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lality
ID
Stuctent
Financial Aict
Programs
A New Approach
an=,
RONALD S. FECSO, Edtitror
Panel on Quality Improvement
in Student Financial Aid Programs
BENJAMIN F. KING, Chair
Committee on National Statistics
Commission on Behavioral and Social Sciences and Education
National Research Council
NATIONAL ACADEMY PRESS
Washington, D.C. 1993
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NATIONAL ACADEMY PRESS · 2101 Constitution Ave., N.W. · Washington, D.C. 20418
NOTICE: The project that is the subject of this report was approved by the Governing Board
of the National Research Council, whose members are drawn from the councils of the National
Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine.
The members of the committee responsible for the report were chosen for their special competences
and with regard for appropriate balance.
This report has been reviewed by a group other than the authors according to procedures
approved by a Report Review Committee consisting of members of the National Academy of
Sciences, the National Academy of Engineering, and the Institute of Medicine.
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of dis-
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advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is
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the National Research Council.
The project that is the subject of this report was supported by the U.S. Department of
Education under contract number LC90051001/C.
Library of Congress Catalog Card No. 93-84866
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B133
Copyright 1993 by the National Academy of Sciences. All rights reserved.
Printed in the United States of America
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PANEL ON QUALITY IMPROVEMENT IN
STUDENT FINANCIAL AID PROGRAMS
BENJAMIN F. KING (Chair), College of Business, Florida Atlantic
University
THOMAS J. BOARDMAN, Department of Statistics, Colorado State
University
*JERRY S. DAVIS, Pennsylvania Higher Education Assistance Agency,
Harrisburg, Pennsylvania
NATALA K. HART, Office of Scholarships and Financial Aid, Indiana
University-Purdue University at Indianapolis
WILLIAM J. HILL, Allied-Signal, Inc., Buffalo, New York
GARY A. LORDEN, Office of Student Affairs, California Institute of
Technology
REBECCA A. MAYNARD, Graduate School of Education, University of
Pennsylvania
ROBERT E. PAPILLA, Office of the President, Montgomery Community
College, Rockville, Maryland
THOMAS D. PARKER, The Education Resources Institute, Boston,
Massachusetts
S. JAMES PRESS, Department of Statistics, University of California,
Riverside
BRIAN ROWAN, School of Education, University of Michigan
JUDITH M. TANUR, Department of Sociology, State University of New
York at Stony Brook
SHARON L. THOMAS PARROTT, Governmental Relations, DeVRY, Inc.,
Oakbrook Terrace, Illinois
RONALD S. FECSO, Study Director
LINDA INGRAM, Research Associate
REBECCA L. HANCOCK, Project Assistant
HELEN LOPEZ, Project Assistant
MELISSA MARSDEN, Project Assistant
SUBRAMANYAM KASALA, Consultant
FREDRICA D. KRAMER, Consultant
MARGARET WEIDENHAMER, Consultant
*
Served until May 1992
. . .
111
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COMMITTEE ON NATIONAL STATISTICS
1992-1993
BURTON H. SINGER (Chair), Department of Epidemiology and Public
Health, Yale University
NORMAN M. BRADBURN (Vice Chair), National Opinion Research
Center, University of Chicago
MARTIN H. DAVID, Department of Economics, University of Wisconsin,
Madison
JOHN F. GEWEKE, Department of Economics, University of Minnesota,
Minneapolis
NOREEN GOLDMAN, Office of Population Research, Princeton
University
LOUIS GORDON, Department of Mathematics, University of Southern
California
JOEL B. GREENHOUSE, Department of Statistics, Carnegie Mellon
University
ERIC A. HANUSHEK, Department of Economics, University of Rochester
ROBERT M. HAWSER, Department of Sociology and Institute for
Research on Poverty, University of Wisconsin, Madison
JANET L. NORWOOD, The Urban Institute, Washington, D.C.
DOROTHY P. RICE, Department of Social and Behavioral Sciences,
School of Nursing, University of California, San Francisco
JOHN E. ROLPH, The RAND Corporation, Santa Monica, California
KEITH RUST, Westat, Inc., Rockville, Maryland
DANIEL L. SOLOMON, Department of Statistics, North Carolina State
University
MIRON L. STRAP, Director
SUSANNA MCFARLAND, Administrative Associate
IV
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Preface
The Panel on Quality Improvement in Student Financial Aid Programs
first convened on September 27, 1991. The U.S. Department of Education
had asked the National Academy of Sciences to form a panel, under the
Committee on National Statistics, to provide guidance in answering the
following questions:
1. Given the nature of Title IV programs, what are realistic goals for
determining whether the system is performing well or poorly?
2. Does the current system of quality control generate accurate and
timely information with which to measure performance? Are all relevant
aspects of certification error measured in a fair, accurate, and reliable man-
ner?
3. Does the information generated provide management at all levels
with appropriate information with which to target error reduction strategies?
4. Are the reviews, oversight, and incentives currently employed to
detect errors sufficient to ensure accountability and effectiveness in pro-
gram administration?
5. What changes, if any, are needed to reduce errors in program admin-
istration without detracting from basic program goals? Where is more in-
formation needed about promising alternatives, and how should this infor-
mation be acquired?
The reader will see that in our response we often make recommenda-
tions that call for sweeping revisions of the present system. If this suggests
the phrase reinventing government, although I can only speak for myself, I
think that most of the panel members would be happy to be identified with
that movement. While our prescriptions contain quite a heavy dose of total
quality management, this emphasis is not the result of merely following a
v
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Vl
PREFACE
current fad. I would describe the individual attitudes toward TQM at our
first meeting as running from a to z—apathetic to zealous perhaps due to
the wide diversity of the panelists' backgrounds. There are in addition to
statisticians from both university and industry school financial aid admin-
istrators, policy analysts, college officers, and education finance experts.
As the details of the postsecondary student financial aid system and issues
of quality were revealed, however, the panel became unanimous in its belief
that a TQM approach is appropriate because (1) customer needs were not
being adequately met; (2) there should be greater focus on actions that
affect fundamental problems with the system rather than overreacting to
special instances that are not part of the natural process but are assignable,
perhaps, only to specific circumstances; and (3) management must dedicate
itself, from the top down, to continuous quality improvement in the system.
The panel met face-to-face 5 times, and those meetings spanned a pe-
riod of only 13 months an extremely efficient operation. Panel members
performed a great deal of research and legwork between meetings inter-
viewing participants in the student financial aid process, drafting parts of
the report, contributing background notes, and reviewing and editing the
work of the staff. They are all to be commended for their outstanding
efforts, and I hope that they received as much pleasure from this experience
as I did in working with them.
On the panel's behalf, I would like to acknowledge and thank all of the
people who assisted us in various ways. We were fortunate to find so many
people willing to share their time and expertise. While everyone's input
was appreciated, some individuals deserve identification for contributions
of exceptional value to our effort.
Thanks go to the staff from financial aid offices at various institu-
tions Sherwood Johnson at the State University of New York at Stony
Brook, David S. Levy at the California Institute of Technology, James Lockwood
at Montgomery College, Patricia McWade at Georgetown University, Olga
Moas at Florida Atlantic University, Michael O' Grady at George Mason
University, and Robin Robinson at American University. Special thanks go
to G. Kay Jacks and the staff at Colorado State University for assistance in
arranging a very informative meeting with staff from Metropolitan State
College, the University of Colorado at Boulder, and the Colorado Institute
of Art.
The Department of Education's technical contact for this study, Daniel
Goldenberg, was especially helpful. Many staff members from the depart-
ment gave freely of their time to assist the panel, especially Ernest Becker,
Robert Biehl, Stephen Carter, Karen Chauvin, Donald Conner, Victoria Edwards,
Brian Fitzgerald, David Goodwin, John Haines, Clarence M. Hicks, Paul
Hill, Molly Hockman, Gerald Malitz, Drew Malizio, Maureen A. McLaughlin,
Barbara Mroz, former assistant secretary of education Carolyn Reid-Wallace,
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PREFACE
. .
V11
Jack C. Reynolds, Jeanne B. Saunders, Angela Torrvella, Anne Tuccillo,
Nina Winkler, and Steven Zwillinger.
Other individuals who provided valuable assistance to the panel include
Paul Biemer, Maurice O. Brice, Ann Coles, Stephen Dienstfrey, Judith Fernandez,
Wayne Gardner, Stanley Johnson, Graham Kalton, Walter L. Kaszuba, Arnold
Kling, Anita Lancaster, Dallas Martin, Elizabeth Martin, Geri Mooney, Pedro
Saavedra, Joan Sander, Richard Sigman, Monroe G. Sirken, and Jaki Stanley.
Advice from several consultants and the background papers prepared
for the panel were highly valued. The panel expresses its thanks to William
Adams, Urton Anderson, Mary Batcher, Daniel Carr, Subramanyan Kasala,
Fredrica D. Kramer, Leda Kydoniefs, Mark Reiser, Paulette Sewell, Clifton
Sutton, Marie van Melis-Wright, and Margaret Weidenhamer.
We wish to thank the members of the Committee on National Statistics
whose critical and constructive comments on the draft report were invalu-
able to the panel. Miron Straf, director of the Committee on National
Statistics, and Susanna McFarland, administrative associate, ensured the
smooth functioning of our operation. Thanks are also due to Eugenia Grohman,
associate director for reports of the Commission on Behavioral and Social
Sciences and Education, and to her technical staff for their editorial work.
Special thanks go to the panel staff: Linda Ingram, research associate,
and Rebecca Hancock, Helen Lopez, and Melissa Marsden, project assis-
tants. Their dedication to the substantive and administrative details of the
project provided a much-needed backdrop to the panel's work.
Finally, I know that the members of the panel enthusiastically join me
in thanking Ronald S. Fecso, the project's study director, for his unstinting
devotion to this project. Through the Intergovernmental Personnel Act, Ron
was "on loan" from the National Agricultural Statistics Service of the U.S.
Department of Agriculture, where, as senior research statistician, he serves
as an expert on sample surveys and has contributed to the development of
quality improvement efforts within that agency. This report would not have
materialized if it were not for Ron's diligent efforts in background research
and writing. In addition, he is to be especially commended for his ingenu-
ity and skills of persuasion in commissioning the technical papers included
in the appendix. We sincerely appreciate the support of the late Charles E.
Caudill and his management team at the National Agricultural Statistics
Service, who made it possible for Ron to assist us.
Benjamin King, Chair
Panel on Quality Improvement in
Student Financial Aid Programs
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Contents
SUMMARY OF MAJOR CONCLUSIONS
AND RECOMMENDATIONS
PART I BACKGROUND
INTRODUCTION
The Federal Student Financial Aid System, 21
Purpose and Scope of Study, 24
Organization of the Report, 25
2 CONTINUOUS IMPROVEMENT: THE NEW QUALITY
MANAGEMENT PHILOSOPHY
Improving Quality, 28
Identifying Customer Needs, 28
Emphasizing Systems Thinking, 29
Making Data-Based Decisions, 30
Accepting Change, 31
Working Together, 31
Understanding Variation, 32
Understanding the Organization's Aims and Purposes, 33
Fostering Top Management Leadership, 34
19
21
26
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x
OVERVIEW OF STUDENT FINANCIAL AID
PROGRAMS
Types and Sources of Student Aid, 35
Federal Student Financial Aid Recipients, 40
Eligibility, 41
The Aid Formula, 42
The Award Process, 43
PART II "QUALITY" IN THE STUDENT
FINANCIAL AID PROGRAMS
4 CURRENT QUALITY CONTROL PROCEDURES
Error Defined, 49
The Quality Control Process, 51
Processing Activities, 53
Audits and Program Reviews, 64
5 ALTERNATIVE PERSPECTIVES ON QUALITY
IN STUDENT FINANCIAL AID PROGRAMS
Surveys of Error, 83
The Applicant's View, 99
Postsecondary Institutions, 109
6 FINANCIAL AID DATA SYSTEMS
The Management Information System, 1 18
Student Loan Data, 120
Problems With the Data System, 121
A Proposed Solution, 122
PART III TOWARD AN IMPROVED
DELIVERY SYSTEM
7 QUALITY CONTROL IN OTHER MONETARY
DISTRIBUTION SYSTEMS
Federal Need-Based Benefit Programs, 128
Private Sector Monetary Distribution Systems, 143
Lessons for Student Financial Aid Programs, 144
8 A NEW STRATEGY FOR THE DEPARTMENT
OF EDUCATION
The Institutional Quality Control Project, 150
Summary of the Panel's Review of the IQC Project, 160
CONTENTS
35
47
49
83
117
125
127
149
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CONTENTS
9 FURTHER INITIATIVES FOR IMPROVEMENT
IN THE SYSTEM
Reauthorization of the Higher Education Act, 163
Toward a New Applicant Processing System, 165
Student Loans, 172
Top Management Leadership, 173
REFERENCES AND BIBLIOGRAPHY
APPENDIXES
A A Review of the Methodology Used in the Integrated
Quality Control Measurement Project
Mark Reiser
B The Taxpayer as Customer
Mary Batcher and Paulette Sewell
Applying for Federal Student Financial Aid for 1992-93
Margaret Weidenhamer
Laboratory Methods and Document Redesign
Leda Kydoniefs and Marie van Melis-Wright
The IRS Experience With Cognitive Labs and Forms Design
Mary Batcher
Alternative Approaches to Audit and Program Review for
Student Financial Aid Programs
Urton Anderson
Biographical Sketches of Panel Members and Staff
Xl
163
177
185
194
197
215
221
225
243
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