Keep the Eye on Access
"It is incumbent upon Congress to recognize the foundation of student financing support that Pell provides, invest in this program to return it to its prominence of two decades ago, and keep colleges and universities from using the grants to supplant institutional need based aid."
-Donald E. Heller
Center for the Study of Higher Education
Higher Ed Watch
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With all the attention paid to student loans of late, there is a risk that policy makers will lose track of an issue of even greater importance for college access for low- and moderate-income students: grants for postsecondary education. Research has long shown that grants, not loans, are the most effective financing vehicle for encouraging the postsecondary attendance and persistence of low and moderate-income students.
While Congress has been pursuing the student loan scandal, it also has recognized the importance of grant aid. In June, the House Appropriations Committee approved an increase in funding that would lift the maximum Pell Grant by $390. That boost would come on top of a $270 increase enacted by Congress earlier in the year. The combined $660 increase would bring the maximum Pell Grant to $4,700. Meanwhile, efforts are also underway in the House and Senate to reduce the government subsidies student loan providers receive and use the savings to increase the maximum award.
This increase in the Pell program is an important step toward improving college access. But Congress and the Administration have a long way to go to return Pell to the prominence it enjoyed during its heyday. Thirty years ago, the maximum Pell Grant had a purchasing power equal to approximately 80 percent of the cost of attendance at a typical public, 4-year college (though legislation capped the amount the student was eligible for at 50 percent of the cost of attendance). As recently as twenty years ago, the maximum Pell had a purchasing power of 60 percent of the public college 4-year cost of attendance. Today, the maximum Pell Grant is worth about half that amount, or 30 percent of the cost of attendance.
To restore the Pell Grant to what it was twenty years ago would require a maximum grant of about $8,000. A ballpark estimate of the additional cost associated with such an increase is approximately $13 billion a year. Given the constraints on discretionary spending that Congress has imposed on itself, not to mention President Bush’s veto threat of current contemplated spending levels, it is unlikely we’ll see a Pell increase in this range any time soon.
Low- and moderate-income students aren’t likely to get much more help from either of the two other primary sources of grant aid: the states and colleges and universities themselves. According to the National Association of State Student Grant and Aid Programs (NASSGAP), state spending on higher education grants totaled $7 billion in 2005-06, the most recent year for which data are available (the federal government spent $12.7 billion on the Pell Grant program that year). But after taking inflation into account, state spending on grants increased at a slower rate than in the prior year, even though most states’ fiscal conditions had improved.
In addition, over 25 percent of the money that states spend on grant aid to undergraduate students is awarded based on "merit" criteria and without considering the financial need of the student or her parents (and merit grants are the fastest-growing form of state grants). Merit aid, as opposed to Pell and other need-based aid, goes disproportionately to students from wealthier families; that is kids who otherwise would go to college whether the grants existed or not. It’s what budget experts call "buying out the base."
More important are the colleges. The nation’s 6,000 colleges and universities are the single largest source of grant aid to students. The most recent data from the U.S. Department of Education indicate that in the 2003-04 academic year, over $14 billion in institutional grants was awarded to undergraduate students, representing 40 percent of all grants received.
But as with state grant aid, merit grants are the fastest growing form of institutional aid. Today, more than half of the institutional grant dollars awarded to students are provided without consideration of financial need. Spurred by the intense competition for the best students, colleges and universities have relied on enrollment management tools, including the awarding of merit aid, to boost their rankings.
As states and colleges and universities continue to shift their priorities away from low- and moderate-income families, the Pell Grant program will become even more critical for ensuring student access. It is incumbent upon Congress to recognize the foundation of student financing support that Pell provides, invest in this program to return it to its prominence of two decades ago, and keep colleges and universities from using the grants to supplant institutional need based aid. At the same time, states and colleges and universities need to recommit to the important goal of providing financial aid to students who truly need the assistance in order to be able to afford to attend college and persist through to a degree once enrolled. Without such a commitment, low and moderate-income students will continue to be left behind in higher education.
Donald E. Heller is associate professor of education and senior research associate in the Center for the Study of Higher Education at The Pennsylvania State University in University Park.
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Reason over rhetoric
Thank you, Jim. . . .
What happened to NAF's Middle Class Agenda?
Does Heller's views represent the NAF's? Has the NAF's views changed since last November when it wrote that an interest rate cut took priority over a Pell Grant increase, because the middle class, not poor people, won the election for the Democrats.
Read on:
"But as in 1995, in 2007, we expect the new majority to move swiftly to enact its agenda. A centerpiece of that agenda are three college access and affordability items:
1) Cut student loan interest rates in half;
2) Extend college tuition tax deductibility; and
3) Raise the maximum Pell Grant by $1,000.
Higher Ed Watch has listed them above in the order that we think will be the Democratic majority's priority. Why that order?
First, the Democratic leadership has campaigned hard and vocally on its proposed student loan interest rate cut. They're bought in. Second, student loans and tax cuts can be folded into a filibuster-protected budget reconciliation bill, which is often used as a legislative tool for fast and controversial action. Those bills tend to move in the Spring. Third, Pell Grant funding is discretionary spending and carried out through the Appropriations process. Those bills tend to move in the Fall . . . or Winter.
But the most important reason Democrats will move to cut student loan interest rates quickly is because college loan debt is a quintissential middle class issue. The average Pell grant recipient comes from a family with a median family income of $15,400. Those families didn't decide this election. Middle class families did.
Editor’s response re: NAF’s Agenda
Thank you for reading Higher Ed Watch, Alex.
First, let us note that Professor Heller speaks for Professor Heller and not Higher Ed Watch or the New America Foundation as a whole. That said, we agree with Heller that Congress should “recognize the foundation of student financing support that the Pell [Grant] provides, invest in this program to return it to its prominence of two decades ago, and keep colleges and universities from using the grants to supplant institutional need based aid.”
Our Higher Ed Watch home page attempts to be clear as to our mission. We’re dedicated to promoting analysis and discussion of ways to increase college access, affordability and quality. We focus on improving the efficiency and effectiveness of federal student aid programs. That remains our mission and Professor Heller's views as expressed in the post above are not inconsistent with it.
Second, on November 30, 2006, we wrote that we expected college affordability would dominate the Congressional education agenda this year. Thus far, we’ve been correct. We’ve also said that we expected a student loan interest rate reduction would be a high priority of the Congressional majority. In fact, on January 17, 2007, in the early days of this Congress, the House of Representatives overwhelmingly approved a student interest rate reduction worth some $6 billion.
To be fair though, neither the original House legislation, nor that chamber’s subsequent reconciliation bill also cutting undergraduate Stafford student loan interest rates in half among other policies, has become law yet. And the Senate passed a reconciliation bill that increased grant aid, but did not cut student loan interest rates. That reconciliation legislation is currently the subject of a House-Senate conference committee. The Fiscal Year 2008 Appropriations bill governing discretionary Pell Grant funding has yet to pass either chamber of Congress, much less be the subject of a House-Senate conference committee.
But we stand by our position that because of its value to middle class families, the new Congressional majority will prioritize passing a reduction in subsidized student loan interest rates and do so via the reconciliation process. Frankly, we think by the end of this Congress, they will also achieve a $1,000 increase in grant aid to Pell recipients. It’s true that neither has been achieved yet. But this Congress is barely over a quarter of the way through its two year term.
Whether our prediction proves to be correct remains to be seen. But like you, we’ll be watching.
Thank you again for your comment.
Bills moving when?
Alex, what reconciliation bills related to student lending have ever moved during springtime? The FY 2002 budget resolution provided budget authority for a huge increase in the special allowance formula (versus the budget baseline), but the actual legislation moved during the winter and was signed into law in Feb. 2002 (the so-called "2003 fix"). The most famous omnibus reconcilation legislation impacting the student loan program was enacted in August 1993. The student loan section was known as The Student Loan Reform Act of 1993, which was almost a complete reauthorization of the student loan programs occurring little more than one year after enactment of the Higher Education Amendments of 1992.
The Deficit Reduction Act of 2005 was signed into law in Feb. 2006 and incorporated the Higher Education Reconciliation Act -- which, despite a lack of hearings, research or study, contained a broad range of changes to the student loan programs which had been unvetted in the higher ed community. (A couple of the more controversial changes were reversed in a supplemental spending bill enacted four months later.) The "inside baseball" nature of this legislation was not only epitomized by the error in the PLUS fixed interest rate language but also the substantive difference between the House and Senate versions of DRA in the medicare language, an oversight that resulted in unsuccessful litigation claiming that the DRA did not comply with the Constitution's presentment clause.
True, the landmark Bush-Daschle tax cuts, protected under budget reconciliation rules by the FY 2002 budget resolution passed in May 2001, did move during the spring, but that tax cut legislation did not include changes to the federal student loan programs.
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