Issue 17: Inspiration for Higher Education

Insights & Outlooks

Reforming Federal Work Study to Support Today’s Students

Financial Aid Reforms
Reforming Federal Work Study to Support Today’s Students

Legislative action around the Higher Education Act is heating up. Senator Alexander has dropped a pared down version of HEA and the House just introduced their HEA reauthorization bill. As Congress considers reauthorization of the law that governs all student aid programs, they should consider reforming Federal Work Study (FWS), a program failing to live up to its potential.

Federal Work Study, while a relatively small program, occupies a special place in HEA. It is the only program that attempts to connect work and higher education. And there is promising research that it can help low-income students complete their degree. Unfortunately, it is misallocated and not closely connected to the careers students are interested in pursuing. 

Currently, the colleges with the largest allocations are New York University, Columbia University, and the University of Southern California. Only 11 percent of FWS goes to community college students and 39 percent goes to private non-profits. In higher education, 39 percent of students are enrolled in community college, while only around 16 percent attend private non-profits. This misallocation means only two percent of community college students are able to benefit from this program. This is particularly bad because low-income students are much more likely to be enrolled in community colleges. And we know from the research that low-income students, who would have to work no matter what, are more likely to benefit from FWS. To add insult to injury, graduate students also receive Federal Work Study to the tune of over a hundred million dollars.

The program also falls short of its potential to connect students to career experience. We know that internships help students explore careers and provide them with valuable experience when entering the job marked. But many times low-income students can’t afford to take these opportunities, particularly if they need to work to support their families. Work Study could support these students having valuable work based learning experiences. Instead, the vast majority is spent subsidizing work on college campuses. There is nothing wrong with working on campus, but let’s face it, Harvard graduates aren’t going to be cleaning dorm rooms for a living. It would be good policy to have a way to support low-income students getting the work experience their richer counterparts take for granted. 

The good news is we can fix it. First, we need to change how the funding is allocated. To do this, Congress should phase out the “base guarantee formula” which rewards longevity in the program and allocate all of the funding to the “fair-share formula”. But right now, the fair-share formula rewards the most expensive schools. To fix this, the formula should be reallocated based on Pell Grants that go to the lowest income students. If we only want to tweak the formula, we could cap the tuition and fees considered at the 25th percentile of all colleges so low-priced institutions, who serve more low-income students, get a fair allocation. At the same time, Federal Work Study should also stop going to graduate students.

These changes would provide similar results: rebalancing FWS to reflect enrollment in higher education. If we reallocated based on Pell, according to an analysis by Robert Kelchen, an assistant professor at Seton Hall University, community colleges would receive around 45 percent of total aid dollars and private 4-year colleges would receive around 11 percent. If we capped tuition and fees to the 25th percentile, Kelchen found that the share of Work Study funds going to community colleges would rise to almost 40 percent and percent going to private, non-profits would decrease to around 14 percent.

At the same time, the structure of the program creates no incentive for colleges to partner with employers and connect students to work that aligns with their major. In fact, it is cheaper and easier to use FWS as a subsidy for on campus employment. There is no requirement that on campus employment be aligned with a student’s course of study in the FSA handbook like there is with off campus, for-profit employers. Colleges are only responsible for a 25 percent wage match while off campus, for-profit employers must provide a 50 percent match. And there is a cap of 25 percent on the total FWS allocation that can subsidize student wages with for-profit employers. Add to this the complication of creating and maintaining employer partnerships, and it is no wonder 92 percent of FWS goes to subsidizing employment on campus. The impulse to control how public money subsidizes wages of for-profit employers is noble. But simplifying and creating an incentive to partner with employers would be good for students and higher education. Federal Work Study is a program uniquely qualified to do that.

As Congress continues to debate the reauthorization of the Higher Education Act, they should consider reforming Federal Work Study. By reallocating and increasing the funding, FWS will be more likely to support today’s students who need to work and would benefit from connecting that employment to their education.

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