Work-study under threat in latest college funding proposals

 USC students received $632 million from federal financial aid programs in 2020-21, the highest and four times the average among other elite universities.

(Daily Trojan graphic. Photo: Daily Trojan file photo)

A total of $198.3 million in campus-based aid to all of California’s universities would be wiped out under new Republican proposals to cut higher education spending, according to data the Daily Trojan collected and collated from the United States Department of Education. Among those who would lose out the most are some 6,637 USC students who received approximately $16 million in federal campus-based funds in fiscal year 2020-21.

President Joe Biden’s plan to forgive $500 billion in student debt last August framed an intensifying discussion around higher education funding into a well-publicized, politicized one. Following the announcement, debate around the topic became the newest political point to score on. An article in The American Conservative said, “Cut off the government dole to universities as fully and quickly as possible.” 

After the Supreme Court’s shutdown of the policy in late June, the Biden administration is trying to forgive student loans again but for a significantly reduced $39 billion and 804,000 borrowers. House Republicans responded by introducing a spending bill July 13 that would eliminate the federal work-study program and other grants benefiting low-income students.

Odalys Molina Martinez, a junior majoring in business administration who is low-income, has been partly funding her academics through jobs that pay through work-study since her freshman year. She estimated that she relied on the program for about 20% of her college costs, and she’s set to work a work-study teaching assistant job in the fall.

Martinez, upon reading the bill, said she felt “very disappointed.”

“With work-study jobs, [employers] know you’re students, so they know that you won’t be able to do like 40 hours a week,” Martinez said. “While for part-time, [employers] will try to put you through as many hours as possible. Not having that program will affect a lot of students both mentally and financially.”

Molina Martinez was among the 1,519 USC students who received a total of $3.5 million in work-study funds in 2020-21. The bill, if passed, would affect the 306 on-campus jobs that qualify for work-study and put job opportunities further out of reach for students who already struggle to find work on-campus. Moreover, the $12 million in Federal Supplemental Education Opportunity Grants that USC students also receive — by far the highest amount of all universities in the country, tied with New York University — would be eliminated.

Among the cornerstones of college affordability is federal funding. As tuition costs have risen, and with USC’s tuition matching the national trend to be nearly 80 times what it was in 1958, the year of the first federal loan, questions over how to widen access to colleges have persisted. 

In response, the federal government enacted schemes in three parts: campus-based programs such as federal work-study, direct federal loans disbursed to students themselves and grant programs that do not oblige recipient students to pay anything back.

Over time, USC’s procurement of federal aid through these programs increased considerably. Data available from fiscal year 1999-2000 shows that aid to the University’s students rose twentyfold since 2001-02, such that USC now holds the largest pool of federal aid among any top 25 university in the U.S., as ranked by US News.

With $632 million in total federal aid received in fiscal year 2020-21 (the latest available data), USC students receive more than four times as much as students in the average top 25 university. Alongside NYU, the sum the University received for 2020-21 is double that of the next university on the list — Columbia University, which took in $315 million.

The large increase in aid received by the University over the last two decades can be attributed to the financial crisis of 2007-08, during which the student loan market faced economic challenges. Banks underwent increased difficulty in obtaining funds to lend to students, while families facing uncertainty grappled with the idea of affording college amid rising tuition. 

In May 2008, former President George Bush signed a bipartisan bill that provided short-term liquidity to lenders and, importantly, created a more efficient Direct Loan program with increased capacity. Just over a year later, former President Barack Obama introduced  new federal student loans, increasing the types of direct loans available to students from four to six and representing undergraduate and graduate students separately for the first time.

In May 2008, President George Bush signed a bipartisan bill called the Ensuring Continued Access to Student Loans Act. Only 12 of today’s top 25 universities have any history of direct loans received prior to 2008.

What followed was a surge in direct loans, and the sum that USC received in direct loans rocketed to $476 million for 2010-11 from a mere $12,000 for 2008-09 and nothing before that.

However, following the most recent recessionary risks since the onset of the pandemic, the answers to key questions around higher education funding have diverged further on both sides of the political aisle. 

Bloomberg’s David A. Hopkins wrote that Democrats view higher education finding as an economic benefit to a younger demographic that it is trying to appeal to, while Republicans are “more likely to regard education as part of a larger cultural conflict … [describing] public schools and universities as liberal-dominated environments that need to be prevented from forcing their ideological vision on U.S. society.”

In a statement following the House Republican bill’s introduction, Alabama Republican Rep. Robert Aderholt wrote that the bill was not “perfect,” but added that “no bill in Congress is ever a perfect bill.”

While prioritizing biodefense, programs that support rural America and Congressional oversight, Aderholt wrote, “In response to the Executive Branch overreach of this Administration, this bill prohibits funding for programs focused solely on Diversity, Equity, and Inclusion, and it eliminates funding for Planned Parenthood and other controversial grantees.”

Federal spending on domestic programs will not increase for the upcoming fiscal year as part of a budget deal reached in late May to avert a default on the country’s debt. These concerns were elevated by Fitch Ratings cutting the U.S. credit rating from its perennial AAA rating to AA+ August 2, partly in response to how the federal government handled the debt crisis two months ago.

House Republicans propose reducing spending further, by cutting funding for the Education Department by 15%. However, Democrats on the House Appropriations Committee said the cuts are actually closer to 30% when $10 billion in rescissions to K-12 programs are factored in.

Why USC received such a large sum of loans compared to other universities is unclear. USC receives far more in direct loans than top universities of a similar enrollment size, such as UCLA and the University of Michigan - Ann Arbor. While the amount it receives has historically been close to NYU, the average student at USC still receives around $2,000 more in direct loans than one at NYU.

The criteria for forgiveness for Pell Grant recipients — a program that subsidizes the cost of tuition for low-income students, and of which USC students received a total of around $22 million in 2020-21 — is more unclear in Biden’s ‘Plan B.’ However, in a draft budget proposed Friday, Senate appropriators proposed boosting the Pell grant by $250 and increasing the maximum award from $7,395 to $7,645 for the 2024–25 academic year.

The possibilities of loan forgiveness or limits on federal aid are reliant on the results of an important upcoming year in U.S. politics. A total of $265 million dollars in funding to the Office of Federal Student Aid might be cut if House Republicans land the bill; the Biden administration had asked for $620 million more. In the meantime, the picture for student aid recipients remains hazy.

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