The Problem
Higher education is unaffordable for the average New Mexican. For most students, personal income and financial aid are not enough to cover the cost of tuition and fees at a four-year college, let alone the cost of supplies and living expenses. Let’s face it, almost everything is more expensive in college. Parking alone can cost up to $500 per year, and a whole separate blog post could be written to discuss the price of textbooks. Students in New Mexico may not know it from the shocking feeling of opening their Bursar’s statements, but tuition in New Mexico is low relative to other states, averaging $6,921 a year, compared to $9,970 nationally.[1] Even with relatively low tuition costs, students in New Mexico struggle to afford college.
Students in New Mexico primarily receive financial aid from the Legislative Lottery Scholarship, Pell Grant, federal loans, and merit-based scholarships.[2] When combined without loans these scholarships rarely cover the full cost of tuition and fees. Tuition coverage from the Lottery Scholarship was reduced from 90 to 60 percent in 2018, leaving a 25 to 40 percent tuition gap for many students, even after Pell Grant has been applied.[3]
College has long been viewed as the gate-way to success in the United States. The American dream centers around the concept that anyone can achieve success regardless of where they come from. While it is doubtful that the American dream ever truly existed, it feels further away than ever for the many students and potential students in New Mexico. Tuition costs have increased exponentially in recent decades. According to the U.S. Department of Education, a student in 1985 could cover full-time annual tuition, fees, room and board at a public institution for $3,571, which equates to $7,964 in 2017 dollars.[4] Comparatively, students payed an average of $17,237 for those goods in 2016, more than twice as much even when accounting for inflation.[4] These trends in tuition costs degrade upward mobility by creating an additional challenge to gaining an education.
Although tuition has been increasing around the country since the 1980's, college unaffordability accelerated after the 2008 recession. From 2008 to 2017, the average cost of tuition increased by 34.6 percent and per student state funding on higher education decreased by 32.7 percent, adjusted for inflation.[5] State funding has since recovered in most states other than New Mexico.[5] However, state funding for higher education is expected to increase in coming years given new revenue in the general fund from oil and gas. This development prompts the question of how general fund money could be spent most effectively to advance college affordability in New Mexico.
Policy Options
Governor Lujan Grisham announced a free college program in September known as the Opportunity Scholarship. If passed, the scholarship will cover undergraduate tuition and fees for recent high school graduates attending a 2- or 4-year college or adults attending a 2-year college.[3] The scholarship is expected to benefit 55,000 students and cost the state 25 to 35 million dollars per year.[3]
While the Opportunity Scholarship is certainly a step in the right direction, it is not without flaws. The scholarship will be paid for by revenues from the general fund, which are largely generated from oil production. The state general fund tends to fluctuate with the price of oil and gas, which may cause this program to be unsustainable. The Opportunity Scholarship is also a last-dollar program, meaning that it only covers tuition that has not been paid for by other sources of financial aid. As a result, the Opportunity Scholarship does not provide money for living expenses or supplies.
Although I support Governor Lujan Grisham’s plan and appreciate the effort to address college unaffordability in New Mexico, I wonder if a better policy option could be created to achieve that goal. To be clear, “better” means a feasible program that makes college cheaper, particularly for those most impacted by high tuition costs.
One policy option could be for New Mexico to create a state student loan program. The idea of expanding student loans leaves a bad taste in my mouth, but I like that the program would be available to all New Mexicans for an estimated 20 million dollars per year.[1,2,6] The program would allow students to borrow up to the cost of tuition and fees with zero interest, loan payments capped at 10 percent income, and loan forgiveness after 10 years. Based on the $51,745 average annual salary for New Mexicans with a bachelor’s degree and the average annual cost of tuition, a graduate could expect to fully repay the cost of four-year tuition within 6 years.[1,12]
Despite the prevailing view that loans come from the federal government, banks, or corporations, states have created student loan programs in the past. A similar state-level student loan program called the Minnesota Student Educational Loan Fund (SELF) provided almost $1.8 billion in financial aid from 1995 to 2014.[7] Although a state-level student loan program would be more generous than federal loans, I am reluctant to recommend a policy that would require students to forgo 10 percent of their income for 10 years and that does not consider living expenses.
Another policy option is expanding the Loan for Service (LFS) program that already exists in New Mexico. Under the current LFS program, for every year that a graduate works in New Mexico, a portion of her loan is forgiven. Once the service commitment is completed, usually after 2 to 3 years, the loan is completely forgiven. To be eligible for the LFS program, a student must be a New Mexico resident, have been accepted into a qualifying program, be enrolled at least half-time, demonstrate financial need, and declare intent to practice their field in a designated shortage area.[8] Students seeking specified degrees in education and health are eligible, and grants vary from $4,000 to $25,000 per year depending on the targeted degree.[8]
Demand for the LFS program is greater than supply of loans. According to the New Mexico Higher Education Department, the Teacher LFS program granted a scholarship to 10 applicants out of 209 who applied in 2016.[8] The LFS program could be expanded in New Mexico to cover all eligible students. Assuming half of UNM students in qualifying programs are eligible and want to join the LFS program, it would cost the state $12,288,000 annually to cover them.[1,9,13] That’s $12,288,000 for college affordability in addition to more doctors, nurses, and teachers in New Mexico. Although this program would keep investments on higher education in-state and stimulate growth in sectors that need graduates, the loans would only benefit students pursuing specified degrees.
The final policy option considered is revising the Lottery Scholarship to cover 100 percent of tuition for students whose families make below $90,000 per year and reducing eligibility requirements from 15 to 9 credit hours. Based on data from the New Mexico Higher Education Department, New Mexico Voices for Children estimated that in 2012, 1 in 3 Lottery Scholarship dollars went to scholarship recipients with annual family incomes above $90,000, amounting to over 19 million dollars per year.[10] That money could be spent on covering 100 percent of tuition costs for students with family incomes below $90,000 per year, which would require 6.5 million dollars based on 2017 values.[11]
The 12.5-million-dollar surplus could then be used to cover tuition for students whose families make above $90,000 per year based on a sliding scale where tuition coverage decreases by 20% for each additional $10,000 earned. For example, students with an annual family income between $90,000 and $99,999 would get 80 percent tuition coverage, while students with an annual family income between $100,000 and $109,999 would get 60 percent tuition coverage, and so on.
Reducing Lottery Scholarship eligibility requirements from 15 to 9 credit hours will help more students benefit from the program who work outside of school. Attending school full-time while working to pay for living expenses is highly unachievable, and as a result, many primarily low-income students who work outside of school do not benefit from the scholarship. The Lottery Scholarship is a first-dollar program, meaning that it covers a set percentage of tuition and fees despite existing financial aid. Under a revised Lottery Scholarship, low-income students who receive the Pell Grant and other scholarships could use that for living-expenses. Although revising the Lottery Scholarship would likely cause a decrease in full-time enrollment, this program is tailored to fit the needs of low-income students who are most impacted by high tuition costs.
Policy Recommendation
My recommendation is to revise the Lottery Scholarship. The Lottery Scholarship is currently inaccessible to low-income students, and as a result, it does not do enough to address college unaffordability. In fact, it risks enforcing socioeconomic divisions and degrading social mobility by benefiting students who already have more privileges. To target students who are most impacted by high tuition costs, the ability to pay for living expenses should be considered because living expenses are a challenge to college affordability in addition to tuition and fees. By granting students a more flexible college schedule and allowing them to keep their Pell Grant, revising the Lottery Scholarship would reduce the financial burdens that contribute to college unaffordability.
Endnotes:
1. Falkenstern, Colleen. 2018. Tuition & Fees in the West 2017-18: Trends and Implications. Boulder: Western Interstate Commission for Higher Education.
2. New Mexico Higher Education Department. 2012. 2012 New Mexico Financial Aid Graph. hed.state.nm.us/uploads/documents/2012_NM_Fin_Aid_graph.pdf. (Accessed October 13, 2019).
3. Office of the Governor. 2019. Gov. Lujan Grisham announces plan to make college tuition-free for New Mexico students. Santa Fe: Office of the Governor Press Releases.
4. U.S. Department of Education. 2019. National Center for Education Statistics. nces.ed.gov/fastfacts/display.asp?id=76. (Accessed November 9, 2019).
5. Mitchell, Michael, Michael Leachman and Kathleen Masterson. 2017. A Lost Decade in Higher Education Funding. Washington, DC: Center on Budget and Policy Priorities.
6. New Mexico Higher Education Department. 2018. Fall 2018 Head Count. hed.state.nm.us/data-reports/data-reports-1/student-enrollment. (Accessed October 13, 2019).
7. Kosir, Marilyn, Jerry Danette, Peter Li, and Thomas Sanford. 2015. Assessing the Feasibility of Creating a SELF Loan Refinancing Program. Minnesota Office of Higher Education.
8. New Mexico Higher Education Department. 2016. 2016 Annual Report. Santa Fe: New Mexico Higher Education Department.
9. The University of New Mexico. 2019. Fall 2019 Official Enrollment Report. oia.unm.edu/facts-and-figures/documents/fall-2019-oer.pdf. (Accessed October 13, 2019).
10. Bradley, Gerard. 2013. Going Broke: Tuition, Financial Need, and the New Mexico Lottery Scholarship Fund. New Mexico Voices for Children. www.nmvoices.org/wp-content/uploads/2013/08/lottery-scholarship-report-2013.pdf (Accessed October 13, 2019).
11. New Mexico Higher Education Department. 2017. Legislative Lottery Scholarship Report. Santa Fe: New Mexico Higher Education Department.
12. U.S. Census Bureau. 2018. 5 Year Data. American Community Survey. Author’s calculations.
13. Cost to state of Loan-For-Service. Author’s calculations. Teachers: There are 1,328 students at UNM’s school of education7 /2 = 664 students who would receive a scholarship. 664 * 4,000 (amount of scholarship) = $2,656,000 per year to provide scholarship to half of UNM education students. Nurses: There are 721 nursing students at UNM7 /2 = 361 granted a scholarship. 361 * 12,000 (amount of scholarship) = $4,332,000 to grant the scholarship to half of UNM’s nursing students. Medical Doctors: There are 423 medical students at UNM7 /2 = 212 granted a scholarship. 212 * 25,000 (amount of scholarship) = $5,300,000 to grant the scholarship to half of UNM’s medical students. 2,656,000+4,332,000+5,300,000=12,288,000 total to expand the LFS program.