Dive Brief:

• The U.S. Department of Education announced Wednesday it would waive restrictions on the Federal Work-Study (FWS) program for 190 institutions, allowing them to pay for students' jobs in the private sector and elsewhere.
• The initiative, known as an "experimental site," means to help the department gauge whether students benefit from being paid for work on or off campus that is related to their field of study. 
• The Trump administration has called for changes to the aid program reflecting long-standing criticism that its funding formula is outdated and disproportionately benefits affluent students. 

Dive Insight:

Institutions from all over the country were invited to participate in the department's experiment, which would let them use FWS funds to pay for students' work in the private sector that relates to their fields of study. It would also cover work required through the curriculum, such as student teaching or clinical rotations. Historically, FWS only allowed on-campus employment.

More than 3,000 colleges and universities provided roughly 600,000 students with FWS opportunities during the 2016-17 academic year, the department said in its announcement. But a small fraction — less than one-tenth of 1% — involved off-campus, private-sector jobs. 

The department said it will review factors including retention, completion and students' post-graduation job placements to determine whether they are better served by the expanded uses for FWS funds.

President Trump has tried to broaden FWS for some time, pushing in previous budget cycles for it to be retooled to focus on workforce and career-oriented training. But the administration has puzzled pundits because it has tried to rework FWS while simultaneously proposing to slash the program's funding. 

In his latest draft budget, covering the 2021 fiscal year, Trump moved to cut FWS by $500 million, a similar reduction to his 2020 proposal. Congress ignored the administration that year, boosting FWS' budget to $1.2 billion — a $50 million increase. But adjusted for inflation, overall funding for the program hasn't increased significantly in the last decade. 

FWS was developed more than 55 years ago to help low-income students pay for college. Some argue, though, it has long failed to do so, skewing instead toward wealthier students. 

Approximately 617,000 students received FWS in 2016-17, according to an analysis by the National Association of Student Financial Aid Administrators. But only about 44% of the dependent, undergraduate recipients came from families with incomes of less than $42,000, while nearly 41% had family incomes of $60,000 or greater. 

Moreover, a larger share of students at private nonprofit colleges, which tend to have higher sticker prices, participate in FWS as compared to their peers at public institutions, according to an analysis last year by the Urban Institute's Center on Education Data and Policy. 

Students at private colleges receive less federal Pell Grant money, a proxy for financial need across an institution. A 2015 study found that the country's 322 most selective private colleges got just 4% of Pell Grant funds but 22% of FWS funding.

Because the Education Department disburses FWS money to institutions directly, those schools have significant discretion in how to distribute it among students. 

While critics have called for the funding formula to be revamped to favor colleges with more low-income students, institutions that benefit from the current system have indicated they wouldn't support such a change, noted Robert Kelchen, the author of the 2015 study and an associate professor of higher education at Seton Hall University, in his report.

But without a significant increase in funding, he wrote, "some colleges will have to lose funds for others to gain." 

Higher ed groups have suggested other ways colleges could improve work-study. That includes adding a coordinator to oversee the program on campuses and manage relationships with employers, NASPA—Student Affairs Administrators in Higher Education recommended last year. Administrators could also mimic a traditional hiring process for on-campus jobs to give students more work experience.