College Opportunity Incentive Fund

A Proposal to Amend the Higher Education Act of 1965

The purpose of the College Opportunity Incentive Fund is to encourage states and institutions of higher education to increase the number of young adults from families with below-median incomes who enroll in and graduate from college.

• The promise and prospect of upward mobility is a bedrock of American economic growth and social cohesion.

• Postsecondary education has become a virtual necessity for an adult to enter and remain in the middle class.

• High school graduates from families with incomes below the national median are much less likely to enroll in higher education than those from higher income backgrounds.

• Among those lower income students who do enroll in college, the proportion completing a degree lags significantly behind higher income groups.

• Large income-based gaps in college enrollment and completion exist even for high school graduates with similar academic qualifications.

• High school students of all backgrounds are significantly more likely to complete a college degree when they enroll shortly after high school, attend full time, and keep work to a minimum (no more than 15 hours per week).

• Financial and other support is critical to improving the rate at which students from low- and moderate-income families enroll in and complete a postsecondary program.

3. College Opportunity Incentive Fund

States receive funds on the basis of the enrollment of students from below-median-income families, and receive double credit in the distribution formula for graduating students from below-median-income families.

Of the funds available under section 5, the U.S. Secretary of Education shall provide the funds to States that submit applications to the Secretary. The applications shall describe the State’s overall plan for college access and success, its progress in achieving its goals, and its intended uses for the Federal incentive funds.

The funds shall be distributed based on the number of students from families with below-median income that enroll and graduate from an institution of higher education in the State.

Each State’s allocation shall be based on its proportion of the combined total of all applying States of the following, for the most recent year available:

• The number of full-time-equivalent dependent undergraduate students with family incomes below the median of all families in the United States, as estimated by the Secretary; plus

• Two times the number of degree and certificate recipients who are dependent undergraduate students with family incomes below the median of all families in the United States.

A State may use its allocation from the Fund to provide grants to students with financial need whose families have below-median income, or to provide grants to institutions in order to increase need-based financial aid for such students. States may distribute funds to institutions on the basis of the institutions’ success in enrolling, retaining, and graduating students from families below the median income.

Amount: $400,000,000 in Fiscal Year 2009, $500,000,000 in 2010, $600,000,000 in 2011, and $750,000,000 in 2012, to be distributed by the Secretary of Education to States according to the method described in section 4.

6/4/07