Federal Student Aid: Expanding Eligibility for Less Than Halftime
Students Could Increase Program Costs, But Benefits Uncertain	 
(10-SEP-03, GAO-03-905).					 
                                                                 
Despite the availability of federal, state, and other sources of 
student aid, concerns have been raised that adult		 
undergraduates--those 24 and older--receive inadequate assistance
in meeting the costs of postsecondary education, particularly	 
those adults who take one to five credits per term (or less than 
halftime). These concerns have been raised because less-than	 
halftime adult students are unable to participate in the largest 
federal student loan programs, the Stafford Loan programs, and	 
they are eligible to receive only one of the two federal higher  
education tax credits, the Lifetime Learning tax credit. To	 
better understand the needs of these adult students, GAO was	 
asked to identify (1) the extent to which adults enroll less than
halftime, the characteristics and factors associated with	 
less-than- halftime enrollment, and the rates of completion among
these students; (2) the extent to which adult students enrolled  
less than halftime receive federal, state, and other assistance  
to help them meet the cost of postsecondary education; and (3)	 
the implications, including the budgetary impact, of changing the
Pell Grant Program to allow less-than-halftime students to count 
room and board costs and personal expenses in their application  
for federal financial aid, and changing the Stafford loan	 
programs to permit participation by less-than-halftime students. 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-905 					        
    ACCNO:   A08410						        
  TITLE:     Federal Student Aid: Expanding Eligibility for Less Than 
Halftime Students Could Increase Program Costs, But Benefits	 
Uncertain							 
     DATE:   09/10/2003 
  SUBJECT:   Adult education					 
	     Aid for education					 
	     College students					 
	     Educational grants 				 
	     Higher education					 
	     Student financial aid				 
	     Student loans					 
	     Tax credit 					 
	     Dept. of Education Stafford Student Loan		 
	     Program						 
                                                                 
	     Federal Pell Grant Program 			 
	     HOPE Tax Credit					 
	     Lifetime Learning Tax Credit			 
	     Temporary Assistance for Needy Families		 
	     Block Grant					 
                                                                 

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GAO-03-905

Report to Congressional Requesters

United States General Accounting Office

GAO

September 2003 FEDERAL STUDENT AID

Expanding Eligibility for Less Than Halftime Students Could Increase
Program Costs, But Benefits Uncertain

GAO- 03- 905

In the 1999- 2000 school year, 2.3 million adults enrolled in
undergraduate education on a less- than- halftime basis, many seeking to
balance school with other responsibilities. Compared with other adult
students, the typical lessthan- halftime adult student was more likely to
work fulltime, be married, and have a household income over $30,000.
Though 3 out of 4 less- than- halftime adult students expect to complete a
degree or certificate program when they begin their education, most leave
school without completing one.

Household Income of Adult Undergraduate Students, 1999- 2000 Percentage of
adult students

Income

Source: GAO calculations from National Postsecondary Student Aid Study,
1999- 2000. Less- than- halftime adult students All other adult students

0 5

10 15

20 25

Over $80,000 $70-$ 79,999

$60-$ 69,999 $50-$ 59,999 $40-$ 49,999 $30-$ 39,999 $20- 29,999

$10- 19,999 $0- 9,999

7 11

15 16 11 11

9 6

14 20

23 18

11 8

6 5 3

6

About 70 percent of less- than- halftime adult students received some
assistance* about 44 percent of their schooling costs* typically from
sources other than federal or state student aid. The sources of assistance
they received varied by household income: lower- income adult students
enrolled less than halftime relied primarily upon student financial aid in
meeting school costs, while higher- income households were assisted
primarily by work- related sources such as the Lifetime Learning tax
credit or employer assistance.

We estimate that proposed changes to the Pell Grant programs would cost
the federal government a minimum of $25 million for the 2003- 2004 school
year. Allowing less- than- halftime students to participate in the
Stafford Loan programs would cost about $113 million per year. College
administrators expressed reservations about expanding Stafford Loan
eligibility due to concerns about increasing default rates.

In commenting on our draft report, Education noted that they found it to
be thorough and useful. Despite the availability of federal,

state, and other sources of student aid, concerns have been raised that
adult undergraduates* those 24 and older* receive inadequate assistance in
meeting the costs of postsecondary education, particularly those adults
who take one to five credits per term (or less than halftime). These
concerns have been raised because less- than

halftime adult students are unable to participate in the largest federal
student loan programs, the Stafford Loan programs, and they are

eligible to receive only one of the two federal higher education tax
credits, the Lifetime Learning tax

credit. To better understand the needs of these adult students, GAO was
asked to identify (1) the extent to which adults enroll less than
halftime, the characteristics and factors associated with less- than-
halftime enrollment, and the rates

of completion among these students; (2) the extent to which adult students
enrolled less than halftime receive federal, state, and

other assistance to help them meet the cost of postsecondary education;
and (3) the implications, including the budgetary impact, of changing the
Pell Grant Program to allow less- than- halftime students to count room
and board costs and personal expenses in their application for federal
financial aid, and changing the Stafford loan programs to permit
participation by less- than- halftime students.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 905. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Cornelia Ashby at (202) 512- 8403 or ashbyc@ gao.
gov.

Highlights of GAO- 03- 905, a report to the Chairman, Committee on
Education and the Workforce, and Chairman, Subcommittee on 21st Century
Competitiveness, Committee on Education and the Workforce, House of
Representatives

September 2003

FEDERAL STUDENT AID

Expanding Eligibility for Less Than Halftime Students Could Increase
Program Costs, But Benefits Uncertain

Page i GAO- 03- 905 Federal Student Aid Letter 1 Results In Brief 3
Background 5 Most of the 2.3 Million Adult Undergraduate Students Who

Enrolled Less Than Halftime Needed to Balance School and Other
Responsibilities, and Many Were Unable to Complete Their Programs 11 Most
Less- Than- Halftime Adult Students Received Some

Assistance with Postsecondary Costs, Typically from WorkRelated Sources 19
Changing the Pell and Stafford Programs Would Provide More

Students With Additional Aid, but Result in Increased Federal Budget Costs
and, Potentially, Undesirable Effects for Students and Institutions 25
Concluding Observations 29 Agency Comments 30 Appendix I Objectives,
Scope, and Methodology 31

Appendix II Estimates and Associated Confidence Intervals 38

Appendix III Budgetary Impact of Possible Behavioral Response to Cost of
Attendance Changes in the Pell Program 48

Appendix IV Comments from the Department of Education 51

Appendix V GAO Contacts and Staff Acknowledgments 52 GAO Contacts 52 Staff
Acknowledgments 52 Tables

Table 1: Differences Between Students Under 24 Years of Age and Age 24 And
Older 6 Contents

Page ii GAO- 03- 905 Federal Student Aid

Table 2: Elements Included in Cost of Attendance for Pell Awards 8 Table
3: Differences Between Less- than- Halftime Adult Students and Other Adult
Students 13 Table 4: Estimated Effects of Changes to Pell Grant Program 26
Table 5: Estimated Effects of Changes to Stafford Loan Programs 27 Table
6: Site Visit States and Institutions Contacted 34 Table 7: Age of All
Undergraduate Students, 1999- 2000 38 Table 8: Age of All Adult
Undergraduate Students, 1999- 2000 38 Table 9: Differences Between
Students 18- 23 and Adult Students

(24 or older) 1999- 2000 38 Table 10: Type of Institution Attended by
Adult Students, 1999- 2000 39 Table 11: Type of Degree Sought by Adult
Undergraduates, 1999- 2000 39 Table 12: Amount of Assistance Received by
All Adult Students, 1999- 2000 39 Table 13: Enrollment Intensity among
Adult Undergraduates, 1999- 2000 40 Table 14: Differences between Less
Than Halftime, Halftime, and Fulltime Adult Students 40 Table 15: Type of
Institution At Which Adult Students Enrolled, 1999- 2000 41 Table 16:
Estimated Costs for Less Than Halftime Adult Students, 1999- 2000 41 Table
17: Percent of Costs Covered by All Sources of Assistance, 1999- 2000 41
Table 18: Mean Assistance Received by Less Than Halftime Students, 1999-
2000 42 Table 19: Mean Amount of Assistance Received by Less Than

Halftime Students, By Source, 1999- 2000 42 Table 20: Type of Aid Received
by Less Than Halftime Students, 1999- 2000 42 Table 21: Percent Receiving
Pell Grants, by Income, 1999- 2000 43 Table 22: Percent Receiving State
Aid, by Income, 1999- 2000 43 Table 23: Percent Receiving Employer Aid, by
Income, 1999- 2000 43 Table 24: Percent Receiving Lifetime Learning Tax
Credit, By

Income, 1999- 2000 44 Table 25: Percent Receiving Institutional Aid, by
Income, 1999- 2000 44 Table 26: Percent Receiving Other Aid, by Income,
1999- 2000 44 Table 27: Percent of Less Than Halftime Adults below 150
Percent of 1998 Federal Poverty Guideline, 1999- 2000 45 Table 28: Type of
Aid Received by Less Than Halftime Students, by Income, 1999- 2000 45

Page iii GAO- 03- 905 Federal Student Aid

Table 29: Average Costs and Amount of Aid Received by Less Than Half- time
Students, by Income, 1999- 2000 46 Table 30: Grade Point Average of Adult
Undergraduates, 1999- 2000 46 Table 31: Degree Or Certificate Expectation
Among Adults Who

Enrolled Less Than Halftime During First Year 46 Table 32: National 6-
Year Completion Rate Among Adult Undergraduates With A Degree Or
Certificate Expectation 47 Table 33: Household Income Distribution of
Adult Students, 1999- 2000 47 Figures

Figure 1: Enrollment Distribution of All 7.1 Million Adult Undergraduate
Students, 1999- 2000 12 Figure 2: Income Levels of Adult Students*
Comparison between

Those Attending Less- Than- Halftime and Other Adult Students 14 Figure 3:
Terms of Less- Than- Halftime Enrollment among Students

Who Began as Adults and Completed Baccalaureate Degrees at Selected 4-
Year Institutions in 2001- 2002 18 Figure 4: Terms of Less- Than- Halftime
Enrollment among Students

Who Began as Adults and Completed Associate Degrees at Selected 2- Year
Institutions, 2001- 2002. 19 Figure 5: Percent of Less- Than- Halftime
Students Receiving Each

Type of Assistance, 1999- 2000 21 Figure 6: Proportion of Less- Than-
Halftime Adults Who Received Assistance, by Household Income, 1999- 2000
22

Page iv GAO- 03- 905 Federal Student Aid Abbreviations

BPS Beginning Postsecondary Students Longitudinal Study COA cost of
attendance EFC expected family contribution FAFSA Free Application for
Federal Student Aid FDLP Federal Direct Loan Program FFELP Federal Family
Education Loan Program FSA Federal Student Aid GED General Educational
Development NCES National Center for Education Statistics NPSAS National
Postsecondary Student Aid Study PRWORA Personal Responsibility and Work
Opportunity

Reconciliation Act TANF Temporary Assistance to Needy Families WIA
Workforce Investment Act

This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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separately.

Page 1 GAO- 03- 905 Federal Student Aid

September 10, 2003 The Honorable John A. Boehner Chairman, Committee on
Education and the Workforce House of Representatives

The Honorable Howard P. *Buck* McKeon Chairman, Subcommittee on 21st
Century Competitiveness Committee on Education and the Workforce House of
Representatives

To help them meet the costs of higher education, the nation*s
postsecondary students received approximately $85 billion in grant and
loan assistance from federal student aid programs, state student aid
programs, and postsecondary institutions in academic year 2001- 2002.
Additional assistance in meeting the costs of postsecondary education was
available from work- related sources of support, such as the Lifetime
Learning tax credit and employer assistance. Despite these sources of
assistance, some suggest that nontraditional students* particularly adult
students* receive inadequate support to help them meet the costs of
undergraduate postsecondary education. There is particular concern about
low- income adult students, who may be enrolled with the hope of improving
their prospects for higher wages and career advancement.

Advocates for adult students note that many adults enroll on a less-
thanhalftime basis and are consequently disadvantaged in obtaining
financial support. For example, less- than- halftime students, those
taking one to five credits, are not eligible to participate in the federal
Stafford student loan programs. 1 Moreover, though they are eligible to
participate in the largest federal student grant program, the Pell Grant
program, no allowances are made for their room, board, and miscellaneous
personal expenses in the calculation of grant amounts, as is done for
students enrolled halftime or more. Furthermore, less- than- halftime
students who are tax filers may

reduce their federal income tax liability through the use of the Lifetime
Learning tax credit, but they are ineligible to claim the other federal
higher education tax credit, the HOPE credit. And, although less- than-
halftime

1 Stafford loans are offered under the Federal Family Education Loan
Program and the William D. Ford Direct Loan Program. United States General
Accounting Office Washington, DC 20548

Page 2 GAO- 03- 905 Federal Student Aid

students are eligible to participate in the federal campus- based aid
programs* Supplemental Educational Opportunity grants, Perkins loans, and
federal work- study aid* the institutions they most often attend receive a
small share of these funds. Finally, advocates suggest, the Workforce
Investment Act (WIA) of 1998 and the Temporary Assistance to Needy
Families (TANF) program authorized by the Personal Responsibility and Work
Opportunity Reconciliation Act (PRWORA) of 1996 chiefly focus on immediate
employment or short- term training and, therefore, provide little
assistance to adults who seek to obtain a postsecondary credential.

In preparation for the upcoming reauthorization of the Higher Education
Act of 1965, you asked us to examine issues concerning adult students,
which, for the purposes of this report, are those who are 24 years or
older. In particular, you asked us to determine (1) the extent to which
adults enroll less than halftime, the characteristics and factors
associated with less- than- halftime enrollment, and the rates of
completion among these students; (2) the extent to which adult students
enrolled less than halftime receive federal, state, and other assistance
to help them meet the costs of postsecondary education; and (3) the
implications, including the budgetary impact, of changing the Pell Grant
program to allow room and board and miscellaneous personal expenses to be
considered in the calculation of grant amounts for less- than- halftime
students, and changing the Stafford loan programs to permit participation
by less- than- halftime

students. To answer question one, we analyzed two datasets created by the
Department of Education*s National Center for Education Statistics: the
1999- 2000 National Postsecondary Student Aid Study (NPSAS), and the 2001
Beginning Postsecondary Students Longitudinal Study (BPS). The two
datasets contain a nationally representative sample of students enrolled
at postsecondary institutions participating in federal student aid
programs and provide information on financial assistance they received,
hours they worked, and a wide range of other characteristics. We also
interviewed administrators of 19 postsecondary institutions, 18 of which
we visited. These included both public and private institutions and 2-
year and 4- year institutions located in four states: California,
Maryland, Ohio, and Virginia. We met with a range of administrators at
these institutions. We discussed with them the factors associated with
less- than- halftime enrollment among adult students, and from 10 of these
institutions we

obtained data on less- than- halftime enrollment and completion among
adult students. To answer question two, we analyzed data from the NPSAS,
surveyed states about financial aid for less- than- halftime students,

Page 3 GAO- 03- 905 Federal Student Aid

and interviewed postsecondary administrators. To answer question three, we
reviewed the Federal Student Aid Handbook, and used data from NPSAS.
Education officials provided us with information on federal subsidy rates
for Stafford loans and reviewed our estimation methodology. Appendix I
provides details on the study*s scope and methodology. Because NPSAS and
BPS are samples, there is sampling error associated with estimates
obtained from them. These sampling errors are reported in appendix II. We
did our work from October 2002 to August 2003 in

accordance with generally accepted government auditing standards. In
school year 1999- 2000, most of the nation*s 2.3 million adult
undergraduates who enrolled less than halftime were fulltime workers
needing to balance the demands of school with other responsibilities, and
few who aimed to complete a certificate or degree could be expected to do

so. Compared with other adult students, those enrolled less than halftime
had higher family incomes, were more often full- time workers, and more
likely to be married. Adults enrolled on a less- than- halftime basis
chiefly attended 2- year public institutions and often used less- than-
halftime enrollment to balance school, work, and family. Less- than-
halftime enrollment may have also enabled adults to address other
challenges they faced, including financial constraints, scheduling
conflicts, and limited

readiness for postsecondary education. For example, during site visits to
postsecondary institutions, administrators said that adults who have been
away from school find the prospect of returning to school intimidating,
both socially and academically, and less- than- halftime enrollment may
allow adult students to take the steps necessary to adjust to academic
life. National data indicate that while most adults who enrolled on a
less- than- halftime basis during their first year of postsecondary
education expected to complete a degree or certificate, few did. Moreover,
data provided by postsecondary institutions indicate that few adults who
completed a certificate or degree consistently enrolled on a less- than-
halftime basis.

In 1999- 2000, about 7 in 10 of the nation*s less- than- halftime adult
students received an average of $462 in assistance with their school
attendance costs of slightly more than $1,000, typically from sources
other than federal or state student aid. Though less- than- halftime adult
students had a range of household incomes, their school attendance costs
and the amount of assistance they received did not vary widely. However,
the sources of support they received did vary by household income. For the
less- than Results In Brief

Page 4 GAO- 03- 905 Federal Student Aid

halftime adult students with a household income below 150 percent of the
federal poverty guideline, 2 student financial aid* rather than work-
related sources of support* was the primary source of assistance. For the
lessthan- halftime adult students with household incomes above this level,
assistance was most often received from one of two work- related sources
of support: the Lifetime Learning tax credit or employer- provided

assistance. WIA and TANF may also provide assistance to less than halftime
adult students. However, WIA block grant funds have generally been used by
states to support employment- related assistance or skills training, and
few less than halftime students received WIA assistance. Very few less-
than- halftime adult students received TANF assistance, and

NPSAS collected no data on the extent to which TANF assistance was used to
meet their costs of postsecondary education.

Changing the Pell and Stafford programs could provide some less-
thanhalftime students with additional aid, increase program costs for the
federal government, and, potentially, pose loan default problems for some
institutions and students. Permitting less- than- halftime students to
include

the same costs as other students in their aid calculations is estimated to
provide 150,000 Pell recipients with additional grant aid averaging $110
per year, and another 13,000 less- than- halftime students who otherwise
would not receive a Pell award with an average award of $630. The federal
budget cost of this change in Pell Grant policy for less- than- halftime
students would be, at a minimum, $25 million for the 2003- 2004 academic

year. 3 Permitting less- than- halftime students to participate in the
Stafford Loan programs would result in more than two million additional
borrowers, according to our estimates. If federal costs per loan dollar
remained the same, this change would cost roughly $113 million per year.
Site visits to postsecondary institutions in four states revealed that
college administrators are concerned about the potential disadvantages of
permitting less- than- halftime students to participate in the Stafford
Loan program. They anticipate that less- than- halftime students who
borrow might be unlikely to complete their studies, and, as a consequence,
more

2 Issued annually by the Department of Health and Human Services, the
poverty guidelines are a simplification of the Census Bureau*s poverty
thresholds, and they are used to determine financial eligibility for
certain federal programs. NPSAS 2000 reports 1998

income data, since these served as the basis for financial aid
applications in the 1999- 2000 school year, when its data were collected.
The 1998 poverty guideline for a three- person household was $13,650.

3 This cost estimate assumes that adults who are not enrolled in school
will not choose to enroll in response to the policy change.

Page 5 GAO- 03- 905 Federal Student Aid

likely to default on their loans. Because institutional eligibility to
participate in federal student aid programs is linked to an institution*s
cohort default rate, 4 permitting borrowing by less- than- halftime
students may have the unintended consequence of jeopardizing the
eligibility of some institutions.

We provided Education with a copy of our draft report for review and
comment. In written comments on our draft report, Education noted that
they found our report to be thorough and useful. Education*s written
comments appear in appendix IV. Education also provided technical
comments, which we incorporated where appropriate.

Each year millions of adults participate in organized learning in the
United States, in a wide range of venues. In 1999, an estimated 90 million
persons 16 and older 5 reported that they had participated in some sort of
formal learning activity, ranging from personal development courses* such
as family genealogy or cooking classes* to apprenticeship and advanced
degree programs. Much of this learning takes place outside of formal
credential programs that confer a certificate or degree*- most often in
the workplace, where employers offer classes for job- specific skills, or
in the many courses offered by postsecondary institutions that are not
part of a credential program, such as a continuing education class.
Enrolling in a certificate or degree program at a postsecondary
institution is an important opportunity, however, for millions of adults
who seek personal growth, or advancement in their working lives.

In the 1999- 2000 academic year, an estimated 7.1 million adults were
enrolled as undergraduates in the nation*s postsecondary institutions,
comprising about 40 percent of all undergraduate students. About
threequarters of these adult undergraduates were between the ages of 24 to
40, while about one- quarter were 41 or older. Compared with undergraduate

4 A cohort default rate is the percentage of a school*s borrowers who
enter repayment status on certain Federal Family Education Loan Program
and/ or William D. Ford Federal Direct Loan Program loans during one
federal fiscal year and default prior to the end of the next fiscal year.

5 The 1999 Adult Education Survey of the National Household Education
Survey surveys *formal learning activity* among all civilian,
noninstitutionalized individuals age 16 and older who were not enrolled in
elementary or secondary school at the time of the interview. Background
Characteristics of Adult

Undergraduate Students

Page 6 GAO- 03- 905 Federal Student Aid

students under the age of 24, adult students enrolled in 1999- 2000 were
more likely to be working full time (35 or more hours per week), to be
married, to have dependents, and to lack a conventional high school
diploma. (See table 1.)

Table 1: Differences Between Students Under 24 Years of Age and Age 24 And
Older

Numbers in percent

Student Characteristics Students Under 24 Students 24 and Older

Work fulltime 24 59 Married 5 50 Have dependents 8 54 GED/ No diploma 4 9
Source: NPSAS 1999- 2000.

Note: See appendix II for confidence intervals associated with these
estimates.

While the majority of undergraduates under the age of 24 were enrolled in
baccalaureate programs, adult undergraduate students were primarily
enrolled in certificate or associate programs in 1999- 2000. Most adult
students (55 percent) were enrolled at 2- year public institutions, while
another 22 percent were enrolled in a public 4- year institution, and 10
percent were enrolled in private 4- year institutions. The remaining adult
students were enrolled at proprietary schools, such as culinary or beauty
schools, or a combination of different types of institutions.

A range of public and private funding sources is available to adults to
assist them in meeting the costs sometimes associated with formal
learning, including employer- provided educational assistance, federal
student aid programs authorized under Title IV of the Higher Education
Act, higher education tax credits, and federal WIA and TANF funds.

In the 1999- 2000 academic year, adult students received about $3.3
billion in grant assistance and $8.5 billion in loan assistance from
programs authorized under Title IV of the Higher Education Act. To receive
federal financial aid, students must meet several eligibility
requirements, including being enrolled in a degree or certificate program,
and maintaining

satisfactory academic progress. Institutions are required to establish
qualitative and quantitative criteria of satisfactory progress, and to A
Range Of Public And

Private Funding Sources Assist Adults In Meeting Educational Costs

Federal Financial Aid Available to Adult Undergraduate Students under
Title IV of the Higher Education Act

Page 7 GAO- 03- 905 Federal Student Aid

monitor student progress. 6 Taken together, these requirements help to
ensure that Title IV funds are used in ways that benefit both students and
the larger public, rather than purely recreational or leisure activities.
Postsecondary institutions must also meet eligibility requirements to
participate in Title IV programs, including legal authorization by the
state in which they offer postsecondary education, accreditation by a
nationally recognized accrediting agency, 7 and limiting regular admission
to

individuals with a high school diploma or its recognized equivalent. 8
Institutional eligibility requirements help to ensure that participating
institutions provide students with quality education or training. Programs
authorized under Title IV include Pell Grants for low- income students and
Stafford Loans. Stafford loans may be either subsidized or unsubsidized.
If the loan is subsidized, the federal government pays the interest cost
of the loan for the time a student is enrolled in school. If the loan is
unsubsidized, the borrower is responsible for paying interest during the
life of the loan. Title IV also authorizes programs funded by the federal
government and administered by participating higher education
institutions, commonly known as campus- based aid* Supplemental
Educational Opportunity grants, Perkins loans, and federal work- study
aid. Students who apply for Title IV aid must do so using the Free
Application

for Federal Student Aid (FAFSA). Information from the FAFSA is used to
determine the amount of money that the adult student is expected to
contribute to his or her own education, called the expected family
contribution (EFC). Statutory definitions establish the criteria that
students must meet to be considered independent of their parents for

6 Qualitative measures include grades or work projects that are used
against an established standard to assess academic progress. Quantitative
measures are standards used to establish the maximum time frame in which
students are expected to complete their

academic programs. 7 Institutions may also meet this requirement by being
preaccredited by an agency or association approved by Education to grant
preaccreditation. Public postsecondary vocational institutions may be
accredited by a state agency that Education recognizes to be a reliable
authority.

8 Institutions may also admit home- schooled students, or individuals
beyond the age of compulsory school attendance in the state where it is
located.

Page 8 GAO- 03- 905 Federal Student Aid

purposes of financial aid, 9 and statutory formulas establish the share of
income and assets that are expected to be available for the student*s
education. Once the EFC is established, it is compared to the cost of
attendance at the institution chosen by the student. As table 2 indicates,
the elements included in the student*s cost of attendance for the purpose
of calculating the Pell Grant award vary according to the extent of their
enrollment.

Table 2: Elements Included in Cost of Attendance for Pell Awards Elements
in cost of attendance

Fulltime or Halftime students (6 or more

credits) Less- than- halftime students (1- 5 credits)

Tuition and fees Books and supplies Transportation Miscellaneous personal
expenses Not included Room and board Not included Child care Other
expenses a Source: 1999- 2000 Student Financial Aid Handbook.

a Such as supportive services for disabled students. If the EFC is greater
than the cost of attendance, the student is not considered to have
financial need for federal Title IV aid programs. If the cost of
attendance is greater than the EFC, then the student is considered to have
financial need. Pell Grant awards are calculated by subtracting the
student*s EFC from the maximum Pell Grant award. Maximum Pell Grant awards
are prorated by the student*s enrollment intensity: students attending
less than halftime are eligible to receive one- quarter of the maximum
Pell Grant award. In 1999- 2000, the maximum Pell Grant award was $3,125
for fulltime students, while the maximum award for a less- thanhalftime
student was $781. The maximum subsidized Stafford loan award

9 To be classified as an independent student for the purpose of receiving
Title IV financial aid, students must meet one of the following criteria:
(1) veteran of armed services; (2) age 24 years or older by December 31st
of the award year; (3) married; (4) enrolled in a graduate or professional
educational program; (5) have legal dependents other than a spouse; or (6)
be an orphan or ward of the court. Financial aid administrators may also
classify students as independent through the exercise of their
professional judgment. In

1999- 2000, 87 percent of students classified as independent were 24 or
older.

Page 9 GAO- 03- 905 Federal Student Aid

is equal to the student*s calculated financial need, subject to statutory
limits on annual and cumulative borrowing. The maximum unsubsidized
Stafford loan award is equal to the student*s cost of attendance, subject
to statutory limits on annual and cumulative borrowing.

Adult students also received financial aid from states, postsecondary
institutions, and other federal sources. 10 In 1999- 2000, states awarded
a total of $975 million to adult students enrolled in undergraduate
education, typically on the basis of estimated financial need. However,
about half of the states did not have aid programs in which adults
enrolled less than halftime were eligible to participate. Postsecondary
institutions awarded $941 million in aid to adult undergraduate students
in 1999- 2000, often on the basis of considerations other than financial
need. Sources of federal

assistance other than Title IV aid were available to adult undergraduates,
the largest of which was Montgomery GI Bill assistance. About $1 billion
was available to the nation*s veterans and eligible service members

through the Montgomery GI Bill. Financial assistance was also available to
adult students from workrelated sources* through two federal higher
education tax credits and from employer- provided educational assistance.
Employers may pay postsecondary educational expenses directly, or
indirectly through employee reimbursement, and they are encouraged to do
so by the federal tax code, which provides favorable tax treatment for
these benefits. In 1999- 2000, employers provided $1.28 billion in
assistance to adult students enrolled in undergraduate postsecondary
education, most often to those workers who were most likely to increase
company productivity or profitability as a result of their education, such
as high- skill, high- demand workers and managers. 11 Employees were
usually required by employers to meet a number of conditions to obtain
this educational assistance* such as a minimum length of service* but were
not obligated to enroll in degree or certificate programs, or to complete
their studies. 12 Assistance

10 These sources include, for example, vocational rehabilitation financial
assistance, which an estimated 0.3 percent of the nation*s adult students
enrolled in postsecondary students received in 1999- 2000.

11 National Academy Press, Knowledge Economy and Postsecondary Education:
Report of a Workshop, 2002; National Center for Education Statistics,
Employer Aid for Postsecondary Education, 1999.

12 International Foundation of Employee Benefit Plans, The Many Faces of
Employee Benefits, http:// www. ifebp. org/ knowledge/ reedubn1. asp.
State, Institutional, and Other

Federal Sources of Financial Assistance Available to Adult Undergraduate
Students

Work- Related Financial Assistance Available to Adult Undergraduate
Students

Page 10 GAO- 03- 905 Federal Student Aid

was also available to students through two federal higher education tax
credits, the HOPE and Lifetime Learning tax credits. 13 Tax filers on
their own behalf, or on behalf of a spouse or dependent may claim both
credits, and both are nonrefundable: if the filer has no tax liability,
they cannot receive the credit. Eligibility for the HOPE credit is limited
to students who are enrolled halftime or more in a degree or certificate
program, and in their first 2 years of postsecondary education. In
contrast to both the HOPE tax credit and the Stafford student loan
programs, the Lifetime Learning tax credit may be used by tax filers who
enroll for any number of credits, and for any course that aids in learning
new or improving existing job skills, including those that are not part of
a degree or certificate program. Additionally, tax filers may use the
credit for as many years as they are enrolled, without regard to degree
progress or completion. Tax filers use all qualified tuition and fees*
minus any tax- free educational assistance 14 received* to compute the
credits. In 1999- 2000, all of the first $1,000 and half of the next
$1,000 of qualified education expenses per student could be used to
compute the HOPE credit, for a maximum credit of $1,500. In 1999- 2000,
each tax filer could use 20 percent of the first $5,000 in qualified
educational expenses to compute the Lifetime Learning credit for a maximum
credit of $1, 000. The Lifetime Learning credit permits tax filers to
combine their own expenses and those of their spouse and dependents. For
taxpayers filing jointly, both credits were initially phased out at
$80,000 adjusted gross income, 15 and fully phased out at $100, 000. 16
Federal programs authorized by WIA and PRWORA may also provide

some adults with assistance in meeting the costs of postsecondary
education. Under WIA, adults and dislocated workers may be eligible to
receive job training after it is determined that they are unlikely to get
a job

leading to self- sufficiency without such training. WIA funds may be used
for postsecondary training only for expenses remaining after the receipt
of 13 For additional information concerning the credits, see U. S. General
Accounting Office,

Student Aid and Tax Benefits: Better Research and Guidance Will Facilitate
Comparison of Effectiveness and Student Use, GAO- 02- 751 (Washington, D.
C.: Sept. 13, 2002).

14 Tax- free educational assistance includes scholarships, Pell Grants,
employer- provided educational assistance, and veterans* educational
assistance. 15 Adjusted gross income is total income reduced by certain
amounts, such as for an individual retirement account or student loan
interest.

16 These phase- out limits apply to returns filed in 2000. Under the
Taxpayer Relief Act of 1997, these amounts are indexed to inflation.
Assistance to Adult Undergraduate Students Under

WIA and PRWORA

Page 11 GAO- 03- 905 Federal Student Aid

Pell Grant and other sources of assistance. Furthermore, state and local
workforce investment boards are authorized to establish limits on the
amount of time or the amount of WIA funds that may be used to meet
training expenses. Under PRWORA, block grants are made to states, which
may use these funds to assist TANF recipients in meeting costs associated
with vocational training or education, including postsecondary education.
These costs may include tuition and fees, childcare, and transportation.

In 1999- 2000, one- third of adult undergraduate students, about 2.3
million, enrolled less than halftime, and most worked fulltime and needed
to balance the demands of school with other responsibilities. Most adults
who enroll as less than halftime students intend to complete a degree or
certificate, but few do. Compared with adult students enrolled halftime or
more, the typical less- than- halftime adult student was older, more
likely to be working and married, and had a higher household income. In
addition,

less- than- halftime students more often enrolled without being in a
degree program, and less often pursued a baccalaureate degree. Although
lessthan- halftime enrollment may permit adults to complete one or two
courses helpful to their employment prospects, such enrollment appears to
be an ineffective long- term strategy for the majority of less-
thanhalftime adult students who intend to complete a degree. Of those
adults who expected to complete a certificate or degree and enrolled on a
less than halftime basis during their first year of school, most had not
completed a degree or certificate, and were no longer enrolled in school.
In 1999- 2000, one- third, about 2.3 million, of adult undergraduate
students

were enrolled less than halftime. As shown in figure 1, other adult
students were either enrolled fulltime (12 or more credits), half- or
three- quarters time (6- 11 credits), or were in a combination of
different enrollment types (mixed). Most of the 2.3 Million

Adult Undergraduate Students Who Enrolled Less Than Halftime Needed to
Balance School and Other Responsibilities, and Many Were Unable to
Complete Their Programs

One- Third of Adult Undergraduate Students Enrolled Less Than Halftime,
and Those Who Did Differed from Other Adult Students

Page 12 GAO- 03- 905 Federal Student Aid

Figure 1: Enrollment Distribution of All 7.1 Million Adult Undergraduate
Students, 1999- 2000

Note: See appendix II for confidence intervals associated with these
estimates.

Compared with adult students enrolled halftime or more, less- thanhalftime
adult students were older, and more likely to be working fulltime, be
married, and have dependents. In addition, less- than- halftime adult
students more often enrolled in 2- year postsecondary institutions, and
less often pursued a baccalaureate degree. Less- than- halftime adult
students had, on average, higher household incomes than did other adult
students. (See table 3.)

Half or three- quarters time 26% 10%

33% 31%

Fulltime Less than halftime

Mixed enrollment Source: GAO calculations from NPSAS 1999- 2000.

Page 13 GAO- 03- 905 Federal Student Aid

Table 3: Differences Between Less- than- Halftime Adult Students and Other
Adult Students

Characteristics of adult students Less than Halftime

Halftime or Three- Quarter Time Fulltime

Median age 37 32 28 Percentage of students working fulltime 77 70 34
Median household income (1998) $42,000 $31,000 $18,000 Percentage of
students married 57 50 42 Percentage of students having dependents 57 55
51

Percentage of students enrolled at 2- year institution 73 58 35

Source: GAO calculations from NPSAS, 1999- 2000. Note: See appendix II for
confidence intervals associated with these estimates.

A substantially larger proportion of adults who enrolled on a less-
thanhalftime basis had household incomes over $30,000 than did adults
enrolled halftime or more. (see figure 2).

An estimated 7 percent of all adult students enrolled less than halftime
in 1999- 2000 had household incomes at or below 100 percent of the federal
poverty guideline, which for a three- person household in 1998 was
$13,650. An estimated 14 percent had household incomes at or below 150
percent of the federal poverty guideline, or $20,475 for a three- person
household.

Page 14 GAO- 03- 905 Federal Student Aid

Figure 2: Income Levels of Adult Students* Comparison between Those
Attending Less- Than- Halftime and Other Adult Students

Note: See appendix II for confidence intervals associated with these
estimates.

0 5

10 15

20 25

Over $80,000 $70-$ 79,999 $60-$ 69,999 $50-$ 59,999 $40-$ 49,999 $30-$
39,999 $20-$ 29,999 $10-$ 19,999 $0-$ 9,999 Percentage of adult students

Income

7 11

15 16 11 11

9 6

14 20

23 18

11 8

6 5

3 6

Source: GAO calculations from NPSAS 1999- 2000. Less- than- halftime adult
students

All other adult students

Page 15 GAO- 03- 905 Federal Student Aid

Adult students choose to enroll on a less- than- halftime basis for many
reasons, the most important of which, most school administrators told us,
is their need to balance school requirements with the competing demands of
work and family. This closely reflects the findings of studies that
examine postsecondary enrollment among adults. 17 School administrators
explained that the balancing act required of many adult students, in which
they attempt simultaneously to meet family responsibilities and work
obligations, left many adults with too little time to be a fulltime
student. The routines of adult life* from caring for sick children to
meeting unexpected job demands* compete with class attendance and the
completion of course assignments, according to these administrators. Faced
with this *juggling act* some adult students may have to pursue
postsecondary education on a less- than- halftime basis.

College administrators we contacted also identified several other
significant reasons why adult students may enroll on a less- than-
halftime basis, including the difficulty meeting the direct costs of
school,

scheduling conflicts, and students* limited readiness for postsecondary
education. Virtually all administrators identified these as important, but
secondary, reasons. While many adult students receive some financial
support towards postsecondary costs, most students pay the majority of
school costs from their own resources. Because adult students may find it
difficult to economize on housing costs by searching for less expensive
accommodations or group housing, enrolling less than halftime can provides
them with a way to reduce out- of- pocket costs associated with tuition
and fees* as well as transportation, childcare, and books.

Scheduling conflicts also played a role, according to college
administrators, in influencing enrollment decisions. Officials noted that
adult students, especially working students, may be unable to enroll on a
halftime or fulltime basis due to the inflexibility of course and program
options made available by postsecondary institutions, or a lack of
flexibility in work schedules on the part of employers. While some
postsecondary institutions offered the majority of their classes during

17 We identified only one study examining less- than- halftime adult
students, Illinois Student Assistance Commission Research Reports, Summer
2001. Others, however, examined similar student populations, such as
working adults or part- time adult students. The findings of these studies
point to broadly similar factors influencing adults* enrollment decisions.
See, for example, Work First, Study Second: Adult Undergraduates Who
Combine Employment and Postsecondary Enrollment, NCES, June 2003; Opening
Doors: Students* Perspectives on Juggling Work, Family, and College, MDRC,
July 2002. School Administrators

Believe Students May Choose Less- ThanHalftime Enrollment for Many
Reasons* Most Commonly to Balance Work, Family, and School

Page 16 GAO- 03- 905 Federal Student Aid

nontraditional hours, such as evenings or weekends, others did not. For
example, administrators at one 4- year school estimated that only 10
percent of the undergraduate courses were offered during evening hours.
Adults may find it easier to plan and manage their schedules over 5 to 7
weeks than they do over longer time periods, such as a traditional 10 or
15week semester. At another institution, administrators noted that 3,000
course sections were offered each semester, but only 10 were available to
adults in a shorter 5 to 7 week format, owing to reluctance of faculty to
teach in alternative times and formats. Administrators at one community

college pointed to a lack of flexibility in employer work schedules,
noting that adult students often withdraw from class when their employer
changes their work schedule, preventing them from attending class.

School administrators explained that some adults might not be ready*
academically or socially* for postsecondary education, and that this may
contribute to their decision to enroll less than halftime. Adult students
often need to refresh or develop college- level skills, they noted,
particularly in mathematics. Adult students may also lack confidence in
themselves or their abilities, or feel out of place in a college setting.
One

administrator noted that some adult students at her institution
experienced stress- related illnesses after they had begun their
coursework and needed to leave mid- semester. National data indicate that
adults enrolled on a less than halftime basis are more likely to be
encountering academic difficulties than other adult students, as reflected
in their lower grade point averages.

National data indicate that most adults who enrolled on a less-
thanhalftime basis during their first year of postsecondary education
expected to complete a degree or certificate, but six years later the
majority had left school with no credential. Moreover, data provided by
postsecondary

institutions included in our review show that few adults who succeeded in
completing a certificate or degree consistently enrolled on a less-
thanhalftime basis. Some adults who enroll in credit- bearing courses at
postsecondary institutions may not intend to complete a degree or
certificate; rather, they may choose to complete only a few courses,
finding this sufficient to acquire the skills that help them gain
employment, obtain a promotion, or find personal satisfaction. Data from
Education*s 1995- 1996 Beginning Postsecondary Students (BPS) study, which
tracked the academic progress and degree completion of students over a 6-
year

period from 1995- 1996 to 2001- 2002, show that 25 percent of adults who
enrolled on a less than halftime basis during their first year of Most
Adults Who Enrolled

as Less- Than- Halftime Students Expected to Complete a Certificate or
Degree, But Did Not

Page 17 GAO- 03- 905 Federal Student Aid

postsecondary education did not expect to complete a degree or
certificate. The remaining 75 percent, however, did.

Most adults who intended to complete a degree or certificate and enrolled
on a less- than- halftime basis during their first year of postsecondary
education left school without completing a degree or certificate. Using
the BPS study, we analyzed completion among those students who first
enrolled at age 24 or older, who expected to complete a certificate,
associate*s degree, or baccalaureate degree, and who enrolled on a less
than halftime basis one or more times during their first year of
postsecondary education. We estimate that about two- thirds (66 percent)
of adults who began in 1995- 1996 did not complete a certificate or degree
by 2001- 2002, and were no longer enrolled in postsecondary education. In
comparison, only about 30 percent of adults who enrolled as halftime or

fulltime students in their first year of school had left school without
completing a degree or certificate.

At those institutions that provided completion data to us, adult
graduates* reliance upon less than halftime enrollment varied with program
length. Of the 1,830 baccalaureate graduates who completed their degrees
in 2001-

2002 at four 4- year institutions we visited, and who when they first
enrolled were age 24 or older, slightly more than one- half never enrolled
on a less- than- halftime basis, and another 36 percent did so for only
one or two terms. No graduates relied exclusively upon less- than-
halftime enrollment to complete their degree. (See fig. 3.)

Page 18 GAO- 03- 905 Federal Student Aid

Figure 3: Terms of Less- Than- Halftime Enrollment among Students Who
Began as Adults and Completed Baccalaureate Degrees at Selected 4- Year
Institutions in 2001- 2002

Of the 1,927 students who completed an associate degree in 2001- 2002 at
four 2- year institutions we visited and who first enrolled at age 24 or
older, almost one- half never enrolled as less- than- halftime students,
or did so for one or two terms. Only 3 percent consistently enrolled on a
less- thanhalftime basis. (See fig. 4.) This pattern of enrollment was
similar for the 348 students who completed a certificate program at three
of the 2- year institutions we visited.

0 10

20 30

40 50

60 All terms 6+ terms 3- 5 terms 1- 2 terms 0 terms Percent of adult
students

Number of terms enrolled less than halftime

Source: Data provided by four baccalaureate institutions visited by GAO.
51

36 7

5 0

Page 19 GAO- 03- 905 Federal Student Aid

Figure 4: Terms of Less- Than- Halftime Enrollment among Students Who
Began as Adults and Completed Associate Degrees at Selected 2- Year
Institutions, 2001- 2002.

In 1999- 2000, about 7 in 10 of the nation*s less- than- halftime adult
students received assistance equaling about 44 percent of their school
costs, typically from sources other than federal and state student aid.
Though less- than- halftime adult students had a range of household
incomes, their

school costs and the amount of assistance they received did not vary
widely; however, the sources of assistance they received did vary by
household income. Student financial aid from federal, state, and

institutional sources comprised the majority of assistance received by
lower- income adults, while most assistance received by higher- income
households was provided by work- related sources. Very few adults enrolled
on a less- than- halftime basis seldom received assistance from either
federal WIA or TANF sources. Most Less- ThanHalftime

Adult Students Received Some Assistance with Postsecondary Costs,
Typically from WorkRelated Sources 0

5 10

15 20

25 30

All terms 6+ terms 3- 5 terms 1- 2 terms 0 terms Percent of adult students

Number of terms enrolled less than halftime

Source: Data provided by four 2- year institutions visited by GAO. 20

28 23

25 3

Page 20 GAO- 03- 905 Federal Student Aid

In 1999- 2000, most less- than- halftime adult students received some
assistance with their postsecondary education or training costs, typically
from sources other than student financial aid. An estimated 70 percent of
less- than- halftime adults received assistance from federal, state, or
other sources with their postsecondary education or training costs, which
are estimated to have been, on average, $1,058 for all less- than-
halftime adult students in 1999- 2000. About one- half of these costs were
comprised of

tuition and fees ($ 480), while the remaining amount was comprised of
books, equipment, childcare, and transportation costs.

For those less- than- halftime adults who received assistance in 1999-
2000, the average amount was $462, or approximately 44 percent of their
school costs. Though the Lifetime Learning tax credit was the source of
assistance most widely received by less- than- halftime adult students,
the average Lifetime Learning tax credit ($ 74) was significantly smaller
than the average Pell Grant award ($ 465) or the average level of employer
support ($ 784). Seven in 10 Less- ThanHalftime

Adult Students Received Assistance for School Costs* Most Often from
Lifetime Learning Tax Credit and Employer Assistance

Page 21 GAO- 03- 905 Federal Student Aid

Figure 5: Percent of Less- Than- Halftime Students Receiving Each Type of
Assistance, 1999- 2000

Notes: Students may receive more than one source of assistance. Other aid
consists chiefly of Montgomery GI Bill assistance. See appendix II for
confidence intervals associated with these estimates.

Few adults who enrolled less- than- halftime in 1999- 2000 had incomes
below 150 percent of the federal poverty guideline, and those who did
received the bulk of assistance with their school costs from student
financial aid* in contrast to the majority of less- than- halftime adult
students who had incomes well above federal poverty guidelines and who
relied chiefly upon work- related sources of assistance to meet school
costs. Although the sources of assistance received by lower- and
higherincome students were different, both groups had about the same
school costs and levels of assistance and, therefore, similar shares of
their school costs met through federal, state, or work- related
assistance. In 1999- 2000,

15 percent of less- than- halftime adults had a household income below 150
percent of the 1998 federal poverty guideline, while the vast majority of
these students had incomes above this level. Less- than- halftime adult
students with household incomes below 150 percent of the 1998 federal
Sources of Assistance

Received by Less- ThanHalftime Adults Varied by Household Income, but
Their School Costs and Amount of Assistance Were Similar

0 10

20 30

40 50

TANF and WIA State aid

Pell Grant Institutional aid Other aid

Employer assistance Lifetime Learning tax credit

Percentage receiving each type of assistance Type of assistance

46 23

5 4 3 2 < 1 Source: GAO calculations from NPSAS, 1999- 2000.

Page 22 GAO- 03- 905 Federal Student Aid

poverty guideline had approximately 43 percent of their estimated $1, 121
in school costs met through all forms of assistance, while those with
incomes above 150 percent of the federal poverty guideline had
approximately 44 percent of their estimated $1,048 in costs met through
assistance.

As figure 6 shows, a larger percentage of lower income less- than-
halftime adult students received Pell Grants than did students with
incomes above 150 percent of the federal poverty guideline, while a
smaller proportion received work- related assistance, either from their
employer or the Lifetime Learning tax credit.

Figure 6: Proportion of Less- Than- Halftime Adults Who Received
Assistance, by Household Income, 1999- 2000

Note: Sample sizes for state, institutional, and other aid do not permit
reliable estimates. See appendix II for confidence intervals associated
with these estimates. Among low- income, less- than- halftime adult
students, educational costs

averaged just over $1, 100, and about 14 percent of these students
received federal Pell Grants to assist them in meeting these costs. Adults
who work

0 10

20 30

40 50

60 Pell Grant Employer assistance Lifetime Learning tax credit Percentage
receiving assistance

Type of assistance

14 9 29

1 25

49 Source: GAO calculations from NPSAS, 1999- 2000.

Less- than- halftime adult students with household income at or below 150%
of the federal poverty guideline

Less- than- halftime adult students with household income above 150% of
the federal poverty guideline

Page 23 GAO- 03- 905 Federal Student Aid

part- time receive employer financial assistance for enrollment in
credential programs less often than those who work fulltime. 18 Compared
with higher- income less- than- halftime adult students, fewer low- income
students worked, and, if they worked, fewer were employed fulltime.
Consequently, a smaller percentage of low- income students received
employer assistance (9 percent) than did higher- income students (25

percent). Finally, about half of these low- income adult students had no
federal income tax liability and were, therefore, ineligible to receive a
Lifetime Learning tax credit. As a result, an estimated 29 percent of
those below 150 percent of the federal poverty guideline received a
Lifetime Learning tax credit.

While lower- income adult students received about two- thirds of their
assistance (66 percent) from federal, state, institutional, and other aid,
the opposite was true of higher- income adult students, who received 71
percent of their support from work- related sources assistance. In 1999-
2000, most adult students (85 percent) had incomes above 150 percent of
the federal poverty guideline. According to federal and state financial
aid rules, these adult students typically had incomes and assets that were
sufficient to meet their postsecondary costs and, therefore, only 1
percent received either federal or state student aid. Most who had incomes
above this level were fulltime workers, and a larger share received both
employer assistance and Lifetime Learning tax credits than did their
lower- income counterparts.

We estimate that less than 1 percent of all less- than- halftime adult
students received either WIA or TANF assistance with the cost of
postsecondary education in 1999- 2000. The population of less- than-
halftime adult students that received WIA funds for vocational training
was too small to reliably estimate the average amount of assistance they
received in 1999- 2000.

Very few less- than- halftime adult students received WIA assistance
because the WIA program focuses on employment- related assistance or
skills training, and generally does not support extended training of adult
students pursuing a postsecondary credential. At some of our visits to
postsecondary institutions, school officials informed us that they were
unfamiliar with WIA. However, those familiar with the program reported

18 National Center for Education Statistics, Employer Aid for
Postsecondary Education,

1999. WIA and TANF Assistance

Was Rarely Received by Less- Than- Halftime Adults

Page 24 GAO- 03- 905 Federal Student Aid

that very few adult students were WIA recipients, and that the number of
adult students enrolled with assistance from WIA was lower than the number
enrolled with assistance under the previous federal workforce policy, the
Job Training Partnership Act. The time and dollar limits established by
local workforce investment boards may make it difficult for adult students
to use WIA funds for the extended training that may be required for the
completion of a postsecondary vocational credential, even for those who
are enrolled on a fulltime basis. As officials at one 2- year
postsecondary institution reported, many adult students entering
certificate programs needed 1 year of remedial coursework before beginning
their program and were, therefore, unable to complete their coursework
within the 1- year time limit established by the local workforce
investment board.

Less than 1 percent of less- than- halftime adult students received TANF
assistance in 1999- 2000, and NPSAS collected no data on the extent to
which TANF funds assisted these students in meeting costs associated with
their training or education. Moreover, school officials at the
institutions we visited were generally unaware of the extent to which
adult students were TANF recipients. One school, however, had created a
program to enable TANF recipients to attend school fulltime. In Maryland,
the Baltimore City Community College and city and state officials
established the School Counts Program, through which selected TANF
recipients who enroll at the community college are provided with advising,
assistance with transportation and childcare expenses, and federal work
study assistance that permits them to maintain a full credit load
throughout the entire calendar year. These supports permit a relatively

large proportion of program participants to complete a certificate or
degree. 19 19 University of Maryland School of Social Work, School Counts
I Report, 2000.

Page 25 GAO- 03- 905 Federal Student Aid

Changing how the Pell and Stafford programs treat less- than- halftime
attendance would provide some less- than- halftime students with
additional aid, but it would likely increase program costs for the federal
government and administrative complexity for postsecondary institutions.

Proposed changes to the Pell Grant program include allowing, for lessthan-
halftime students, the inclusion of room and board and miscellaneous
personal expenses, as is done for fulltime students. Another proposed
change would be to allow less- than- halftime students to participate in
the Stafford Loan programs. Administrators of postsecondary institutions
in the four states we visited expressed concern about potential negative
consequences of the Stafford loan proposal.

Allowing, for all less- than- halftime students , 20 the inclusion of room
and board and miscellaneous personal expenses in their cost of attendance,
as is done for other students, would increase the number of less-
thanhalftime

students who receive a Pell grant and increase Pell award amounts for
those who already receive a grant. We estimate that about 13,000 less-
than- halftime students who do not receive a Pell award under current law
would receive an average award of $630 under this alternative in the 2003-
2004 academic year. In addition, about 150,000 less- thanhalftime students
would receive a Pell Grant award increase of $111 per year in 2003- 2004.
(See table 4.) The total federal budget cost of changing Pell Grant policy
for less- than- halftime students would be approximately

$25 million for the 2003- 2004 academic year. This cost estimate assumes
that adults who are not enrolled in school will not choose to enroll in
response to the policy change. If about 35,000 individuals who are not in
school respond to this change in policy by enrolling less than halftime,
an estimate implied, in part, by some research, there could be an
additional

federal budget cost of about $10 million in addition to the $25 million
associated with already enrolled students. (See app. III.)

20 The federal financial aid methodology provides that dependent and
independent students use the same cost elements in calculating their cost
of attendance. Therefore, our analysis assumes that all less- than-
halftime students, dependent and independent, would be affected by a
change to the cost of attendance. Changing the Pell and

Stafford Programs Would Provide More Students With Additional Aid, but
Result in Increased Federal Budget Costs and, Potentially, Undesirable
Effects for Students and Institutions Changes to the Pell Grant Program
Will Increase Program Costs* Most Often Assisting Students Currently
Receiving Pell Awards

Page 26 GAO- 03- 905 Federal Student Aid

Table 4: Estimated Effects of Changes to Pell Grant Program Students
affected

Number of students receiving

new/ larger award Estimated increase

in Pell award under alternative law

Estimated federal budgetary cost,

2003- 2004

Currently enrolled and no Pell received, newly eligible 13,000 $630
$8,190,000

Currently enrolled and receiving Pell, eligible for larger Pell 150,000
$111 $16,650,000

Total cost $24,840,000

Source: GAO analysis. Note: Estimate assumes adults who are not in school
will not enroll in response to the policy change and that cost of
attendance elements for both dependent and independent students would be
changed. See appendix I for estimation methodology.

While current law does not permit less- than- halftime students to
participate in the Stafford loan programs, some have proposed that these
students be allowed to participate. This change to the loan program would
increase federal subsidy costs 21 associated with the Stafford programs.
Moreover, campus administrators anticipate that the change could have
undesirable effects on postsecondary institutions and on students.

Permitting all less- than- halftime students to participate in the
Stafford loan programs would increase federal subsidy costs associated
with the Stafford loan programs by approximately $113 million in fiscal
year 2004. 22 21 For budgetary purposes, loan subsidy cost* the portion of
cost paid by the federal

government* is calculated for each loan cohort. Subsidy costs represent
the estimated lifetime costs, excluding administration costs, to the
federal government of FFELP and FDLP loans calculated on a net present
value basis. Net present value is the future stream of benefits and costs
converted into equivalent values today, using an appropriate discount
rate.

22 The federal financial aid methodology provides that dependent and
independent students use the same cost elements in calculating their cost
of attendance. Therefore, our analysis assumes that all less- than-
halftime students, dependent and independent, would be affected by a
change to the cost of attendance. Changes to the Stafford

Loan Program Will Increase Program Costs and May Result in Disadvantages
to Students and Institutions

Page 27 GAO- 03- 905 Federal Student Aid

We estimate that the average unsubsidized Stafford loan 23 taken out by
adult students enrolled less- than- halftime would be approximately $680,
while the average subsidized loan would be about $1,200. Federal subsidy
costs in subsequent fiscal years would change depending upon the number of
students enrolled at eligible institutions, loan amounts per student, and
federal subsidy costs per loan dollar. Table 5: Estimated Effects of
Changes to Stafford Loan Programs

Stafford program Expected loan amount Estimated number

of borrowers a Estimated federal subsidy cost, 2003- 2004 b Unsubsidized
Loan $680 550,000 $34,000,000

Subsidized Loan $1,200 1,900,000 $79,000,000

Total $113,000,000

Source: GAO analysis. a Estimate assumes that dependent and independent
students are allowed to participate in the Stafford programs and that all
who are eligible borrow. See appendix I for estimation methodology. b
Estimated federal subsidy cost is less than estimated loan volume
(expected loan amount multiplied

by estimated number of borrowers) because, unlike grants, borrowers must
repay loans.

While administrators pointed to several potential benefits of providing
Stafford eligibility for less- than- halftime students, they far more
often pointed to a larger set of disadvantages* for both postsecondary
institutions and student borrowers* that might accompany this change.
Discussing potential benefits of expanding eligibility to include less-
thanhalftime students, they noted that changing the Stafford loan program
might permit less- than- halftime students to reduce their reliance on
more costly types of borrowing, or to reduce the extent to which they work
to finance their education. Additionally, some students might prefer* or
better cope with* enrollment as a less- than- halftime student, but are
encouraged by Stafford eligibility rules to take six or more credits. If
eligibility for the program were extended to less- than- halftime
students, this incentive for students to enroll for more credits would be
removed.

23 Stafford loans may be either subsidized or unsubsidized. If the loan is
subsidized, the federal government pays the interest cost of the loan for
the time a student is enrolled in school. If the loan is unsubsidized, the
borrower is responsible for paying interest during the life of the loan.
While called *unsubsidized,* the federal government can still incur costs
on such loans, including costs associated with borrowers who default on
their loans and, under the FFELP, costs of making certain interest subsidy
payments to lenders.

Page 28 GAO- 03- 905 Federal Student Aid

Administrators, particularly those at public 2- year postsecondary
institutions, expressed the potential disadvantages associated with
expanding eligibility. They observed that expanding eligibility to less-
thanhalftime students might increase their institution's cohort default
rate. Students who do not complete a certificate or degree, research
indicates, are especially likely to default on their loans. 24 In light of
the low rates of

completion among less- than- halftime students, they reasoned, this
population might be at particular risk of defaulting on Stafford loans.
Institutional eligibility to participate in federal student aid programs
is linked to an institution's cohort default rate, and permitting
borrowing by less- than- halftime students could result in some
institutions losing Title IV eligibility. In addition, changing Stafford
eligibility to include borrowers

enrolled less than halftime would, they anticipate, result in a large
expansion in the number of students participating in the Stafford loan
programs, increasing the administrative burden faced by campus financial
aid offices. Furthermore, at some postsecondary institutions, policies on
satisfactory academic progress may need to be revised in response to

changing Stafford eligibility. Administrators also noted potential
disadvantages to less- than- halftime student borrowers. They expressed
concern that Stafford borrowing by lower- income adults enrolled less than
halftime* few of whom might have a certificate or degree and higher
earnings as a result of their enrollment* might burden these students with
unmanageable debt. Allowing less- thanhalftime students to borrow in the
Stafford loan programs, they noted, may also increase the number of
students who reach their overall borrowing limits before the completion of
a degree. Finally, they indicated, changing program eligibility may
encourage protracted less- than- halftime enrollment as a means by which
to postpone repayment. Students with outstanding subsidized Stafford loans
must now enter repayment if they enroll for fewer than six credits.
However, if students were permitted to defer repayment while enrolled for
one to five credits, some might choose to enroll for a few credits each
term as a way to delay repayment.

24 Research on the characteristics of student loan defaulters indicates
that current wages are inversely associated with the probability of
default, while withdrawing from school is positively associated with the
probability of default. Research findings are based on student borrowers
who were enrolled halftime or more, and may not be applicable to a less-
than- halftime borrowing population. See, for example, Clearing Accounts:
The Causes of Student Loan Default, EdFund, 2002; State of Student Aid in
Texas, TG Research and Analytical Services, April 2003.

Page 29 GAO- 03- 905 Federal Student Aid

There are a variety of formal learning opportunities open to adults, and a
range of funding sources that support participation in them. Some sources
of funding available to adult learners, particularly work- related
assistance provided by employers or the Lifetime Learning tax credit,
permit shortterm study that does not lead to the completion of a degree or
certificate. Both employers and employees may benefit as skills,
productivity, and earnings increase. In contrast to these funding streams,
the federal student

assistance programs authorized under Title IV of the Higher Education Act
provide assistance for adult learning that takes place in eligible
postsecondary institutions, and is intended to result in the completion of
a postsecondary credential: a certificate, associate*s degree, or
baccalaureate degree. The Higher Education Act*s provisions concerning
institutional eligibility help to ensure billions of dollars in federal
student

assistance is available only to those institutions that provide students
with quality education or training worth the time, energy, and money that
they* and the nation*s taxpayers* invest. 25 Requiring that students
enroll in* and make progress toward* a postsecondary credential ensures
that the federal investment in Title IV programs is used to support
learning that is broadly beneficial to the public, rather than students*
recreational or leisure activities.

Some adults who begin postsecondary education on a less than halftime
basis do not intend to complete a degree, and many others expect to do so,
but are unable to continue to completion. If less than halftime adults who
do not complete a credential nonetheless benefit from completing a few
postsecondary courses, 26 then federal policy tools designed to support
shorter- term and non- credential adult learning* such as tax incentives
for employer- provided educational assistance and the Lifetime Learning
tax credit* can better assist these learners than can Title IV programs.
The

potential costs* to the federal government, institutions, and students* of
proposed changes to the Pell Grant and Stafford Loan programs,
particularly the latter, may outweigh their potential benefits for less-
thanhalftime adult students. Permitting less- than- halftime students to

25 Higher Education: Ensuring Quality Education From Proprietary
Institutions,

GAO/ T- HEHS- 96- 158. 26 There is not a consensus among those who study
the economic returns to education or training whether the completion of a
credential results in additional economic gains to students. See, for
example, Labor Market Returns to Two- and Four- Year College: Is a Credit
Really a Credit and Do Degrees Matter? Kane, T. J., and Rouse, C. E.
(1993); Credits

and Attainment: Returns to Postsecondary Education Ten Years After High
School,

NCES, 2001- 168. Concluding

Observations

Page 30 GAO- 03- 905 Federal Student Aid

participate in the Stafford student loan programs would provide a new
source of borrowing for these students, but it may be accompanied by
unintended and unwanted consequences, including increasing the volume of
loans at risk of default. Allowing less- than- halftime students to
include room, board, and personal expenses in calculating their Pell Grant
cost of attendance would most often assist less- than- halftime students
who are currently receiving a Pell grant, providing them with an estimated
$100 annual increase in assistance, rather than providing a widely
available source of assistance to adults who are not currently receiving
Pell Grants.

In written comments on our draft report, Education stated that it
appreciated our thorough review and examination of the financial, and
other, impediments that are often unique to adult learners as they pursue
postsecondary education and training opportunities and found useful the
concerns raised by postsecondary institutions. In addition, Education
noted that the report would complement a recent report of its own and that
it would assist Education in achieving one of its departmental strategic
goals. Education also provided technical comments, which we incorporated
where appropriate. Education*s written comments appear in appendix IV. As
agreed with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from
its date. At that time we will send copies to the Secretary of Education
and other interested parties. We will also make copies available to others
on

request. In addition, the report will be available at no charge on the GAO
Web site at http:// www. gao. gov.

If you or your staff have any questions or wish to discuss this material
further, please call me at (202) 512- 8403, or Jeff Appel at (202) 512-
9915. Other contacts and staff acknowledgments are listed in appendix V.

Cornelia M. Ashby Director, Education, Workforce,

and Income Security Issues Agency Comments

Appendix I: Objectives, Scope, and Methodology

Page 31 GAO- 03- 905 Federal Student Aid

We were asked to determine: (1) the extent to which adults enroll less
than halftime, the characteristics and factors associated with less-
thanhalftime enrollment, and the rates of completion among these students;
(2) the extent to which adult students enrolled less than halftime receive
federal, state, and other assistance to help them meet the costs of

postsecondary education; and (3) the implications, including the budgetary
impact, of changing the Pell Grant Program to allow room and board and
miscellaneous personal expenses to be considered in the calculation of
grant amounts for less- than- halftime students and changing the Stafford
loan programs to permit participation by less- than- halftime

students. For the purposes of this report, adult students are those who
are 24 years or older.

In designing our study, we reviewed data and literature pertaining to
financial aid for adult students and part- time students, and we analyzed
focus group findings examining the barriers to enrollment and persistence
faced by low- income adults. We interviewed officials at the Department of
Education, researchers, and representatives of higher education
organizations, such as the American Association of Community Colleges and
the National Association of Student Financial Administrators; and we
interviewed administrators of two institutions of higher education not
included in our four sample states: the City University of New York and
Kaplan College. We also reviewed studies and surveys of employerprovided
educational assistance.

To determine the extent of less- than- halftime enrollment among adult
students and the characteristics, completion rates, and financial support
they received, we analyzed national data and visited selected
postsecondary institutions. We analyzed two datasets created by the

National Center for Education Statistics: the 1999- 2000 National
Postsecondary Student Aid Study (NPSAS), and the 2001 Beginning
Postsecondary Students Study (BPS). Both datasets* NPSAS and BPS*
contained a nationally representative sample of students enrolled at
postsecondary institutions participating in federal student aid programs
and provided information on financial assistance they received, hours they
worked, and a wide range of other characteristics. We computed estimates
of the Lifetime Learning credits received by less- than- halftime adult
students using data from NPSAS. NPSAS data are collected at the individual
student level, and cannot be aggregated into families or linked Appendix
I: Objectives, Scope, and

Methodology

Appendix I: Objectives, Scope, and Methodology

Page 32 GAO- 03- 905 Federal Student Aid

to tax filing status. Therefore, our analysis treated individual students
as if they were credit claimants and recipients. 1 To assess the
reliability of the NPSAS and BPS sample data, we reviewed

existing information about the sample, including the documentation
produced by NCES, and performed electronic testing of the required data
elements to detect obvious problems in accuracy and completeness. We

determined that the NPSAS and BPS data were sufficiently reliable for this
report. Because both surveys are samples of a larger student population,
there is some sampling error associated with them. Sampling errors are
often represented as a 95- percent confidence interval: an interval that
95 times out of 100 will contain the true population value. The upper and
lower bounds of the 95- percent confidence intervals for each estimate are
presented in the tables in appendix II.

National datasets provide valuable but limited information. For example,
NPSAS is a cross- sectional rather than longitudinal study, and it,
therefore, cannot be used to identify the duration for which students
enrolled on a less- than- halftime basis. Some student characteristics or
factors that may be associated with less- than- halftime enrollment, such
as course scheduling problems, are not contained in these datasets.
Consequently, we augmented national datasets with information collected
from postsecondary institutions.

We interviewed school administrators from 19 postsecondary institutions,
including public and private schools and 2- year and 4- year institutions.
These institutions were located in four states* California, Maryland,
Ohio, and Virginia* in which the costs for resident tuition and fees at
public 2- year institutions and the amount of available state aid varied.
2 For example, in California the cost for resident 2- year tuition was
lower than for all other states ($ 330), but no state aid is available to
students pursuing their postsecondary credentials on a less- than-
halftime basis. Maryland ranked 9th among states in tuition and fees at
public 2- year institutions ($ 2,564) and, like California, did not have
state financial aid available to

1 Additional details of the methodology are described in appendix I of U.
S. General Accounting Office, Student Aid and Tax Benefits: Better
Research and Guidance Will Facilitate Comparison of Effectiveness and
Student Use, GAO- 02- 751, Washington, D. C.: Sept. 13, 2002.

2 Two- year tuition and fees were selected because nearly three out of
four less- than- halftime adult students are enrolled at public 2- year
institutions.

Appendix I: Objectives, Scope, and Methodology

Page 33 GAO- 03- 905 Federal Student Aid

less- than- halftime students. Both Virginia and Ohio had state aid
available for less- than- halftime students; however, Virginia*s 2- year
tuition ($ 1,304) was lower than that of Ohio ($ 2,300).

Within each state, we contacted three to six institutions (see table 1).
Because most less- than- halftime adult students are enrolled at 2- year
public institutions, we visited more of this type than other postsecondary
schools. In addition, we selected institutions with large proportions of
adult students in their overall student body. We met with a range of
school administrators at these institutions, including financial aid
officers, student affairs officers, directors of institutional research,
and other administrative officers. We discussed with them their less-
than- halftime adult student population and the implications of changing
the Pell Grant and Stafford Loan Programs. We also collected institutional
data on spells on less than halftime enrollment among students graduating
from 10 of the

19 we visited. We solicited information from each institutional research
officer about the reliability of these data and reviewed the data for
obvious problems of accuracy and completeness. Because these are not
samples of a larger student population, there are no confidence intervals
associated with them.

Appendix I: Objectives, Scope, and Methodology

Page 34 GAO- 03- 905 Federal Student Aid

Table 6: Site Visit States and Institutions Contacted State Name (type)

California City College of San Francisco, San Francisco (2- year public)
Contra Costa College, San Pablo (2- year public) Holy Names College,
Oakland (4- year private) Sierra College, Rocklin (2- year public) San
Francisco State University, San Francisco (4- year public)

Maryland Allegany College, Cumberland (2- year public) Baltimore City
Community College, Baltimore (2- year public) Montgomery College,
Rockville (2- year public)

Ohio Capital University, Columbus (4- year private) Cleveland State
University, Cleveland (4- year public) Columbus State Community College,
Columbus (2- year public) Cuyahoga Community College, Highland Hills (2-
year public) University of Akron Wayne College, Orrville (2- and 4- year
public)

Virginia Germanna Community College, Fredericksburg (2- year public)
Northern Virginia Community College, Annandale (2- year public) Old
Dominion University, Norfolk (4- year public) Tidewater Community College,
Norfolk (2- year public) Applied Career Training, Arlington (Proprietary)
Stratford University, Falls Church (Proprietary)

Source: GAO. The following steps were taken to estimate the additional
federal budget costs associated with permitting degree- seeking students
enrolled less than halftime to include room, board, and miscellaneous
personal expenses in calculating their cost of attendance (alternative
COA) for the purpose of receiving a Pell Grant.

Using the 1999- 2000 National Postsecondary Student Aid Study, we
estimated a Pell Grant for all students in the sample who were less-
thanhalftime students seeking a certificate or undergraduate degree. We
estimated Pell Grant awards under the current law, and under an
alternative COA for the 1999- 2000 school year. The estimated total
federal costs under current law and the alternative COA were calculated by

summing the estimated individual grants. The federal cost associated with
changing the Pell Grant policy was calculated as the difference between
the estimated federal cost under current law and the estimated federal
Cost Estimation Methodology

Pell Grant Analysis

Appendix I: Objectives, Scope, and Methodology

Page 35 GAO- 03- 905 Federal Student Aid

cost under the alternative COA. Federal costs for school year 1999- 2000
were projected to school year 2003- 04 by assuming that the ratio of these
estimated federal costs to the total cost of the Pell grant program in
school year 2003- 04 were the same as in school year 1999- 2000. To
estimate the average Pell grant in school year 2003- 04, we projected the
estimated number of Pell grant recipients in school year 1999- 2000 who
are less than halftime students seeking a certificate or undergraduate
degree to school

year 2003- 04. We did this by assuming that the proportion of this
estimated number of recipients to the total number of recipients in school
year 1999- 2000 equals this proportion in school year 2003- 04. The
average Pell Grant in school year 2003- 04 equals the estimated federal
cost in school year 2003- 04 divided by the estimated number of recipients
in school year 2003- 04. Federal costs other than the amounts of the Pell
Grants were not considered in our analysis.

Our estimate of students* Pell Grant awards is based upon the federal
needs analysis methodology for calculating the Pell Grant and the Regular
Disbursement Schedule for Determining Less than Halftime Awards (FSA
Handbook 1999- 2000, Pell Reference). 3 If the student did not apply for

financial aid, or the institution they attended did not have any Pell
recipients in 1999- 2000, we assumed that the student*s estimated Pell
Grant to be $0. The same steps were taken in estimating a student*s Pell
Grant under the alternative COA except that the Pell cost of attendance
was estimated to include room and board and personal expenses. To receive
a Pell Grant under the alternative COA, the individual must have applied
for financial aid. Inherent in this assumption is that an alternative Pell
cost of attendance will not affect students* decisions to apply for
financial aid. We undertook the following analysis to estimate the federal
subsidy cost

of allowing degree- seeking students who enroll less than halftime to be
eligible for subsidized and unsubsidized Stafford loans.

Using the 1999- 2000 National Postsecondary Student Aid Study, we
estimated the Stafford subsidized and unsubsidized loans for all students
in the sample who were less- than- halftime students seeking a certificate
or undergraduate degree would receive if the law were changed to allow
less

than halftime students to receive these loans. The total loan volumes 3
The estimated cost of attendance and the expected family contribution were
rounded to the middle of the ranges reported in the Disbursement Schedule.
Stafford Loan Analysis

Appendix I: Objectives, Scope, and Methodology

Page 36 GAO- 03- 905 Federal Student Aid

summed and weighted over all students by FFELP/ FDLP, school type, and
class year were projected from school year 1999- 2000 to school year 2003-
04 by assuming that the proportion of this estimated loan volume to the
total loan volume in fiscal year 1999- 2000 would equal the proportion of
the estimated loan volume in school year 2003- 04 to the total loan volume
in FY 2003- 04. The federal cost of this policy change equals the
projected loan volume times the applicable subsidy rate in 2003- 04,
summed over FFELP/ FDLP, school type, and class year. 4 Federal costs

other than the subsidy costs of the loans were not considered. To estimate
the average loan awards in school year 2003- 04, we projected the
estimated number of Stafford subsidized and unsubsidized recipients in
school year 1999- 2000 who are less than halftime students seeking a
certificate or undergraduate degree to school year 2003- 04. We did this
by assuming that the proportion of this estimated number of recipients to
the total number of recipients in fiscal year 1999- 2000 would equal the
proportion of recipients in school year 2003- 04 to the total number of
recipients in fiscal year 2003- 04. The average loan award in school year
2003- 04 equals the estimated loan volume in school year 2003- 04 divided
by the estimated number of recipients in school year 2003- 04. Our
estimate of students* subsidized loan awards is based upon the federal

needs analysis methodology for subsidized Stafford loans. For each student
we estimated a cost of attendance (minus room and board and personal
expenses) for the period enrolled in school (loan COA). We calculated and
prorated the expected family contribution for the number of months the
student attended school. We also calculated each student*s estimated
financial assistance, adding federal, state, private, and institutional
aid. The estimated subsidized loan award was calculated as the loan COA,
minus the prorated expected family contribution and estimated financial
assistance. Estimated subsidized loans, if above the loan limit level,
were set at the maximum amount allowed by law. For the students attending
institutions for which no Stafford loan recipients were reported, we
assumed that estimated subsidized loan was $0. 4 Subsidy rates represent
the federal portion of non- administrative costs* principally

interest subsidies and defaults* associated with each borrowed dollar over
the life of the loan. Subsidy rates are estimated by Education for FFELP
and FDLP by loan type (subsidized and unsubsidized), borrower
characteristics (class year), and by institution

attended (2 year, 4 year, and proprietary). While called *unsubsidized,*
the federal government can still incur costs on such loans, including
costs associated with borrowers who default on their loans and, under the
FFELP, costs of making certain interest subsidy

payments to lenders.

Appendix I: Objectives, Scope, and Methodology

Page 37 GAO- 03- 905 Federal Student Aid

For each student in the NPSAS sample, we also estimated an unsubsidized
award. This amount was calculated as the prorated expected family
contribution plus unmet need. Unmet need was estimated to be the loan COA,
minus prorated expected family contribution and federal, state, private,
and institutional aid. If the estimated unsubsidized award was greater
than the loan limit minus the estimated subsidized award, we replaced the
estimated unsubsidized award with the loan limit minus the estimated
subsidized award. For the students attending institutions for which no
Stafford loan recipients were reported, we assumed that estimated
unsubsidized loans was $0.

All students were assumed to borrow the Stafford loan amounts for which
they qualify. Inherent in this assumption is that all students who are
eligible will apply for Stafford loans.

Education officials provided information on federal subsidy rates for
Stafford loans, budget estimates for the Pell Grant program, and reviewed
our estimation methodology.

Appendix II: Estimates and Associated Confidence Intervals Page 38 GAO-
03- 905 Federal Student Aid

Tables 7- 31 contain the sample- based estimates and associated confidence
intervals for our reported results.

Table 7: Age of All Undergraduate Students, 1999- 2000 Percent Lower and
upper bounds of 95

percent confidence interval 24 and older (adult) 42.87 42.17- 43.58 23 and
under (non- adult) 57.13 56.42- 57.83 Source: GAO calculations based upon
NPSAS 1999- 2000 data.

Table 8: Age of All Adult Undergraduate Students, 1999- 2000 Percent Lower
and upper bounds of 95

percent confidence interval 24- 30 43.29 42.13- 44.45 31- 40 30.80 29.70-
31.90 41 and older 25.91 24.86- 26.97 Source: GAO calculations based upon
NPSAS 1999- 2000 data.

Table 9: Differences Between Students 18- 23 and Adult Students (24 or
older) 19992000 Adult students

Lower and upper bounds of 95 percent

confidence interval Non- adult

students Lower and upper bounds

of 95 percent confidence interval

Work fulltime 59.33 58.18- 60.48 24.12 23.26- 24.98 Married 49.68 48.51-
50.86 4.53 4.14- 4.94 Have dependents 54.96 53.76- 56.15 7.87 7.33- 8.43
GED/ no diploma 9.36 8.66- 10. 09 3. 60 3.21- 4.02 Source: GAO
calculations based upon NPSAS 1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals

Appendix II: Estimates and Associated Confidence Intervals Page 39 GAO-
03- 905 Federal Student Aid

Table 10: Type of Institution Attended by Adult Students, 1999- 2000
Percent Lower and upper bounds of 95

percent confidence interval Public 4- year 22.44 21.78- 23.10 Private 4-
year 10.33 9.90- 10. 75 Public 2 year 55.51 54.62- 56.40 Private- for
profit 6.47 6.18- 6.77 Multiple institutions 5.26 4.90- 5.64 Source: GAO
calculations based upon NPSAS 1999- 2000 data.

Table 11: Type of Degree Sought by Adult Undergraduates, 1999- 2000
Percent Lower and upper bounds of 95

percent confidence interval Certificate 13.77 13.01- 14.52 Associate 39.80
38.69- 40.92 Bachelor 27.97 27.21- 28.68 No degree 6.97 6.32- 7.67
Transition 11.52 10.77- 12.26 Source: GAO calculations based upon NPSAS
1999- 2000 data.

Table 12: Amount of Assistance Received by All Adult Students, 1999- 2000
Total dollars Lower and upper bounds of 95

percent confidence interval Federal title IV grants $3,320,761,399
$3,174,289,967-$ 3,467,232,830 Federal title IV loans $8,526,918,039
$8,181,580,018-$ 8,872,256,059 Employer assistance $1,280,758,192
$1,188,008,227-$ 1,373,508,157 State aid $975,120,393 $900,963,408-$
1,049,277,377 Institutional aid $940,596,062 $855,535,763-$ 1,025,656,360
Veterans assistance $1,036,349,868 $902,790,140-$ 1,169,909,595 WIA
$274,756,812 $221,029,425-$ 328,484,198 Source: GAO calculations based
upon NPSAS 1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 40 GAO-
03- 905 Federal Student Aid

Table 13: Enrollment Intensity among Adult Undergraduates, 1999- 2000
Percent Lower and upper bounds of 95

percent confidence interval Less than halftime 33.16 32.01- 34.30 Halftime
25.98 24.90- 26.99 Fulltime 30.48 29.54- 31.42 Mixed 9.90 9.22- 10. 60
Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 14: Differences between Less Than Halftime, Halftime, and Fulltime
Adult Students Less- than- halftime adult

students Lower and upper

bounds of 95 percent confidence

interval One- half or

threequarter- time adult students

Lower and upper bounds of 95

percent confidence

interval Fulltime adult students

Lower and upper bounds of 95 percent

confidence interval

Median age 37 36- 38 32 31- 32 28.00 28.00- 29.00 Percent working fulltime
77.22 75.25- 79.19 69.52 67.31- 71.72 33.76 32.05- 35.48 Median household

income (dollars) 42,000 41,000- 45,000 31,000 30,000- 33,000 18,000
17,000- 19,000 Percent married 57.42 55.12- 59.72 50.23 47.86- 52.61 42.10
40.33- 43.86 Percent With dependent 57.34 54.98- 59.69 56.95 54.55- 59.34
52.04 50.21- 53.86 Percent at 2- year institution 73.43 71.89- 74.97 57.61
55.53- 59.69 35.37 33.57- 37.17 Source: GAO calculations based upon NPSAS
1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 41 GAO-
03- 905 Federal Student Aid

Table 15: Type of Institution At Which Adult Students Enrolled, 1999- 2000
Less- than- halftime adult

students Lower and upper

bounds of 95 percent confidence

interval Halftime adult students

Lower and upper bounds of 95 percent

confidence interval Full- time adult

students Lower and upper

bounds of 95 percent confidence

interval

Public 4- year 14.81 13.66- 15.96 23.03 21.43- 24.62 28.71 27.34- 30.07
Private 4- year 7.24 6.47- 8.07 10.38 9.36- 11. 46 13.36 12.45- 14.26
Public 2 year 73.43 71.89- 74.97 57.61 55.53- 59.69 35.37 33.57- 37.17
Private- for profit 1.01 0.80- 1.26 3.37 2.89- 3.90 16.09 15.18- 17.01
Multiple institutions 3.51 2.95- 4.14 5.62 4.88- 6.44 6.47 5.81- 7.19
Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 16: Estimated Costs for Less Than Halftime Adult Students, 1999-
2000 Total dollars

(mean) Lower and upper bounds of 95 percent confidence interval

Total costs $1058.47 $997.02-$ 1119. 93 Tuition $480.19 $455.74-$ 504. 65
Books $225.17 $208.41-$ 241. 92 Other $227.10 $198.20-$ 256. 01 Child care
$147.90 $107.80-$ 188. 01 Transportation $885.43 $757.37-$ 1013. 49
Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 17: Percent of Costs Covered by All Sources of Assistance, 1999-
2000 Percent of costs

covered by assistance, all

sources Lower and upper bounds of 95 percent confidence interval At or
below 150 percent of the

poverty guideline 42.93 28.66- 57.20 Above 150 percent of the poverty
guideline 43.04 37.57- 48.51 Source: GAO calculations based upon NPSAS
1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 42 GAO-
03- 905 Federal Student Aid

Table 18: Mean Assistance Received by Less Than Halftime Students, 1999-
2000 Mean amount Lower and upper bounds of 95

percent confidence interval Total aid $462.12 $411.53- 512.71 Source: GAO
calculations based upon NPSAS 1999- 2000 data.

Table 19: Mean Amount of Assistance Received by Less Than Halftime
Students, By Source, 1999- 2000

Mean Amount Lower and upper bounds of 95 percent confidence interval Pell
$465.01 $433.45- 496.58 State aid $474.72 $330.01- 619.43 Employer aid
$784.09 $695.50- 872.68 Lifetime Learning tax credit $73.79 $67.97- 79.61

Institutional aid $631.77 $478.45- 785.10 Other Aid $1251.83 $802.00-
1701. 66 Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 20: Type of Aid Received by Less Than Halftime Students, 1999- 2000
Percent Lower and upper bounds of 95

percent confidence interval Pell 3.20 2.49- 4.04 State aid 1.73 1.13- 2.54
Employer aid 23.08 21.20- 24.95 Lifetime Learning tax credit 46.45 44.13-
48.77 Institutional aid 3.67 2.86- 4.64 Vocational aid 0.37 0.13- 0.84
Other aid 5.06 4.08- 6.20 Source: GAO calculations based upon NPSAS 1999-
2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 43 GAO-
03- 905 Federal Student Aid

Table 21: Percent Receiving Pell Grants, by Income, 1999- 2000 Percent
Received

Pell Grant Lower and upper bounds of 95 percent confidence interval At or
below 150 percent of the

poverty guideline 13.74 9.94- 18. 32 Above 150 percent of the poverty
guideline 1.41 0.81- 2.27 Total 3.20 2.49- 4.04 Source: GAO calculations
based upon NPSAS 1999- 2000 data.

Table 22: Percent Receiving State Aid, by Income, 1999- 2000 Percent
received

state aid Lower and upper bounds of 95 percent confidence interval At or
below 150 percent of the

poverty guideline 4.27 0.00- 43. 07 Above 150 percent of the poverty
guideline 1.30 0.72- 2.16 Total 1.73 1.13- 2.54 Source: GAO calculations
based upon NPSAS 1999- 2000 data.

Table 23: Percent Receiving Employer Aid, by Income, 1999- 2000 Percent
received

employer aid Lower and upper bounds of 95 percent confidence interval At
or below 150 percent of the

poverty guideline 9.43 0.04- 53. 11 Above 150 percent of the poverty
guideline 25.40 23.30- 27.49 Total 23.08 21.20- 24.95 Source: GAO
calculations based upon NPSAS 1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 44 GAO-
03- 905 Federal Student Aid

Table 24: Percent Receiving Lifetime Learning Tax Credit, By Income, 1999-
2000 Percent received Lifetime Learning tax

credit Lower and upper bounds of 95 percent confidence interval At or
below 150 percent of

the poverty guideline 29.38 22.74- 36.72 Above 150 percent of the poverty
guideline 49.35 46.85- 51.86 Total 46.45 44.13- 48.77 Source: GAO
calculations based upon NPSAS 1999- 2000 data.

Table 25: Percent Receiving Institutional Aid, by Income, 1999- 2000
Percent received institutional aid Lower and upper bounds of 95

percent confidence interval At or below 150 percent of the poverty
guideline 7.11 0.00- 51. 59 Above 150 percent of the poverty guideline
3.09 2.30- 4.05 Total 3.67 2.86- 4.64 Source: GAO calculations based upon
NPSAS 1999- 2000 data.

Table 26: Percent Receiving Other Aid, by Income, 1999- 2000 Percent
received

other aid Lower and upper bounds of 95 percent confidence interval At or
below 150 percent of

the poverty guideline 6.03 1.70- 14. 61 Above 150 percent of the poverty
guideline 4.90 3.83- 6.16 Total 5.06 4.08- 6.20 Source: GAO calculations
based upon NPSAS 1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 45 GAO-
03- 905 Federal Student Aid

Table 27: Percent of Less Than Halftime Adults below 150 Percent of 1998
Federal Poverty Guideline, 1999- 2000 Percent at or

below 150 percent of the

poverty guideline

Lower and upper bounds of 95 percent

confidence interval

Percent above 150 percent of

the poverty guideline

Lower and upper bounds of 95 percent

confidence interval

Less- thanhalftime adults 14.52 12.90- 16.26 85.48 83.84- 87.12 Source:
GAO calculations based upon NPSAS 1999- 2000 data.

Table 28: Type of Aid Received by Less Than Halftime Students, by Income,
1999- 2000

Percent at or below 150 percent of the poverty

guideline Lower and

upper bounds of 95 percent confidence

interval Percent above

150 percent of the poverty

guideline Lower and

upper bounds of 95 percent confidence

interval

Pell 13.74 9.94- 18. 32 1.41 0.81- 2.27 State aid 4.27 0.00- 43. 07 1.30
0.72- 2.16 Employer aid 9.43 0.04- 53. 11 25.40 23.30- 27.49 Lifetime
Learning tax credit 29.38 22.74- 36.72 49.35 46.85- 51.86 Institutional
aid 7.11 0.00- 51. 59 3.09 2.30- 4.05 Other aid 6.03 1.70- 14. 61 4.90
3.83- 6.16 Source: GAO calculations based upon NPSAS 1999- 2000 data.

Appendix II: Estimates and Associated Confidence Intervals Page 46 GAO-
03- 905 Federal Student Aid

Table 29: Average Costs and Amount of Aid Received by Less Than Half- time
Students, by Income, 1999- 2000 Amount for students at or below 150
percent of

the poverty guideline Lower and upper

bounds of 95 percent confidence interval

Amount for students above 150 percent of the poverty guideline

Lower and upper bounds of 95 percent

confidence interval

Average costs $1120.84 $940.32-$ 1301. 37 $1047.88 $982.68-$ 1113. 08
Total Aid $478.32 $336.31-$ 620. 33 $459.90 $405.72-$ 514. 08 Pell $471.97
$428.69-$ 515. 24 $453.49 $409.99-$ 497. 00 State aid $582.93 $262.14-$
903. 72 $414.40 $285.94-$ 542. 85 Employer assistance $789.82 $185.48-$
1394. 16 $783.73 $697.51-$ 869. 95 Lifetime Learning tax credit $67.99
$51.91-$ 84. 06 $74.38 $68.16-$ 80. 60 Institutional aid $336.53 $193.93-$
479. 14 $747.19 $546.71-$ 947. 66

Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 30: Grade Point Average of Adult Undergraduates, 1999- 2000 Percent
with GPA of

C or lower Lower and upper bounds of 95 percent confidence interval Less-
Than- Halftime

Adult 17.11 15.37- 18.97 All Other adult Students 10.22 9.41- 11. 04
Source: GAO calculations based upon NPSAS 1999- 2000 data.

Table 31: Degree Or Certificate Expectation Among Adults Who Enrolled Less
Than Halftime During First Year

Percent Lower and upper bounds of 95 percent confidence interval Expect to
earn certificate or

degree 75.25 66.23- 84.27 Do not expect to earn certificate or degree
24.75 15.73- 33.77 Source: GAO calculations based upon BPS 2001 data.

Appendix II: Estimates and Associated Confidence Intervals Page 47 GAO-
03- 905 Federal Student Aid

Table 32: National 6- Year Completion Rate Among Adult Undergraduates With
A Degree Or Certificate Expectation Percent who did not

receive a degree or certificate and are no

longer enrolled Lower and upper bounds of 95 percent confidence interval
Enrolled in first year as

less- than- halftime student 66.39 54.77- 78.01 Source: GAO calculations
based upon BPS 2001 data.

Table 33: Household Income Distribution of Adult Students, 1999- 2000 Less
Than Halftime Halftime or More

Percent Lower and upper

bounds of 95 percent confidence

interval Percent Lower and upper

bounds of 95 percent confidence

interval

$0- 9,999 6.78 5.61- 8.10 20.4 19.36- 21.44 $10-$ 19,999 10.69 9.27- 12.
26 22.68 21.54- 23.82 $20-$ 29,999 15.09 13.41- 16.89 17.86 16.80- 18.92
$30-$ 39,999 15.93 14.22- 17.76 11.48 10.60- 12.36 $40-$ 49,999 11.13
9.70- 12. 68 8.2 7. 44- 8.96 $50-$ 59,999 11.13 9.72- 12. 68 5.59 4.96-
6.22 $60-$ 69,999 9.29 7.96- 10. 76 4.57 4.02- 5.12 $70-$ 79,999 5.90
4.79- 7.16 3.28 2.79- 3.77 $80,000 and above 14.07 12.52- 15.73 5.95 5.30-
6.60 Source: GAO calculations based upon NPSAS 1999- 2000 data.

Appendix III: Budgetary Impact of Possible Behavioral Response to Cost of
Attendance Changes in the Pell Program

Page 48 GAO- 03- 905 Federal Student Aid

The policy change in the Pell Grant Program we considered was changing the
cost of attendance calculation for less- than- halftime students so that
it does not exclude room, board and personal expenses. This policy change
would increase the number of people who are qualified to receive an award,
and it would increase the size of the award for those who are already
qualified to receive an award under current law.

This policy change may cause people to change their postsecondary
enrollment behavior. Specifically, some people who are not enrolled in
postsecondary education may choose to enroll less than halftime in
response to the policy change. Students who are already enrolled less than
halftime in postsecondary education are unlikely to change their
enrollment in response to the policy change.

As Seftor and Turner 1 note, there is no consensus within the economic
literature on the effect of Pell Grants on enrollment. For example, Hansen
2 and Kane 3 found that Pell Grants have no effect on enrollment. However,

they found that Pell Grant Program does affect the enrollment behavior of
older, nontraditional students. Since the policy changes we consider are
specific to less- than- halftime students and over 80 percent of less-
thanhalftime students are independents, the Seftor and Turner findings
appear to be more applicable to this analysis. Seftor and Turner estimated
price elasticities that fall in the range of *0. 34 to -0.14. To estimate
the possible behavioral response to a change in Pell Grant

policy, we applied a price elasticity in the middle of those identified by
Seftor and Turner (* 0.24) to the less than halftime Pell award amounts
estimated in this study. 4 We assumed that changes to the Pell Grant cost
of attendance methodology, if adopted, would be applied to the cost of
attendance for both dependent and independent students enrolled on a

1 Neil S. Seftor and Sarah E. Turner, *Back to School: Federal Student Aid
Policy and Adult College Enrollment.* The Journal of Human Resources 37
(2002): 336- 352. 2 W. Lee Hansen, *Impact of Student Financial Aid
Access.* In The Crisis in Higher Education, ed. Joseph Fromkin, 1983. New
York: Academy of Sciences. 3 Thomas J. Kane, *College Entry by Blacks
Since 1970: The Role of College Costs, Family Background, and the Returns
to Education.* Journal of Political Economy, 102( 5), 1994; *Rising Public
College Tuition and College Entry: How Well Do Public Subsidies Promote
Access to College?* NBER Working Paper 5164, 1995.

4 A price elasticity of *0. 24 implies that a 1% decrease in college costs
would increase enrollment by 0.24% Appendix III: Budgetary Impact of
Possible

Behavioral Response to Cost of Attendance Changes in the Pell Program

Appendix III: Budgetary Impact of Possible Behavioral Response to Cost of
Attendance Changes in the Pell Program

Page 49 GAO- 03- 905 Federal Student Aid

less than halftime basis. Therefore, in calculating the possible
behavioral response we applied these estimated Pell Grant awards and price
elasticities to the population of all persons 18- 35 who were not enrolled
in school and who had not earned a postsecondary credential. 5 On this
basis, we estimate that the Pell Grant policy change will cause about
35,000 people between the ages of 18 and 35 who are not currently enrolled
in school and who do not currently have an undergraduate degree to enroll
less than halftime. This conclusion was reached based upon the following

calculations:  We found that the Pell Grant policy change would increase
the average

Pell Grant award from $0 to $630 for 0.63 percent (12,679/ 2,007,542) of
the less- than- halftime student population, increase the average Pell
Grant award $111 for 7.46 percent (149,731/ 2,007,542) of the less- than-
halftime student population, and have no effect on the Pell Grant award
for the rest

of the student population.  Of the 33 million people aged 18- 35 who are
not enrolled in school and

without a undergraduate degree, we assumed that only 18 percent of them
would consider going to school less than halftime: the same proportion of
the undergraduate population currently enrolled on a less than halftime
basis. This is the population who may change their enrollment behavior
because of the policy change.

 Of that population, we assumed that 0.63 percent of them would have an
increase in their Pell Grant award of $630 and 7.5 percent of them would
have an increase in their Pell Grant award of $111.

 Using the average cost of school when attending less than halftime of
$500, 6 this suggests that there would be an additional 35, 053 people ([
33,000, 000 x 0.18 x 0.0063 x 630/ 500 x 0.24]+ [33, 000,000 x 0.18 x
0.075 x 111/ 500 x 0.24]) enrolling in school less than halftime in
response to the policy change.

5 Estimates of the size of this population were obtained from the National
Household Education Surveys Program, Adult Education and Lifelong Learning
Survey, 2001. Adults older than 35 were not included in the population,
since they were assumed to be significantly less likely to enroll in
response to changes in grant assistance.

6 To be consistent with the Turner and Seftor methodology, we assumed that
students attended 4- year colleges, and we included only tuition and fees
in the definition of cost.

Appendix III: Budgetary Impact of Possible Behavioral Response to Cost of
Attendance Changes in the Pell Program

Page 50 GAO- 03- 905 Federal Student Aid

 This enrollment response would cost the federal government $9,764,063 ([
33,000, 000 x 0.18 x 0.0063 x 630/ 500 x 0.24] x $630+ [33, 000,000 x 0.18
x 0.075 x 111/ 500 x 0.24] x $111).

Appendix IV: Comments from the Department of Education

Page 51 GAO- 03- 905 Federal Student Aid

Appendix IV: Comments from the Department of Education

Appendix V: GAO Contacts and Staff Acknowledgments Page 52 GAO- 03- 905
Federal Student Aid

Jeff Appel (202) 512- 9915 Thomas Weko (202) 512- 8796 In addition to
those named above, the following people made significant contributions to
this report: Cedric Burton, Betty Clark, Cindy Decker, Gordon Mermin, John
Mingus, Susan Conlon, and Corrina Nicolaou. Appendix V: GAO Contacts and
Staff

Acknowledgments GAO Contacts Staff Acknowledgments

(130204)

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