                                  Percent               percent confidence interval
                                                             Less than halftime                                         33.16                            32.01-34.30
                                                             Halftime                                                   25.98                            24.90-26.99
                                                             Fulltime                                                   30.48                            29.54-31.42
                                                             Mixed                                                       9.90                             9.22-10.60
                                                            Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 14: Differences between Less Than Halftime, Halftime, and Fulltime Adult Students

                                            Lower and upper                     One-half or Lower and upper
                                               bounds of 95                          three-    bounds of 95
                                Less-than-          percent                    quarter-time         percent                                        Lower and upper
                             halftime adult      confidence                           adult      confidence                     Fulltime adult bounds of 95 percent
                                   students         interval                      students          interval                          students   confidence interval
 Median age                                   37                   36-38                     32                     31-32               28.00            28.00-29.00
 Percent working 

 fulltime                                 77.22             75.25-79.19                  69.52             67.31-71.72                  33.76            32.05-35.48

 Median

 household 

 income (dollars)                       42,000          41,000-45,000                   31,000          30,000-33,000                  18,000         17,000-19,000

 Percent married                          57.42             55.12-59.72                  50.23             47.86-52.61                  42.10            40.33-43.86
 Percent With 

 dependent                                57.34             54.98-59.69                  56.95             54.55-59.34                  52.04            50.21-53.86

 Percent at 2-year 

 institution                              73.43             71.89-74.97                  57.61             55.53-59.69                  35.37            33.57-37.17

Source: GAO calculations based upon NPSAS 1999-2000 data.




                                                            Page 40                                                                  GAO-03-905 Federal Student Aid
                                                            Appendix II: Estimates and Associated
                                                            Confidence Intervals




Table 15: Type of Institution At Which Adult Students Enrolled, 1999-2000

                                                      Lower and upper                                           Lower and                        Lower and upper
                                                         bounds of 95                                       upper bounds                            bounds of 95
                                  Less-than-                  percent                                        of 95 percent                               percent
                               halftime adult              confidence             Halftime adult               confidence      Full-time adult        confidence
                                     students                 interval                  students                   interval           students           interval
 Public 4-year                             14.81              13.66-15.96                      23.03            21.43-24.62             28.71         27.34-30.07
 Private 4-year                              7.24                6.47-8.07                     10.38             9.36-11.46             13.36         12.45-14.26
 Public 2 year                             73.43              71.89-74.97                      57.61            55.53-59.69             35.37         33.57-37.17
 Private-for profit                          1.01                0.80-1.26                      3.37               2.89-3.90            16.09         15.18-17.01
 Multiple
 institutions                                3.51                2.95-4.14                      5.62               4.88-6.44             6.47           5.81-7.19
Source: GAO calculations based upon NPSAS 1999-2000 data.



                                                            Table 16: Estimated Costs for Less Than Halftime Adult Students, 1999-2000

                                                                                               Total dollars             Lower and upper bounds of 95 percent
                                                                                                     (mean)                                confidence interval
                                                             Total costs                            $1058.47                                     $997.02-$1119.93
                                                             Tuition                                  $480.19                                     $455.74-$504.65
                                                             Books                                    $225.17                                     $208.41-$241.92
                                                             Other                                    $227.10                                     $198.20-$256.01
                                                             Child care                               $147.90                                     $107.80-$188.01
                                                             Transportation                           $885.43                                    $757.37-$1013.49
                                                            Source: GAO calculations based upon NPSAS 1999-2000 data.



                                                            Table 17: Percent of Costs Covered by All Sources of Assistance, 1999-2000

                                                                                                            Percent of costs
                                                                                                                 covered by
                                                                                                              assistance, all     Lower and upper bounds of 95
                                                                                                                    sources         percent confidence interval
                                                             At or below 150 percent of the
                                                             poverty guideline                                           42.93                        28.66-57.20
                                                             Above 150 percent of the
                                                             poverty guideline                                           43.04                        37.57-48.51
                                                            Source: GAO calculations based upon NPSAS 1999-2000 data.




                                                            Page 41                                                              GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 18: Mean Assistance Received by Less Than Halftime Students, 1999-2000

                                                                       Lower and upper bounds of 95
                                                   Mean amount           percent confidence interval
 Total aid                                                  $462.12                    $411.53-512.71
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 19: Mean Amount of Assistance Received by Less Than Halftime Students,
By Source, 1999-2000

                                                                       Lower and upper bounds of 95
                                                   Mean Amount           percent confidence interval
 Pell                                                        $465.01                   $433.45-496.58
 State aid                                                   $474.72                   $330.01-619.43
 Employer aid                                                $784.09                   $695.50-872.68
 Lifetime Learning tax credit                                 $73.79                     $67.97-79.61
 Institutional aid                                           $631.77                   $478.45-785.10
 Other Aid                                                  $1251.83                  $802.00-1701.66
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 20: Type of Aid Received by Less Than Halftime Students, 1999-2000

                                                                       Lower and upper bounds of 95
                                                            Percent      percent confidence interval
 Pell                                                           3.20                         2.49-4.04
 State aid                                                      1.73                         1.13-2.54
 Employer aid                                                  23.08                      21.20-24.95
 Lifetime Learning tax credit                                  46.45                      44.13-48.77
 Institutional aid                                              3.67                         2.86-4.64
 Vocational aid                                                 0.37                         0.13-0.84
 Other aid                                                      5.06                         4.08-6.20
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 42                                                                GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 21: Percent Receiving Pell Grants, by Income, 1999-2000

                                                 Percent Received Lower and upper bounds of 95
                                                        Pell Grant  percent confidence interval
 At or below 150 percent of the
 poverty guideline                                          13.74                        9.94-18.32
 Above 150 percent of the
 poverty guideline                                           1.41                         0.81-2.27
 Total                                                       3.20                         2.49-4.04
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 22: Percent Receiving State Aid, by Income, 1999-2000

                                                  Percent received Lower and upper bounds of 95
                                                          state aid  percent confidence interval
 At or below 150 percent of the
 poverty guideline                                           4.27                        0.00-43.07
 Above 150 percent of the
 poverty guideline                                           1.30                         0.72-2.16
 Total                                                       1.73                         1.13-2.54
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 23: Percent Receiving Employer Aid, by Income, 1999-2000

                                                  Percent received Lower and upper bounds of 95
                                                     employer aid    percent confidence interval
 At or below 150 percent of the
 poverty guideline                                           9.43                        0.04-53.11
 Above 150 percent of the
 poverty guideline                                          25.40                      23.30-27.49
 Total                                                      23.08                      21.20-24.95
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 43                                                             GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 24: Percent Receiving Lifetime Learning Tax Credit, By Income, 1999-2000

                                                 Percent received
                                            Lifetime Learning tax Lower and upper bounds of 95
                                                            credit  percent confidence interval
 At or below 150 percent of
 the poverty guideline                                       29.38                      22.74-36.72
 Above 150 percent of the
 poverty guideline                                           49.35                      46.85-51.86
 Total                                                       46.45                      44.13-48.77
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 25: Percent Receiving Institutional Aid, by Income, 1999-2000

                                                  Percent received Lower and upper bounds of 95
                                                   institutional aid percent confidence interval
 At or below 150 percent of
 the poverty guideline                                        7.11                        0.00-51.59
 Above 150 percent of the
 poverty guideline                                            3.09                         2.30-4.05
 Total                                                        3.67                         2.86-4.64
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 26: Percent Receiving Other Aid, by Income, 1999-2000

                                              Percent received       Lower and upper bounds of 95
                                                     other aid         percent confidence interval
 At or below 150 percent of
 the poverty guideline                                      6.03                          1.70-14.61
 Above 150 percent of the
 poverty guideline                                          4.90                           3.83-6.16
 Total                                                      5.06                           4.08-6.20
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 44                                                              GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 27: Percent of Less Than Halftime Adults below 150 Percent of 1998 Federal
Poverty Guideline, 1999-2000

                           Percent at or               Lower and                              Lower and
                             below 150             upper bounds          Percent above    upper bounds
                          percent of the            of 95 percent        150 percent of    of 95 percent
                                poverty               confidence            the poverty      confidence
                              guideline                   interval            guideline          interval
 Less-than-
 halftime adults                      14.52            12.90-16.26                85.48     83.84-87.12
Source: GAO calculations based upon NPSAS 1999-2000 data.



Table 28: Type of Aid Received by Less Than Halftime Students, by Income, 1999-
2000

                             Percent at or             Lower and                              Lower and
                               below 150           upper bounds          Percent above    upper bounds
                               percent of           of 95 percent        150 percent of    of 95 percent
                              the poverty             confidence            the poverty      confidence
                                guideline                 interval            guideline          interval
 Pell                                   13.74               9.94-18.32             1.41        0.81-2.27
 State aid                               4.27               0.00-43.07             1.30        0.72-2.16
 Employer aid                            9.43               0.04-53.11           25.40      23.30-27.49
 Lifetime Learning
 tax credit                             29.38          22.74-36.72               49.35      46.85-51.86
 Institutional aid                       7.11               0.00-51.59             3.09        2.30-4.05
 Other aid                               6.03               1.70-14.61             4.90        3.83-6.16
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 45                                                                  GAO-03-905 Federal Student Aid
                                                            Appendix II: Estimates and Associated
                                                            Confidence Intervals




Table 29: Average Costs and Amount of Aid Received by Less Than Half-time Students, by Income, 1999-2000

                                      Amount for students at                     Lower and upper                   Amount for students             Lower and upper
                                      or below 150 percent of                bounds of 95 percent                 above 150 percent of         bounds of 95 percent
                                        the poverty guideline                  confidence interval                the poverty guideline          confidence interval
 Average costs                                              $1120.84               $940.32-$1301.37                                $1047.88        $982.68-$1113.08
 Total Aid                                                   $478.32                 $336.31-$620.33                                $459.90         $405.72-$514.08
 Pell                                                        $471.97                 $428.69-$515.24                                $453.49         $409.99-$497.00
 State aid                                                   $582.93                 $262.14-$903.72                                $414.40         $285.94-$542.85
 Employer assistance                                         $789.82               $185.48-$1394.16                                 $783.73         $697.51-$869.95
 Lifetime Learning tax
 credit                                                       $67.99                     $51.91-$84.06                               $74.38           $68.16-$80.60
 Institutional aid                                           $336.53                 $193.93-$479.14                                $747.19         $546.71-$947.66
Source: GAO calculations based upon NPSAS 1999-2000 data.



                                                            Table 30: Grade Point Average of Adult Undergraduates, 1999-2000

                                                                                                Percent with GPA of                   Lower and upper bounds of 95
                                                                                                         C or lower                     percent confidence interval
                                                             Less-Than-Halftime
                                                             Adult                                                      17.11                           15.37-18.97
                                                             All Other adult
                                                             Students                                                   10.22                             9.41-11.04
                                                            Source: GAO calculations based upon NPSAS 1999-2000 data.



                                                            Table 31: Degree Or Certificate Expectation Among Adults Who Enrolled Less Than
                                                            Halftime During First Year

                                                                                                                                      Lower and upper bounds of 95
                                                                                                                         Percent        percent confidence interval
                                                             Expect to earn certificate or 

                                                             degree                                                        75.25                        66.23-84.27

                                                             Do not expect to earn 

                                                             certificate or degree                                         24.75                        15.73-33.77

                                                            Source: GAO calculations based upon BPS 2001 data.




                                                            Page 46                                                                  GAO-03-905 Federal Student Aid
Appendix II: Estimates and Associated
Confidence Intervals




Table 32: National 6-Year Completion Rate Among Adult Undergraduates With A
Degree Or Certificate Expectation

                                           Percent who did not
                                            receive a degree or
                                          certificate and are no          Lower and upper bounds of 95
                                                 longer enrolled            percent confidence interval
 Enrolled in first year as 

 less-than-halftime student                                     66.39                        54.77-78.01

Source: GAO calculations based upon BPS 2001 data.



Table 33: Household Income Distribution of Adult Students, 1999-2000

                                        Less Than Halftime                       Halftime or More
                                           Lower and upper                             Lower and upper
                                              bounds of 95                                bounds of 95
                                                   percent                                     percent
                                                confidence                                  confidence
                                   Percent         interval                 Percent            interval
 $0-9,999                               6.78                  5.61-8.10         20.4         19.36-21.44
 $10-$19,999                           10.69                 9.27-12.26        22.68         21.54-23.82
 $20-$29,999                           15.09                13.41-16.89        17.86         16.80-18.92
 $30-$39,999                           15.93                14.22-17.76        11.48         10.60-12.36
 $40-$49,999                           11.13                 9.70-12.68          8.2           7.44-8.96
 $50-$59,999                           11.13                 9.72-12.68         5.59           4.96-6.22
 $60-$69,999                            9.29                 7.96-10.76         4.57           4.02-5.12
 $70-$79,999                            5.90                  4.79-7.16         3.28           2.79-3.77
 $80,000 and above                     14.07                12.52-15.73         5.95           5.30-6.60
Source: GAO calculations based upon NPSAS 1999-2000 data.




Page 47                                                                   GAO-03-905 Federal Student Aid
Appendix III: Budgetary Impact of Possible
Behavioral Response to Cost of Attendance
Changes in the Pell Program
              The policy change in the Pell Grant Program we considered was changing
              the cost of attendance calculation for less-than-halftime students so that it
              does not exclude room, board and personal expenses. This policy change
              would increase the number of people who are qualified to receive an
              award, and it would increase the size of the award for those who are
              already qualified to receive an award under current law.

              This policy change may cause people to change their postsecondary
              enrollment behavior. Specifically, some people who are not enrolled in
              postsecondary education may choose to enroll less than halftime in
              response to the policy change. Students who are already enrolled less than
              halftime in postsecondary education are unlikely to change their
              enrollment in response to the policy change.

              As Seftor and Turner1 note, there is no consensus within the economic
              literature on the effect of Pell Grants on enrollment. For example, Hansen2
              and Kane3 found that Pell Grants have no effect on enrollment. However,
              they found that Pell Grant Program does affect the enrollment behavior of
              older, nontraditional students. Since the policy changes we consider are
              specific to less-than-halftime students and over 80 percent of less-than-
              halftime students are independents, the Seftor and Turner findings appear
              to be more applicable to this analysis. Seftor and Turner estimated price
              elasticities that fall in the range of –0.34 to -0.14.

              To estimate the possible behavioral response to a change in Pell Grant
              policy, we applied a price elasticity in the middle of those identified by
              Seftor and Turner (–0.24) to the less than halftime Pell award amounts
              estimated in this study.4 We assumed that changes to the Pell Grant cost of
              attendance methodology, if adopted, would be applied to the cost of
              attendance for both dependent and independent students enrolled on a



              1
              Neil S. Seftor and Sarah E. Turner, “Back to School: Federal Student Aid Policy and Adult
              College Enrollment.” The Journal of Human Resources 37 (2002): 336-352.
              2
              W. Lee Hansen, “Impact of Student Financial Aid Access.” In The Crisis in Higher
              Education, ed. Joseph Fromkin, 1983. New York: Academy of Sciences.
              3
               Thomas J. Kane, “College Entry by Blacks Since 1970: The Role of College Costs, Family
              Background, and the Returns to Education.” Journal of Political Economy, 102(5), 1994;
              “Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote
              Access to College?” NBER Working Paper 5164, 1995.
              4
               A price elasticity of –0.24 implies that a 1% decrease in college costs would increase
              enrollment by 0.24%




              Page 48                                                    GAO-03-905 Federal Student Aid
     Appendix III: Budgetary Impact of Possible
     Behavioral Response to Cost of Attendance
     Changes in the Pell Program




     less than halftime basis. Therefore, in calculating the possible behavioral
     response we applied these estimated Pell Grant awards and price
     elasticities to the population of all persons 18-35 who were not enrolled in
     school and who had not earned a postsecondary credential.5 On this basis,
     we estimate that the Pell Grant policy change will cause about 35,000
     people between the ages of 18 and 35 who are not currently enrolled in
     school and who do not currently have an undergraduate degree to enroll
     less than halftime. This conclusion was reached based upon the following
     calculations:

•	   We found that the Pell Grant policy change would increase the average
     Pell Grant award from $0 to $630 for 0.63 percent (12,679/2,007,542) of the
     less-than-halftime student population, increase the average Pell Grant
     award $111 for 7.46 percent (149,731/2,007,542) of the less-than-halftime
     student population, and have no effect on the Pell Grant award for the rest
     of the student population.

•	   Of the 33 million people aged 18-35 who are not enrolled in school and
     without a undergraduate degree, we assumed that only 18 percent of them
     would consider going to school less than halftime: the same proportion of
     the undergraduate population currently enrolled on a less than halftime
     basis. This is the population who may change their enrollment behavior
     because of the policy change.

•	   Of that population, we assumed that 0.63 percent of them would have an
     increase in their Pell Grant award of $630 and 7.5 percent of them would
     have an increase in their Pell Grant award of $111.

•    Using the average cost of school when attending less than halftime of
     $500,6 this suggests that there would be an additional 35,053 people
     ([33,000,000 x 0.18 x 0.0063 x 630/500 x 0.24]+ [33,000,000 x 0.18 x 0.075 x
     111/500 x 0.24]) enrolling in school less than halftime in response to the
     policy change.




     5
      Estimates of the size of this population were obtained from the National Household
     Education Surveys Program, Adult Education and Lifelong Learning Survey, 2001. Adults
     older than 35 were not included in the population, since they were assumed to be
     significantly less likely to enroll in response to changes in grant assistance.
     6
      To be consistent with the Turner and Seftor methodology, we assumed that students
     attended 4-year colleges, and we included only tuition and fees in the definition of cost.




     Page 49                                                    GAO-03-905 Federal Student Aid
     Appendix III: Budgetary Impact of Possible
     Behavioral Response to Cost of Attendance
     Changes in the Pell Program




•	   This enrollment response would cost the federal government $9,764,063
     ([33,000,000 x 0.18 x 0.0063 x 630/500 x 0.24] x $630+ [33,000,000 x 0.18 x
     0.075 x 111/500 x 0.24] x $111).




     Page 50                                         GAO-03-905 Federal Student Aid
Appendix IV: Comments from the
Department of Education




             Page 51             GAO-03-905 Federal Student Aid
Appendix V: GAO Contacts and Staff
Acknowledgments

                  Jeff Appel (202) 512-9915
GAO Contacts      Thomas Weko (202) 512-8796


                  In addition to those named above, the following people made significant
Staff             contributions to this report: Cedric Burton, Betty Clark, Cindy Decker,
Acknowledgments   Gordon Mermin, John Mingus, Susan Conlon, and Corrina Nicolaou.




(130204)
                  Page 52                                       GAO-03-905 Federal Student Aid
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