Pells Under Fire

December 17th, 2011 at 2:24 pm

A number of folks suggested that free or subsidized higher education should be part of the OPA (the policy agenda implied by the President’s Osawatomie speech).

I take the point.  There are many market barriers to both access to and completion of higher ed and thus a well-established role for government.  (While policy has typically focused on access, readers of OTE know that I’ve come to view completion as an equally important intervention point.)

So let’s look a bit at something we’ve accomplished in this area that has perhaps not gotten enough recognition, outside of conservatives who are actively (and somewhat successfully) hacking away at it.  I’m talking about the increase in Pell grants.

Around 10 million undergrads get help from Pells these days, and the maximum grant was recently kicked up to $5,550.  The figures show a) the increase in Pell spending and b) the increase in the share of undergrads with Pell grants.

Source: Dept of Ed, (hattip: KM)

Importantly, according to the Dept of Ed, about 40% of the increased expenditures in the top figure is cyclical, i.e., due to the increase in college attendance that you expect to see in recession, as job opportunities become scarce.  The rest would then be attributable to increased eligibility and higher grants.

And of course, college tuitions have gone up too, while incomes for most families have fallen in real terms.  As my colleague Kelsey Merrick has written:  “…expansions to the Pell Grant program successfully shielded low- and moderate-income students from tuition increases in 2010.  But the maximum award currently covers only 10 percent to 15 percent of the average costs of a four-year college.”

So, while Pell grants will not by themselves overcome all the barriers kids from less advantaged families face in accessing and completing college, they help.  So why are conservatives gunning for the program?

Basically, because it’s increasing and any government spending outside of defense with a positive first derivative is automatically guilty without a trial, even though the trend is expected to flatten out soon.

The appropriations bill just negotiated, for example, cuts the number of Pell-eligible semesters from 18 to 12, thereby generally limiting grants to six years.  It also reduces the family income level at which students would be automatically eligible for the grant from $30K to $23K (though higher income families can get grants depending on their means and the cost of their school).

It’s not unreasonable to limit semesters of Pell but given that the six-year college completion rate is about 50% (with huge school-by-school variance around that average), unless the change comes with a substantive policy commitment to boost that completion rate–which, of course, it doesn’t–it’s worrisome.

And the lower threshold just doesn’t make sense.  If anything, the burden of paying for college is creeping higher up the income scale.  This change goes the wrong way.

Here’s what I’d append to the OPA work-in-progress:

–support for programs that smooth the transition from 2-4 year colleges

–protecting Pells for families in the bottom half of the income scale

–a federal countercyclical policy that automatically holds down tuition increases at public colleges in recession.

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2 comments in reply to "Pells Under Fire"

  1. Jean says:

    Considering that full employment and progressive taxation were in your original list, the list of policy solutions seems complete and comprehensive. I think the only thing lacking is a motivating force. War obviously doesn’t work, and an alien attack probably would only result in these solutions if we were victorious. I’m not sure what sort of event would be grand enough to drive this kind of economic surge, and result in a picture that looks like this.

    Invading Mars, maybe?

  2. PeonInChief says:

    Many lower income students require more than six years to complete college. The main reason for this is not tuition–or even books–although the cost of college texts has gone from egregious to disgusting. It’s living expenses. When I was in college in the 1970s, students could make it on part-time work–sharing an apartment, buying food, paying for basic transportation and the like. (My college also provided free basic health care.) But the collapse in wages over the last 30 years means that working students must work nearly full time to meet those same expenses. In fact, most working class students are full-time workers and part-time students.