Giving Compass' Take:

• Sandy Baum argues that incremental reform is insufficient for the Federal Work-Study Program, which supplies funding for students to be paid to work while they are in college. 

• How can funders work to develop more effective work-study strategies and implement them? 

• Learn more about building a better future for work-study.

The federal government spends $1 billion a year subsidizing colleges and universities to provide jobs to their students through the Federal Work-Study (FWS) Program. Many ideas for reforming the federal student aid system, including recent proposals from both Republicans and Democrats, include modifying the FWS Program, which, along with Federal Supplemental Educational Opportunity Grants (FSEOG), is a “campus-based” program, allocating federal funds to institutions, not to individual students. Most critics of the program, and most reform proposals, focus on the formula for allocating funds to institutions. But as the reauthorization of the Higher Education Act approaches, it is worth reconsidering the goals of FWS and asking whether the current program structure is the best way to achieve those goals.

A fundamental question is whether federal subsidies to institutions that encourage them to provide employment by paying part of students’ wages should be considered financial aid. Students are generally being paid a market wage (or lower); they are not receiving a subsidy. Yet these earnings are added to grant aid and federal loans as a component of the financial aid packages institutions, along with federal and state governments, provide to supplement students’ resources to help them pay for college. Students’ wages add to their ability to finance their educational expenses, but whether the wage is paid entirely by the employer or partially by the government is not relevant. Requiring students to work to receive a portion of their financial aid packages diminishes the time they can devote to earning money to augment the resources available to them and their families.

Federal work-study creates employment opportunities for students, frequently on campus. In contemplating the future of FWS, policymakers should focus on the most effective strategies for increasing meaningful employment opportunities for a significant number of students, particularly those with limited resources.

The Federal Work-Study Program was introduced as part of the Economic Opportunity Act of 1964 to help low-income college students earn money while enrolled. The federal government provides funds to institutions, not to individual students. Institutions then allocate the funds to students with documented financial need, providing a match of at least 25 percent of the wages students receive under the program. Students may be employed by the institution or by an outside employer, but more than 90 percent of FWS earnings are from on-campus jobs. At least 7 percent of the federal allocation must support students working in community service jobs.

FWS earnings are treated differently by the federal need analysis formula than earnings from other employment. Because they are counted as financial aid in the year they were earned, FWS earnings do not count as income in the determination of need in following years. Earning more from a non-FWS job increases a student’s income and expected family contribution, reducing future aid eligibility; the same is not true of FWS earnings. In other words, FWS earnings are treated as financial aid—not as earnings from employment—in the determination of financial need.

About 90 percent of the $1 billion in annual FWS funds go to undergraduate student wages, and 10 percent support graduate student employment. These FWS dollars equaled 3 percent of the $28.2 billion of Pell grant funding in 2017–18, a decline from 7 percent of the Pell dollars in 2007–08 and 13 percent in 1997–98 (figure 1). The number of undergraduate and graduate FWS recipients—about 600,000—is less than 10 percent of the number of undergraduates receiving Pell grants (Baum et al. 2018, tables 1 and 5).