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By Art Hauptman

There is widespread agreement among financial aid analysts and practitioners that our country’s student aid system is not working as effectively as it could be. Many believe that the solution to this problem is to have the federal government on the existing student aid programs.

I disagree. The federal government currently spends roughly $40 billion for grants, college work study, loan subsidies, and tax breaks for college — more than enough to achieve the programs’ goals if they were operating effectively and efficiently. , the current structure of student financial support in this country needs to be changed in fundamental ways.

Federal aid programs and tax benefits should be molded into a more comprehensive and comprehensible whole. This would entail some program consolidation and with each other. The federal government should also strengthen the incentives it provides states, colleges, and the private sector so that Such a system should adhere to the following six principles:

• It should be much simpler for students and their families to apply for aid and for college officials to administer it. The current application process and families, especially those most at-risk.

• A of all students, although institutions should be encouraged to cover some or all of this self-help component for students from the most impoverished circumstances.

• The largest proportion of assistance should be This greater commitment to targeting of benefits should include federal and state policies, institutional practices, and private sector initiatives.

• Tuition tax breaks should be the primary form of non-repayable aid for middle class students and lifelong learners who are already in the work force. Tax benefits are than cramming them into the already strained traditional student aid programs.

• The federal student loan programs should be restructured to reduce the adverse effects of growing debt burdens and to stem instances of program abuse. The policy focus should shift from the traditional emphasis on when the loan is made to .

• Greater reliance should be placed on non-financial aid activities to improve the preparation and increase the aspirations of students most at-risk. Student aid ; reaching them in various ways while they are in grade school or middle school is clearly key to greater success.

By taking the following three steps, policymakers can accomplish the kind of reform that is needed without spending any additional money:

• Federal student aid programs and tuition tax benefits should be integrated in a systematic way. Many student aid advocates have suggested and using the savings to increase spending on need-based financial aid. Others have suggested . A better approach is to recognize the need for tax benefits — both to offset current tuition expenses and stimulate more college savings — and integrate the tax system with federal student aid programs: before, during, and after college.

• The federal government should be more aggressive in seeking to increase the access and success of the students from the lowest income families. Federal policy makers have tended to rely on expanding Pell Grants as the means for helping low-income students. But it is increasingly obvious that , including more early intervention through and related efforts, and providing incentives for institutions to require less borrowing from these students. It would also be worthwhile to consider establishing college savings accounts for poor but promising students to raise their aspirations.

• A student-centered seamless federal student loan structure should be created. Federal student loan policies and practices have been central to postsecondary policy debates for the past several decades, with the primary focus over the past 15 years on whether loans should be financed directly by the federal government or privately financed. But the has obscured a number of other critical issues related to the provision of student loans, including the complexity of the system and whether federal policies . We should consider how the federal student loan structure can be streamlined so that all loans have the same terms and conditions and real relief is provided to borrowers in trouble when they reach repayment.

These three sets of reforms could be paid for largely through changes in the student loan programs that would: restrict the in-school interest payments that the government makes on behalf of students in the subsidized Stafford Loan program to Pell Grant recipients; increase the share of federal student loans provided through the Direct Loan Program; and to determine a market rate of return on federally guaranteed loans and thereby drive down federal payments to lenders. In addition, improving coordination between the Pell Grant and tax credit programs would create some savings by making students from middle-income families ineligible for Pell Grants. This change would justify increasing tuition tax benefits for middle-class students and their families through the consolidation of existing tuition tax breaks into a new single expanded tuition tax credit.

Future posts will consider how adopting these reforms could lead to a reinvigorated system of student financial support in this country.

Art Hauptman is an independent consultant on higher education finance issues. His guest blog column will continue to appear each Tuesday in the month of May. The views expressed herein are his own and do not necessarily reflect the positions of the ¹ú²úÊÓƵ Foundation.