Tennessee Promise Scholarship Sails Through Senate

Driveto55VerticalLogoThe Tennessee Promise Scholarship Act of 2014 passed the state Senate last night by a 30-1 vote. The Promise, a key component of Governor Haslam’s Drive to 55 Initiative, will be used to provide “last dollar” scholarship awards (after all other scholarships and financial aid are applied) towards the cost of tuition and fees for first-time Tennessee freshman students pursuing an associates degree or technical certificate.

The legislation also has provisions aimed specifically at university students. A couple of years ago, the legislature adopted changes to the HOPE Lottery Scholarship program that would allow students to receive their awards for the summer terms in addition to the traditional Fall and Spring semesters. When the change was implemented, modifications were made to the terminating events for the Lottery Scholarship.  Rather than students being eligible for a full five years, the award was capped at 120 attempted semester hours or when a degree was earned, whichever of the two came first.

The Tennessee Promise legislation contains a significant change to current law surrounding HOPE Scholarships:  The change will allow students to take advantage of 8 full semesters of HOPE eligibility (taking as many hours as they wish within that period) or to use the standard 120 semester hour cap.  Students will retain their scholarship for eight semesters or 120 semester hours, whichever occurs last.

As with most policy changes, the change in HOPE Scholarship terminating events comes with a price tag.  To cover the cost of making this change, The Tennessee Promise legislation changes HOPE Scholarship award amounts.

At four-year universities, freshmen and sophomores eligible for the HOPE award will receive $3,500 annually.  HOPE eligible juniors and seniors will see an increase in their current award amount to $4,500 annually.

The Tennessee Promise has not yet come up for a vote on the House floor.  It is expected to be heard in the coming days as lawmakers wrap up the legislative session.

 

POLICY BREAKDOWN: The Tennessee Promise Explained

With the adoption of the Complete College Tennessee Act (2010) and the recent roll out of Governor Bill Haslam’s Drive to 55 agenda, the landscape of higher education in Tennessee has shifted dramatically to a re-engineered throughput and credential driven enterprise. In order to maximize economic viability and to incentivize the growth of a new and more prepared workforce for prospective businesses as well as current Tennessee employers, Governor Haslam has challenged higher education stakeholders with raising the bar. However, leveraging the existing framework will not be enough to achieve the state’s goal of increasing the current postsecondary attainment level of 32 percent to more than 55 percent by the year 2025. The primary lever by which the Governor plans to push Tennessee forward in student success and achievement is the recently introduced Tennessee Promise Scholarship Act of 2014.

While noting that some of the provisions in the legislation have far reaching implications for rising high school graduates, postsecondary institutions and the state; it is not merely the “free community college” bill that it has perhaps been made out to be.  The bill does lay out the plan to extend the Tennessee Achieves program (currently operating out of a select few counties) statewide as the incentive basis for students to pursue an associates degree or a technical certificate credential. However, the proposal also addresses a wide array of lottery specific and lottery funded policy areas that are designed to increase access and incentivize the timely throughput of students.

As noted earlier, the Tennessee Promise has largely been billed as the “free community college” initiative. While the Promise may in fact provide the extra incentive for some to attend a local community college, it is more appropriate to say that the expansion of the Tennessee Achieves program statewide will provide a specific population of graduating high school students with some last dollar opportunities. Because of the already low cost of attending a community college (approximately $3,800 annually) and the stipulation that all financial aid be applied to tuition and fee costs, few students who are eligible for either HOPE awards or PELL grants will receive Promise dollars.

The target population for the Tennessee Promise grants will likely be those high school graduates who are not academically eligible (3.0 cumulative grade point average in high school or a 21 ACT score) for the HOPE scholarship and also do not qualify for substantial PELL grants. It is the goal of the program that these students might be incentivized to pursue an associates degree or technical certificate. Thus, students seeking to enroll in UTC, UTK or UTM will not be eligible for funds under the Tennessee Promise as none of the UT institutions offer associate degrees.

Similarly, the provisions within the bill that outline a new opportunity for non-traditional students to attend one of Tennessee’s technology centers (the Tn Colleges of Applied Technology or TCAT) also do not apply to the UT institutions. The Wilder-Naifeh Reconnect Grant is a one-time offer to non-traditional students to receive a grant sufficient to cover the tuition and fees associated with a technical certificate program at a TCAT. None of the UT institutions offer such technical certificates.

What’s in it for UT?

Despite that UT institutions will not directly benefit from the Tennessee Promise grants or the Wilder-Naifeh Reconnect Grant, there are provisions within the legislation specifically aimed at university students. A couple of years ago, the legislature adopted changes to the HOPE Lottery program that would allow students to receive their awards for the summer terms in addition to the traditional Fall and Spring semesters. However, anytime policy changes are made within the lottery program that represent an increase in costs, additional policy changes must be made to account for like savings. When the summer term stipends were implemented, subsequent modifications were made to the terminating events for the Lottery. Rather than a full five years of eligibility, the award was capped at 120 attempted semester hours or when a degree was earned, whichever of the two came first. Whether a student had attained a degree within the 120 hours or not, the HOPE award was terminated.

Several attempts have been made in recent years to develop a compromise approach to allow students the latitude to exceed the 120 semester hour cap without causing a significant cost burden to the lottery program. The Tn Promise legislation contains the statutory change that will allow a student the option to take advantage of 8 full semesters of HOPE eligibility (taking as many hours as they wish within that period) or to use the standard 120 semester hour cap. As proposed, students will retain their scholarship for eight semesters or 120 semester hours, whichever occurs last.

The inclusion of the revised terminating events addresses the needs of students whose academic pursuits go beyond the base 120 semester hours needed for the typical degree. Honor’s College students, ROTC cadets, students seeking two majors or an additional minor, and those students who simply want more from their college experience have historically been financially discouraged from their pursuits due to the early cutoff of lottery award opportunities. In an effort to better serve these students, the legislation provides an open-ended eight semesters of eligibility to students at the four-year institutions in order to accomplish their personal goals yet do so in such a way that also allows them and their parents to avoid the burden of an extra year’s worth of student loans and attendance costs.

The caveat to the open-ended eight semester provision is the need to offset the resulting increased costs to the lottery program. To do this, the Tennessee Promise legislation proposes significant funding changes to HOPE award amounts at two and four year institutions. For context, it is important to note that the HOPE Scholarship as well as the General Assembly Merit supplement and ASPIRE supplement (need-based) are funded solely by net proceeds from the lottery revenues. The pending Tennessee Promise grants will be funded primarily by interest revenues off of a trust account and any surplus net revenue after all other HOPE expenditures are made.

In order to mitigate the cost of implementing the Tn Promise grants, the base HOPE award for community college students will be increased from $1,000 per semester to $1,500 per semester.  However, in order to offset the cost of implementing the 8-semester provision under the language of the original bill, freshmen and sophomores at the 4-year universities would have seen their per semester award decrease from $2,000 per semester to $1,500. Also per the original language in the bill, students who retained their HOPE award through to their junior and senior years would have seen their award for those years increased to $2,500. However, on further analysis of the potential financial impact to university students, it became apparent to the Administration and to legislators that modifications were needed.

The language of the original bill similarly impacted universities within the UT system. UT institutions are aggressively seeking ways to offset cost increases, minimize tuition increases and still maintain recruitment and freshmen cohort sizes.  UT administrators have reservations regarding any legislation, the Tennessee Promise included, that might provide further disincentive to students who otherwise would pursue a degree from one of the UT campuses. Given the concerns of all the public and private universities in the state, compromise language to address the financial impact to HOPE eligible students at the 4-year institutions was proposed by the Administration and amended to the bill.

HOPE eligible students at community colleges will still see the proposed increase as originally provided; however, those 2-year students who are otherwise eligible for the HOPE awards and the ASPIRE supplement will see that supplement amount of $750 per semester reduced to $250 per semester as a further cost-savings. Under the revised bill, freshmen and sophomore students receiving the HOPE award at a 4-year institution will receive $1,750 per semester as opposed to the originally projected $1,500 per semester.  Likewise, HOPE eligible juniors and seniors attending 4-year institutions will still see an increase in their award amount. Though the original bill projected an increase to $2,500 per semester, under the revised language they will receive $2,250 per semester, a $250 increase over the current stipend amount.

Tennessee Promise Scholarship Act of 2014:  The Basics

  • Creates a new Trust account from transferred funds out of the Tennessee Lottery Reserve account. The interest from the Trust combined with available surplus revenues from the Tennessee lottery proceeds will be placed in a secondary account – the Tennessee Promise Special Reserve.
  • Funds available in the Tn Promise Special Reserve will be used to provide “last dollar” awards, after all other scholarships and financial aid, towards the cost of tuition and fees for first-time freshman students pursuing an associates degree or technical certificate.
  • Requires participating students to ‘buy-in’ to the program through public service and mentoring programs.
  • Creates the Wilder-Naifeh Reconnect Grant, a one-time grant for non-traditional students seeking a technical certificate. The grant amount will cover tuition/fees at one of the technology centers.
  • Changes the HOPE award amounts for freshmen and sophomores at both two and four year institutions:
    -  Community college freshmen/sophomores: increase award from $1000/per semester to $1500/per semester.
    -  University freshmen/sophomores: Reduce award from $2000/per semester to $1750/per semester.
    -  University juniors/seniors: Increase award amount from $2000/per semester to $2250 /per semester.
    -  Community college students: Reduce the ASPIRE supplement for need-based students by $500/per semester.
  • Changes the terminating events for HOPE scholarship eligibility: The 8 Semester Provision.  HOPE recipients may retain the scholarship until the first of the following:
    -  have earned their degree
    -  been enrolled for five years
    OR until whichever occurs last between:
    -  a student has received HOPE for eight semesters
    -  a student has attempted 120 semester hours.