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##  How Minority Students Finance Their Higher Education. ERIC Digest.           

All types of financial aid have been shown to have a positive                   influence on college enrollment, regardless of the students race or             ethnicity (St. John & Noell, 1989). Today, financial aid is central             to the successful enrollment and retention of low-income students.              For the majority of these students (90 percent), receiving financial            assistance is critical in paying for college. Moreover, the                     availability of funds to meet tuition and other college-going costs             not only impacts students decisions on whether to attend college,               but it also greatly influences their choice of college. Surveys                 indicate that student loans, specifically, play an enormous role in             all student decisions regarding college (e.g., Baum & Saunders,                 1998). For minority students, whose financial aid does not meet                 college costs, the difference can be problematic. Having sufficient             funds enhances college students academic performance, facilitates               their social integration on campus, and increases their chances of              persistence to graduation (Nora & Cabrera, 1996). 
This digest                 examines the various financial sources minority students use to meet            the costs of a higher education, some of which were created with the            specific goal of promoting their college attendance. It concludes               with recommendations for public policy to increase the availability             of aid for college attendance based on student experiences with                 existing practices. SOURCES OF FINANCIAL AIDFederal Student               Loans. It has been estimated that more than 50 percent of students              earning degrees have had their education at least partially financed            through Federal student loans (American Council on Education, 1997).            That figure has been confirmed in a study reporting rapidly                     escalating financial aid awards as the major source of financial                assistance, which also confirms a strategy of emphasizing grants in             the early year packages and shifting to loans in the later                      years (Fenske, Porter, & DuBrock, 2000). Among borrowers,                       students (mostly minorities) attending community colleges and other             two- and three-year colleges have relied heavily on Federal Stafford            loan programs, available to those from lower-income families. Many              of these students are also able to meet their costs through Federal             Pell grants and some additional resources (e.g., family savings,                current income). Pell grants are a resource for students whose                  annual family income is no more than $40,000 enrolled in, or                    accepted for enrollment in a college. Student loans are the most                common source of aid for low-income students, as 73 percent received            Federal student loans, and 35 percent had loans from other                      sources (O'Brien & Shedd, 2001). 
Pre-College Programs and                     Grants 
A study conducted by The Institute for Higher Education                Policy on the impact of pre-college programs on student success                 found that for those who participated in pre-college programs such              as the Federal TRIO programs or institution-sponsored programs the              impact was positive with regard to several performance                          indicators (O'Brien & Shedd, 2001). Minority students and Pell Grant            recipients, both largely low income, had some of the highest                    participation rates in pre-college programs. Study findings were                consistent with other national data indicating that 49 percent of               low-income students nationwide receive a Pell Grant. Approximately              66 percent of financial aid recipients reported that their financial            aid met the cost of attending college. However, for those whose                 financial aid did not meet the costs of attending college, the                  financial gap was a hardship. 
College Prepaid Plans 
As of                   October 1999, 20 states offered a new mechanism for financing a                 students college education: College Prepaid Plans (Olivas, 1999).               These programs work on a very straightforward principle: parents                place a lump sum in a contract (or make monthly payments) that                  guarantees the money will be sufficient for an equivalent of tuition            and fees in a set period of time in the future. Some states have now            also established similar programs--savings program trust                        funds (SPTF)--which have gained tax exempt status in recent years               and make it possible for individuals to invest in a state-operated              investment fund for college tuition and related expenses such as                room and board. The funds permit parents to defer the gains made                from their investments and to delay and transfer the earnings to the            beneficiary children, who are taxed at lower rates than are                     wage-earners. 
Olivas (1999) underscores the fact that it is very              unlikely that middle- and low-income families will profit from such             ventures, however. Even as early as 1990 evidence indicated that not            all sectors of society (and specifically those most in need of                  financial assistance) were benefiting from prepaid plans or savings             program trust funds; it was, in fact, the richest population with               children that purchased the majority of monthly payment option                  contracts (Lehman, 1990). 
Student Credit Cards 
One of the most              disturbing means of paying for college expenses, from tuition to                books to meals, is through student credit cards (e.g., Blair, 1997).            The abundance of credit cards offered to all college students, along            with the ease with which they can be acquired, make it possible for             today's college students to have more opportunities for making                  credit purchases than any prior generation of students. Included in             the lure to attract students to credit card use are minorities and              low-income students. Evidence that credit card usage is a means for             them to meet college-related finances is seen in O'Brien and                    Shedds (2001) study which found that low-income college students in             New England not only used money earned from working or savings to               help them pay for college, but that 50 percent of those students                received money from their parents and nearly 25 percent used credit             cards. IMPLICATIONS FOR FEDERAL POLICY ON HIGHER                              EDUCATIONHistorically, Federal policy related to the goals and              financing of higher education have been affected by political cycles            that exist for various public policy issues--cycles which alternate             between concerns to improve quality and concerns to improve access,             according to Nora and Horvaths 1989 review of the impact of                     financial assistance on minority enrollments and persistence.                   Further, Campaigne and Hossler (1998), in their report on the impact            of financial aid programs on student achievement and success, found             that financial aid policies have not been judicious or focused, and             that no clear goals were evident from the decisions, although [i]t              would be appealing to report that changes in federal financial aid              policy have been driven by data, rational planning, and clear policy            objectives. 
It is difficult to ascertain the influence of Federal             student aid programs, and student loan programs in particular, for              numerous reasons. Campaigne and Hossler (1998) concluded that the               consequences of economic, social, and public policy trends                      differentially affect students and families from different income               groups. To effectively study the effects of Federal loans on student            access, institutional choice, and persistence, perceptions and                  subjectivity cannot be disregarded. For some families, and college              students, the impact of cost and subsidies is simply more important             than for others. 
Given the various patterns of financing a college            degree as shown above, policy recommendations, grounded in current              policy and data, should reflect the following (e.g., Wolanin,                   2001): 
* Increased stress on grant aid resources at Federal,                  state, and institutional levels that lower dependence on loans for              low-income students. 
* Growth in work-study programs that help                integrate working students into the institution and help them                   finance their education. 
* Reassurance to students regarding the              availability and timing of student aid to lessen the potential                  negative impact of paying for an education on their ability to                  persist in higher education. 
* Targeted financial aid programs for            students whose need is not met by current financial aid programs,               specifically part-time and minority students. 
* Continued state               support through need-based grants. 
Efforts to address the issue of            subsidizing the costs of attaining a higher education degree have               overlapped with important political concepts of the 1980s and 1990s             that focused on accountability and efficiency. The result has been a            shift in the old argument over who benefits from a higher education:            the individual or society. Federal grants, more indicative of the               belief that society benefits, have been reduced substantially. They             were replaced by an emphasis on Federal loans, tax exemptions, and              prepaid college plans, which place the burden on the individual who             is to benefit from a college degree. One outcome of this shift has              been an increase in student indebtedness and a desperate search for             alternative means of financing a college education, namely, credit              card usage. The upshot has been that graduates from low-income                  families, and students who withdraw from college, find themselves in            debt not only to the Federal government but also to private credit              card companies. While those fortunate enough to earn a college                  degree have letters following their names, repayment of huge debts              incurred while in college almost totally negates any                            rewards. REFERENCESAmerican Council on Education. (1997,                  October). New information on student borrowing. ACE Policy Brief.               Washington, DC: American Council on Education. 
Baum, S., &                    Saunders, D. (1998). Life after debt: Results of the national                   student loan survey. Braintree, MA: Nellie Mae. 
Blair, A.D. (1997,            November-December). A high wire act: Balancing student loan and                 credit card debt. Credit World, 86(2), 15-17. 
Campaigne, D.A., &              Hossler, D. (1998). How do loans affect the educational decisions of            students? Access, aspirations, college choice, and persistence. In              R. Fossey & M. Bateman (Eds.), Condemning students to debt: College             loans and public policy. New York: Teachers College Press. (ED 430              434) 
Fenske, R.H., Porter, J.D., & DuBrock, C.P. (2000, February).            Tracking financial aid and persistence of women, minority, and needy            students in science, engineering, and mathematics. Research in                  Higher Education, 41(1), 67-94. (EJ 601 738) 
Lehman, J.S. (1990,              April). Social irresponsibility, actuarial assumptions, and wealth              redistribution: Lessons about public policy from a prepaid tuition              program. Michigan Law Review, 88(5), 1035-1141. 
Nora, A., &                   Cabrera, A.F. (1996, March-April). The role of perceptions in                   prejudice and discrimination and the adjustment of minority students            to college. Journal of Higher Education, 67(2), 119-148. (EJ 520                132) 
Nora, A., & Horvath, F. (1989, May). Financial assistance:               Minority enrollments and persistence. Education and Urban Society,              21(3), 299-311. (EJ 391 565) 
O'Brien, C., & Shedd, J. (2001).                 Getting through college: Voices of low-income and minority students             in New England. Washington, DC: Institute for Higher Education                  Policy. (ED 451 770) 
Olivas, M.A. (1999). College prepaid and                 savings plans: Third generation progress and problems. Working                  paper. The Institute for Higher Education Law and Governance,                   University of Houston, Houston, TX. 
St. John, E.P., & Noell,                  J. (1989, December). The effects of student financial aid on access             to higher education: An analysis of progress with special                       consideration of minority enrollment. Research in Higher Education,             30(6), 563-581. 
Wolanin, T.R. (2001, April). Rhetoric and reality:            Effects and consequences of the HOPE Scholarship. The New Millennium            Project on Higher Education Costs, Pricing, and Productivity Working            Paper. Washington, DC: The Institute for Higher Education                       Policy. (ED 451 819) 
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This Digest was developed by the ERIC            Clearinghouse on Urban Education, with funding from the Office of               Educational Research and Improvement, U.S. Department of Education,             under contract no. ED-99-CO-0035. The opinions in this Digest do not            necessarily reflect the position or policies of OERI or the                     Department of Education.                                                     **Title:** How Minority Students Finance Their Higher Education. ERIC Digest.           **Document Type:** Information Analyses---ERIC Information Analysis Products (IAPs) (071); Information Analyses---ERIC Digests (Selected) in Full Text (073); **Available From:** ERIC Clearinghouse on Urban Education, Institute for Urban and                  Minority Education, Box 40, Teachers College, Columbia University,              New York, NY 10027. Tel: 800-601-4868 (Toll Free); Web site:                    http://www.eric-web.tc.columbia.edu.                                         **Descriptors:** College Students,  Educational Finance, Federal Aid, Grants,  Higher            Education, Low Income Groups,  Minority Groups,  Paying for College,             Student Costs, Student Loan Programs                                        **Identifiers:** Credit Cards, ERIC Digests, Tuition Prepayment                               
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