Sarah Savage/Erin M. Graves: 'Financial capabilities' for college

BOSTON

Community colleges have traditionally responded to the financial needs of their students by removing or minimizing financial barriers to attending. Efforts to make community college tuition free fit with this philosophy. But where efforts to minimize or remove financial barriers to attending community college fall short is in empowering students to navigate the next financial crossroads they encounter, to make well-informed financial decisions that will decrease their vulnerability as students and to position them with the tools for achieving financial wellness as they progress through life.

Empowerment work that helps students manage their financial lives can be described as building their "financial capabilities." The intention of this work is to teach students effective money management, savings and planning techniques but also to provide opportunities to apply what students learn, which is critical to developing positive financial habits. More commonly referenced "financial literacy" remains relevant but is more often associated with knowledge transfer and skill development than application and behavior change. Empowerment work is intended to build students’ capacity.

While engaging with students in this way is new territory for most community colleges, it is an emerging area in which some institutions have already developed expertise and observed significant benefits. To illustrate, the Boston Fed’s Financial Capabilities Group describes the experiences and insights of eight community colleges from around the country in its new Community College Handbook, released as part of the group’s Community College Initiative.

The need to help students develop skills and confidence to manage their financial lives effectively, to provide real ways of doing this and to deliver services when students are most likely to have opportunities to put what they learn into practice is evident from the institutions’ experiences.

In one example, a financial aid staff member at a community college in Florida helped pilot a peer-to-peer effort over concern that while financial aid was relatively easy to come by, students lacked clear guidance on how the aid could best be utilized. The pilot began on a small scale, with three work-study students approaching peers leaving the financial aid office with their refunds, engaging them in discussions about plans for their refunds, and encouraging them to divide purchase decisions into “needs” versus “wants.”

This pilot grew to include a multicampus, well-funded Financial Learning Ambassador Program that delivered timely and tailored guidance on money management techniques through a peer-to-peer model. By identifying times when students are most likely to make financial decisions, staff and students implementing the program could ensure the relevancy and timeliness of content (e.g., demonstrating “shopping on a budget” and setting up resource tables around the time when financial aid refunds are dispersed).

Motivated by similar concerns for financial well-being, community colleges based in New Mexico and Baltimore County sought to address students’ financial needs beyond educational costs and identified comprehensive financial coaching as part of the solution. Staff at one institution observed that in addition to academic challenges, students were already struggling with day-to-day financial needs and therefore less able to plan for the future.

Likewise, many students attending community college in Baltimore County not only live below the poverty level but also lack tools to manage their finances. While one institution offers financial coaching as part of a comprehensive financial stability center model that bundles education and employment services, work and income supports, and financial and asset-building services, the other offers coaching only. The Handbook’s case studies go into depth on how the respective institutions decided which services to offer.

Two community colleges in Oregon and Arizona took a different approach. In an effort to address their students’ unmet financial needs and to help them develop positive financial habits, these institutions offer educational matched savings programs that match student savings at an established rate (e.g., 1 to 1 or greater). After meeting program milestones such as making a specified number of consecutive savings deposits and completing a certain number of hours of financial education classes or workshops, students can use their savings and matching funds to cover approved educational expenses such as tuition, fees, books, and supplies.

These programs have required concerted efforts by external partners, funders and institutional staff. In these cases, administrators and staff members committed to this level of collaboration because they saw the value in not only helping students pay for educational expenses but also to complete the program with much higher quality financial decision-making abilities than when they started.

These case studies along with others featured in the Boston Fed’s Handbook provide examples of new ways of responding to the financial challenges community college students face. The studies demonstrate how previous approaches to minimizing challenges—while well-intended—have not historically enhanced a student’s ability to independently overcome the next challenge they are likely to face.

The case studies describe just a handful of models for building students’ capacity for managing their financial lives. While we hope this might generate discussion and ideas among institutional personnel and potential partners, we also want to emphasize the need for more research to determine additional best practices. This is why the Boston Fed is evaluating a two-year multi-institutional pilot that combines educational matched savings programming, financial coaching and support systems to help students navigate the financial aid process.

We want to know if students who receive services demonstrate stronger educational outcomes, such as higher rates of persistence; and financial outcomes, such as improved decision-making surrounding paying for school and managing their financial lives, versus those who do not receive any services at all. We also want to understand the interplay of these outcomes and the extent to which a model of this kind could be scaled up.

In the meantime, we continue to advocate that community colleges commit to helping their students to manage their financial lives effectively. We have hosted a series of events that brought together expertsin-person and online, and we will be actively engaging community colleges in discussions tailored to their unique institutional contexts and student needs through on-site visits. One of our recent visits to an institution in Massachusetts, for instance, included a broad cross-section of institutional staff, faculty and students, and resulted in a rich discussion of possibilities for applying what we have learned to this institution’s unique context.

Institutions and the students they serve will be better positioned when students are knowledgeable, well-informed stewards of their financial lives and able to navigate financial systems as students, workforce participants, and members of society. The Resource Handbook is intended to make this case, demonstrate actual examples and observed benefits, provide insights into how to achieve effective delivery, and ultimately, to foster a shared belief of how working with students in this way is integral to their educational progress and future financial wellness.

Sarah Savage is community-affairs manager and Erin M. Graves is senior policy analyst in the Financial Capabilities Group at the Federal Reserve Bank of Boston. This piece originated on the Web site of the New England Board of Higher Education (nebhe.org).

Yves Salomon-Fernandez: Obama college plan in Mass.

FRAMINGHAM

President Obama started off the year with a proposal to make a community college education as “universal” as high school by making the associate degree or first two years of a bachelor’s degree tuition-free. The details of how this would be funded are still emerging. Should the proposal successfully move through Congress, Massachusetts, for one, stands to gain much from it. Here’s why:

1. Community colleges prepare students for “middle-skills” jobs. New England’s available pool of middle-skills workers has been historically low and continues to decline, as documented recently by the Federal Reserve Bank of Boston. Coupled with declining high school enrollments and a projected 15 percent reduction in the region’s labor force by 2020 due primarily to retirements, an increase in middle-skills talent would help employers in our knowledge-driven economy fill open positions.

2. Since the Boston Foundation report in 2011 that highlighted the low graduation rate of the state’s community colleges—a report that precipitated the community college reform passed by the Massachusetts legislature that established performance across multiple metrics as funding criteria—there has been little evidence that outcomes of community college students have significantly increased. Nationally, the Gates Foundation, and locally the Boston Fed, have documented the barriers to completion and transfer for community college students. Not surprisingly, they are largely economic with students balancing work and family obligations.

3. The Obama proposal would positively affect the taxpayer base in Massachusetts and elsewhere. Moving the traditional community college students into a higher income level has the potential of increasing the tax base for the state and reducing existing or potential burden on government.

For the president’s proposal to work, there will have to be some accountability and alignment of policies at both the federal and state levels. Accountability should vary by state. Massachusetts is not Tennessee, Utah, California or Florida. There are significant variations among states in how community colleges are funded, how they are structured, how well they are aligned with business and industry, and how well integrated they are within the state’s public higher education system.

For the proposal to work, necessary provisions will have to be made to current welfare policies. Current policies do not always favor students returning to school, especially single mothers. The existing research shows that in households where the mother holds a college degree, children are more likely to attend and succeed in college.

A uniform proposal at the federal level that does not reduce benefits for students receiving public assistance as they increase their income because of their college attendance would also need to be in place to maximize returns on this $60 billion investment over the next decade for current taxpayers who will be footing the bill. Appropriate policies at the state and federal levels that encourage long-term economic independence and reduce the burden on government should accompany the free community college proposal.

On average, the community college population represents a vulnerable segment of students. Thus, their upward movement on the socioeconomic ladder on a large scale will strengthen the country’s overall competitiveness and reduce costs for the public in the long-run. The tuition-free proposal’s success will depend on community colleges being able to improve outcomes for students—meaning completion or transfer into a bachelor’s degree program and job placement.

To maximize outcomes for regional industry under this proposal, local businesses, policymakers and colleges will need to be intentional about working together. Increases in community college graduates may not automatically translate into increases in the available talent pool for local businesses. At the end of last year, a joint study published by Accenture, Burning Glass and Harvard University advocated taking a supply-chain approach to closing the middle-skills gap in Massachusetts.

Its basic premise was that the middle-skills problem needs to be viewed from an economic competitiveness perspective. Among its recommendations was that policymakers and higher-education administrators act as facilitators for greater collaboration between businesses and community colleges. Intentional and effective public-private partnerships can maximize the returns for states should the president’s proposal move forward.

The president’s proposal is not as radical as it may appear to those outside higher education. Subsidizing higher education costs for students is rampant among private colleges and universities under the practice known as “tuition-discounting.” A 2006 study by the College Board found that private colleges and universities included in its sample discounted as much as 33 percent of their tuition to attract students. These took the form of need-based as well as non-need-based aid. While most tuition discounts are used as a means to provide access to students who would otherwise not be able to attend those schools, those students are not the sole recipients. Tuition discounts are also extended to students whose family incomes indicate that they can afford the full price of tuition and fees.

A more recent study by the National Association of College and University Business Officers in 2013 found that 88 percent of freshmen received an institutional grant or discount during the 2012-13 academic year, with the average grant covering over 50 percent of tuition and fees. These discounts come at a financial loss to the institution.

The details of the president’s proposal have yet to emerge, but the concept itself holds much promise for the country. As many have already pointed out, it would not solve the student loan crisis, but it would significantly slow it down and reduce the magnitude of its scale for students who opt to start at a community college and major in the fields targeted by the president’s proposal, since tuition and fees at community colleges tend to be a fraction of most colleges and universities. A community college education presents value for both low-income and middle-income students and families.

In Massachusetts, for example, a student who completes a bachelor’s degree through the community college to a state university or University of Massachusetts pathway can complete a degree for as little as $30,000, compared with the state median of $120,000 for a bachelor’s degree. With community colleges enrolling 36 percent  of the state’s high school graduates and nine out of 10 of those graduates remaining in the state, an investment in community college completion can ensure that local business can fill jobs that do not require an advanced degree and keep those jobs here rather than moving to other states or offshore.

Yves Salomon-Fernandez is vice president for strategic planning at MassBay Community College and campus executive officer for its Framingham location. This originated on the Web site of the New England Board of Higher Education (nebhe.org).