Start, to Finish: Deputy Secretary Tony Miller's Remarks at the Federal Student Aid Conference

My thanks to Bill Taggart and Eduardo Ochoa , who just detailed the tremendous record of the past year in providing student aid and highlighted some of our plans and thinking for next year.

Their remarks underscore that the shift to Direct Lending and the massive infusion of new funding for Pell Grants marks a real sea-change in federal student aid. And you not only met the challenge of implementing sweeping change, you surpassed expectations. You proved the skeptics wrong.

In the 2009-2010 school year, students received $28 billion in Pell Grants, a record-setting amount, and $10 billion more than the year before. As Bill reported earlier, 99.9 percent of postsecondary institutions have now successfully originated a Direct Loan. In fact, we don’t know of a single instance where an eligible student was unable to receive a loan.

Behind all those numbers, are the stories of your students--of millions of Americans whose lives were transformed by the opportunity to attend college. I know, because I was once one of those students.

With the help of scholarships and Stafford loans, I enrolled in a co-op engineering-work study program, and worked full-time as an engineer at Caterpillar while going to school.

I remember paying my loan off, month after month, just like Bill Taggart, President Obama, and the First Lady did. And I’ll never forget that my college loans and scholarships opened new worlds for me. I can’t think of an administration in my lifetime that has such a personal, visceral belief in the power of education and the importance of expanding college access.

So, yes--this is a moment to celebrate the story and accomplishments of college aid.

But it is also a moment to pause—to take stock and think about the future of financial aid. And I want to suggest to you that next year, and in the years ahead, the existing model of student aid needs to be re-imagined and reshaped.

I want to provide two takeaway messages to mull and act on when you leave this conference. First, we need to embrace a modified mindset about the purpose of student aid. Student aid can no longer just be about providing access to postsecondary institutions. Instead, it also has to be about encouraging college completion and earning a degree.

Financial aid administrators should think of their overriding purpose as helping students succeed, not just get started. As William Bowen and his colleagues write in their book, Crossing the Finish Line, “financial aid policy must be a consideration in any concerted effort to raise graduation rates.”

My second, related message is that strengthening financial aid entails more than providing new federal dollars, as vital as they are. The truth is that all levels of government and all institutions of higher education must advance reform and college completion by making postsecondary education far more productive and efficient than it is today.

The stakes are large here because the world has changed. The days where you could land a good job without finishing high school are over. And the days where you can land a good job with just a high school diploma are disappearing fast. As Secretary Duncan says, if we give students “a chance not just to go to college but to graduate, we change not just their life chances but the life chances of their children and their grandchildren.” As a son, as a grandson, and now with own son, I know how true this is.

Reshaping student aid is also central to our national prosperity. In the knowledge economy, education, especially a college education, is the new game-changer driving economic growth.

Having visited with my counterparts from China, Brazil, India, Australia, and New Zealand, among others, I can personally attest to the commitment countries across the globe are placing on education. President Obama has warned that “the nation that out-educates us today will out-compete us tomorrow.” That is why the President has set a goal that the United States will once again have the highest proportion of college graduates in the world by 2020.

The President’s 2020 goal is widely shared--across party lines, regions, ethnic groups, among young and old. Yet it is not a goal that can be achieved by continuing to do what we are doing now, just a little bit better.

To achieve the goal of being number one in the world by 2020, college attainment rates will likely have to rise about 50 percent over the course of the coming decade. Three in five young adults will need to earn a degree, compared to two in five today.

As Eduardo just laid out, reaching the 2020 goal requires dramatically boosting the productivity of postsecondary institutions. It requires restructuring the delivery and organization of higher education. There is simply no other way to get there from here.

Now, meeting the 2020 goal also requires re-imagining our longstanding model of student aid. Traditionally, financial aid administrators have worked hard to focus on college access but paid comparatively little attention to college completion. In the past, if students didn’t succeed we often assumed it was the fault of the student, not the college. A lot of attention was paid to inputs--but not so much to accountability for outcomes.

At the same time, the financial aid system has not been user-friendly or timely. Not long ago, the FASFA form contained over 150 questions. It was more complicated than the typical federal tax return.

As Secretary Duncan has pointed out, it was crazy that teenagers would almost need an advanced degree to fill out the FASFA form when their aim was to go to college to earn a degree. It was also crazy that definitive information about aid eligibility typically was not provided to parents and children until after a student had applied or was accepted at college. As Susan Dynarski has noted, financial aid officers had, in effect, to act like car dealers, informing customers about a rebate incentive only after the customer agreed to purchase a car.

Many states, postsecondary institutions, and financial aid officers treated the complexity of the financial aid process as a necessary evil that ensured aid got targeted to students with the greatest need.

We now know that those concerns about misallocating aid were exaggerated. The complexity of financial aid and the lack of timely information about eligibility were not necessary evils. In fact, they were unnecessary impediments to college access and affordability.

By some estimates, two million Pell-eligible students don’t fill out the FASFA form. And if many students in college aren’t filling out the FASFA, untold numbers of students who are considering college aren’t filling it out either. The new consensus, as William Bowen writes, is “that the reliable, simple, and predictable provision of financial aid is important not just for initial access to college but to success in graduating.”

When I talk about the importance of reshaping financial aid to better support college completion, I am sometimes told it can’t be done. I am told that I’m being unrealistic. The argument I hear runs like this: College administrators are trapped in the “iron triangle” where the three sides of the triangle—quality, access, and cost—seem like mutually conflicting choices. Elevating quality raises costs. Increasing access can dilute quality. And reducing costs impairs both quality and access.

Historically, higher education has paid less attention to one side of the iron triangle, constraining costs. But for the foreseeable future, higher-education leaders cannot expect to rely on sustained economic growth and increased government revenues to pave the way for expanded enrollment.

For the next several years, the new normal in higher education will likely entail doing more with less--rather than new infusions of funding that allow college administrators to do more with more.

Yet there is an obvious remedy to the trap of the iron triangle. The way to break out of it is through large productivity gains. Jumps in productivity allow you to boost access and success while at the same time constraining costs.

Productivity, we know, matters. And it turns out it matters a great deal. One can no longer just round up the usual demographic suspects to explain the full range in college completion rates at different institutions. Graduation rates vary dramatically, even at institutions with similar admission standards and selectivity. The management practice of those colleges and universities have to be part of the explanation for those differences—and part of the solution.

A new McKinsey & Company study quantifies the vast potential for ramping up completion rates through productivity improvements alone. One prime example, which Eduardo referred to, is redesigning instruction by making smarter, more effective use of technology to drive better learning outcomes, particularly in large gateway courses. Another example is limiting or reducing excess student course credits and student withdrawals from classes, both of which add to the cost of obtaining a degree.

But here is the bottom line of the McKinsey & Company report: It concludes that the 2020 goal can be achieved without increased public funding, if postsecondary institutions increase their average degree productivity by 23 percent. And that 23 percent rise in degree productivity, measured as cost per degree, is within reach.

The McKinsey study divides four-year and two-year schools into peer groups with similar student selectivity, transfer rates, and other student characteristics. In each of the peer groups, the top quartile of institutions is 23 percent more productive than their peer group average. That means less efficient institutions have big and practical opportunities to boost their college completion rates to match those of institutions like themselves.

Now, perhaps you are thinking that some of these policies are beyond your bailiwick as financial aid officers. I have to say: You’re right. You’re right that financial aid officers aren’t responsible for students arriving on campus who need remedial instruction and are nowhere near college-ready. Ratcheting up college completion rates is a collective responsibility for educators, from cradle to career. That makes the administration’s K-12 reform agenda to dramatically accelerate career and college-readiness all the more important.

Even so, the collective responsibility to elevate college completion cannot be a discussion-ending excuse for inaction. The truth is that there are important steps that financial aid administrators can take, and in some cases already are taking, to help boost graduation rates.

It is no surprise, but the amount of grant and loan money that students receive influences graduation rates for low-income students. William Bowen documented that an increase in annual net price of $1,000 at state flagship universities is associated with a decline of 3 percentage points in the six-year graduation rate for low-income students. When Arkansas and Georgia’s HOPE scholarship programs provided free tuition and fees at in-state public universities for students with a GPA of 3.0 or higher, persistence to a bachelor’s degree increased by five to ten percent.

Yet more money and lower net prices are not the only financial-aid antidote for low graduation rates. The stability, simplicity, timeliness, and predictability of student aid all figure importantly in boosting graduation rates.

That is one reason why the Department has put so much effort into simplifying and expediting the FASFA application. Cutting out unnecessary questions, incorporating skip logic, and allowing applicants to populate their online application with IRS data are going a long way to simplifying the FAFSA process.

On average, students today are taking just over a half-hour to complete the online FASFA—an overall reduction of five million hours. This year, as of Thanksgiving, we have processed 18.8 million FAFSA applications, an increase of 11 percent over last year’s tally for the same time period.

More than a quarter million applicants have used the IRS data retrieval tool on the FAFSA form just since last January--and we expect many more will do so when we launch again in late January for the 2011-12 school year. As Bill Taggart noted, we now provide applicants with Pell Grant award and student loan eligibility estimates immediately upon completion of the FAFSA.

One of the great frustrations with the FAFSA is that students often submit applications with missing signatures or items left unanswered, and then mistakenly assume their application has been accepted. High school administrators consistently discover a 20 to 30 percentage point gap between the actual completion rates of FASFA and what students report.

So, we are working on that, too. We have launched a 20-site FASFA pilot project to close the completion gap.

At the pilot sites, secondary schools and school districts will be able to obtain real-time access to data on FAFSA completion without using social security numbers. When Secretary Duncan launched a similar program in Chicago in 2007 while serving as superintendent, FASFA completion rates shot up from 64 percent to 81 percent. And this coming year, Chicago’s FASFA completion rate is projected to be above 90 percent.

States and universities, meanwhile, are also leading the way in structuring financial aid to do more to support student success. At present, about one in seven students who earn a degree take more credits than they need to graduate. And those excess credits lengthen the time to graduation and can drive up dropout rates.

As a result, officials in West Virginia altered the performance requirements for aid when they designed their state’s version of the HOPE Scholarship program. West Virginia officials noticed that in other states with similar programs, scholarship students weren’t required to take a big-enough course load to graduate in four years.

In the West Virginia Promise scholarship program, students are required to take enough courses each semester to graduate on-time. A follow-up analysis of the West Virginia program found it raised on-time graduation rates by almost 7 percentage points.

Other colleges and universities are innovating by experimenting with performance-based scholarships and emergency aid.

Rigorous evaluations of performance-based scholarships, where students have to maintain a minimum GPA and be enrolled more than half-time, have shown that performance-based scholarships prompted more students to enroll full-time, stay in school, pass more courses, and earn more credits.

I bet that most people in this hall know of students who dropped out of school in the midst of a temporary but avoidable crisis. Maybe the student’s car broke down and needed costly repairs. Maybe they were having housing or child care problems. A small emergency grant or loan would have helped them through their rough patch. But on most campuses, that kind of emergency financial aid is either not available or takes too long to secure.

Several years ago, the Dreamkeepers and Angel Fund launched an experiment to see if the provision of emergency aid could improve student persistence. They disbursed over $845,000 in emergency aid at 37 community colleges.

Both students and college administrators said the emergency aid helped students remain in college. And aid recipients re-enrolled at a rate comparable to the average student, despite being more disadvantaged.

Now, performance-based scholarships and emergency financial aid are still being tested out. So is the notion of shifting more merit-based aid for affluent students to needs-based aid for low-income students. But these are promising innovations that illustrate the potential to reshape financial aid to do more to support completion and success.

These innovations also, frankly, point up shortcomings in our state and federal data systems. If financial aid administrators were to implement performance-based scholarships on a broad basis, they would need reliable and complete data on student persistence and completion.

Unfortunately, many states have big gaps in tracking student progress through college, as does the federal IPEDS data system. We don’t universally collect and report graduation rates for part-time students, transfer students, or disaggregate graduation rates for low-income students.

States, the federal government, and institutions of higher education all need to address those shortcomings. These data gaps only underscore that elevating college attainment rates is very much a collective responsibility.

Bill Taggart mentioned earlier that when the Department proposed the switch to Direct Lending, many people thought it couldn’t be done in a timely and effective way. I hear that skepticism, and frankly, I understand it, I appreciate it. But I think the skeptics underestimate the potential for change to the status quo.

When the administration arrived in Washington, the conventional wisdom was that nothing could be done to develop common, higher standards for K-12 career and college-readiness. Standards were a state issue--and common standards were the third rail of education policy. But states, of their own volition, did band together and develop common, higher standards for college-readiness.

That is only one of many examples where reform defied expectations and up-ended the status quo.

The dramatic increase in college graduates called for by the President’s 2020 goal is ambitious. Yet I believe we can ramp up our college completion rates. Other countries, including South Korea, Canada, Japan, Ireland, and New Zealand have recorded dramatic increases in college attainment in the recent past.

In conclusion, I absolutely applaud your extraordinary accomplishments over the last year in providing student aid. But at the same time, let us raise the bar in higher education. Let us keep our eyes on the prize of getting more students in a cap and gown.

This shift toward structuring student aid to do more to reward success is an opportunity to be welcomed. It amplifies the importance of your work--and the special opportunity to transform the life chances of students. Working together, let us make student aid provide not just a strong start in college but a strong finish.