Posts tagged ‘Pell Grant’

March 11, 2014

The reduced purchasing power of the Pell Grant

by Grace

Cornell professor of political science Suzanne Mettler writes about how federal student aid has become less effective in promoting opportunity”.

…  In the 1970s, the maximum Pell grants for low-income students covered nearly 80 percent of costs at the average four-year public university, but by 2013-14 they covered just 31 percent. Presidents beginning with Bill Clinton introduced costly new tax policies to help with tuition, but these have failed to improve access for the less well off.

Perhaps if Pell Grant funds were spent more efficiently, they could be used to cover a higher percent of costs for qualifying students.

‘Pell Grants Shouldn’t Pay for Remedial College’

 … A huge proportion of this $40 billion annual federal investment is flowing to people who simply aren’t prepared to do college-level work. And this is perverting higher education’s mission, suppressing completion rates and warping the country’s K-12 system.

Current Pell Grant spending is wasteful.

About two-thirds of low-income community-college students — and one-third of poor students at four-year colleges — need remedial (aka “developmental”) education, according to Complete College America, a nonprofit group. But it’s not working: Less than 10 percent of students who start in remedial education graduate from community college within three years, and just 35 percent of remedial students earn a four-year degree within six years.

One solution would be to limit Pell Grant eligibility to students prepared to do college-level work.  That could be accomplished by having colleges establish minimum requirements for admission based on rigorous entrance exams.

Related:  We spend $40 billion yearly on Pell Grants, but we have no idea about results (Cost of College) 

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May 14, 2013

‘Pell Grants Shouldn’t Pay for Remedial College’

by Grace

Michael Petrilli argues that Pell Grants should not be used to pay for remedial college courses.

 … A huge proportion of this $40 billion annual federal investment is flowing to people who simply aren’t prepared to do college-level work. And this is perverting higher education’s mission, suppressing completion rates and warping the country’s K-12 system.

Current Pell Grant spending is wasteful.

About two-thirds of low-income community-college students — and one-third of poor students at four-year colleges — need remedial (aka “developmental”) education, according to Complete College America, a nonprofit group. But it’s not working: Less than 10 percent of students who start in remedial education graduate from community college within three years, and just 35 percent of remedial students earn a four-year degree within six years.

A proposed solution

What if the government decreed that three years hence, students would only be eligible for Pell aid if enrolled in credit-bearing college courses, thus disqualifying remedial education for support?

Possible positive effects:

  • More resources could go to ambitious students, giving them an incentive to work hard to prepare for college-level work.
  • K-12 schools would become more accountable if they knew their graduates would only received college assistance if they were ready for college.
  • Colleges would become more selective, rasing their standards of learning.
  • Pell Grant money could be focused on the most qualified students, improving their chances of graduation.

In sum, disqualifying the use of Pell grants for remedial education would substantially reduce the gap between the number of students entering higher education and the number completing degrees.

Possible negative effects:

Yes, there are obvious downsides. Most significantly, many students wouldn’t be able to afford remedial education and thus would never go to college in the first place. Millions of potential Pell recipients — many of them minorities — might be discouraged from even entering the higher-education pipeline. Such an outcome seems unfair and cuts against the American tradition of open access, as well as second and third chances.

Then again, it’s not so certain that these individuals are better off trying college in the first place. Most don’t make it to graduation….

Perhaps the greatest risk is that colleges would respond to the new rules in a perverse manner: by giving credit for courses that used to be considered “remedial.”  …  would further dilute the value of a college degree.

Petrilli suggests the potential upside is sufficiently compelling to warrant a pilot program that would limit Pell Grants only to students ready to do college-level work.  

Perhaps offer the deal to an entire state. Study what happens. My guess is that it would have a salutary effect on the K-12 system, on higher education and on college-completion rates. Let’s find out.

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March 4, 2013

Sequester will cut thousands of college work study jobs

by Grace

Pell Grants won’t be affected, but other types of federal student aid and research funding will be cut as the result of the sequestration that took effect on March 1.

The impending federal budget cuts known as the sequester, which will go into effect on Friday without action by Congress, are poised to have a significantly negative effect on both public and private universities nationwide. Some forms of federal student aid and funding for a variety of research programs are likely to find themselves on the chopping block, according to the White House and university administrators.

Several critical revenue streams for universities are at risk: The National Science Foundation, National Institutes of Health and the National Endowment for the Humanities are all subject to cuts that fall within both the 7.6 percent cut to mandatory spending and the 8.2 percent cut to discretionary spending.

Students’ tuition rates won’t go up, and Pell Grants are protected; but the federal work-study program and other scholarship sources, like the Supplemental Educational Opportunity Grant, would be subject to the 8.2 percent cut.

Some examples of how that breaks down, according to the White House: 4,720 low-income students in Texas would lose federal financial aid; an estimated 2,370 college students in Iowa will lose federal college aid; 4,520 low-income college students in New York would lose money; 6,250 Florida low-income students and 9,600 in California would get hit.

On campuses, uncertainty reigns.

The ambiguity of how the sequester will affect student aid, jobs, and research is adding to a gloomy atmosphere for colleges and universities.  Estimates on the dollar amounts and number of students affected differ significantly depending on the source.

Some estimated numbers

It’s hard to pin down accurate numbers.

Arne Duncan:

“That ($86 million cut) would mean for the fall as many as 70,000 students would lose access to grants and to work-study opportunities,” Duncan said during the briefing….

Chronicle of Higher Education:

… programs like the Supplemental Educational Opportunity Grant and Federal Work-Study would be cut by millions of dollars, eliminating more than 100,000 students from participation.

Meanwhile, here in New York we learned how the cuts will affect K-12 education.

The School Boards Association has detailed district-by-district predictions of how the $102 million in federal cuts would be spread out.

Federal grants make up roughly 8 percent of statewide education expenditures. Most school money comes from the state budget and local revenues, including property taxes.

My local school district is slated to lose $50,141 in federal aid.

December 3, 2012

Fiscal cliff would hurt education tax benefits (and employment prospects)

by Grace

If no agreement is reached on budget issues by December 31, many educational tax benefits will tumble over the “fiscal cliff”.

According to the New America Foundation’s Ed Money Watch, among the deductions that will expire or revert to lower levels are six that totaled $23 billion in 2012: the American Opportunity Tax Credit (AOTC); the exclusion from taxable income of employer-provided educational assistance; the exemption allowing parents to claim students aged 19-23 as dependents; the student loan interest rate deduction; several health care-related scholarships; and the Coverdell account provision allowing families to invest up to $2,000 annually in to an investment account for a child’s educational expenses with no taxes on earnings or withdrawals.

According to this chart from Ed Money Watch, many of these changes will affect low- and middle-income families.

20121130.FiscalCliffEdChanges1

Recession and higher unemployment
I suspect that many people are “blissfully ignorant” of these and other implications of the upcoming fiscal cliff.  For college students, the loss of these tax breaks is probably less likely to hurt them than would the lower GDP and rising unemployment brought on by higher taxes.

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November 30, 2012

Political outlook for the Pell Grant and other federal college aid

by Grace

Next year the Pell Grant program will face a $5.7 billion shortfall and interest rates on federally subsidized students loans are scheduled to double to 6.8%.  Given the pressure to curtail overall government spending, it’s prudent to expect changes in federal college aid programs.

Sequestration  - The Pell Grant is protected from first-year cuts, but all federal student loan programs would be cut by 8.2% if no agreement is reached to avert the fiscal cliff.

Student loans  –  Several options have been discussed, including doing away with the subsidy but lowering interest rates by tying them to U.S. Treasuries.  For the purpose of targeting lower-income students, it has been argued that the recently enhanced income-based repayment program does a more effective job than loan subsidies.

Pell Grant  –  A push to overhaul Pell grants has come from various directions, with a common perspective that they need to become more efficient and effective.  Some ideas are to use the grants as an incentive for higher college completion rates and increased state aid for low-income students.

A fuller discussion of the issues can be found at What’s Next for the Pell Grant? (Inside Higher Ed).

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Does the government make a profit from student loans?

From What’s Next for the Pell Grant? (Inside Higher Ed), this caught my attention:

Even subsidized loans are a moneymaker for the federal government under the current accounting system, notes Sarah Flanagan, vice president for government relations and policy at the National Association of Independent Colleges and Universities.

But this is contested by a spokesperson for the Democrat-controlled Senate Committee on Health, Education, Pensions and Labor in a PolitiFact piece:

Subsidized loans do not make money for the government, Sessions said. They actually cost the federal government money.

An explanation of how student loans are a money-maker from This Can’t Be Happening:

Inflation, according to the government’s own statistics, is running at 2.7%. In other words, the government, which is the lender in the case of Stafford Loans, is already making 0.7% on its “subsidized” loans to undergraduates. And the inflation rate has been considerably lower in prior years, so the government has actually been making out like a bandit longer term. If it were to start earning 6.8% on these loans, like it’s already making on older loans, unsubsudized Stafford loans and Perkins Loans, the Treasury would be raking in huge profits on a loan program which is supposed to be helping make college affordable for lower income and middle-income students.

And this from the Minneapolis Star Tribune:

Now, the possibility that the federal government actually makes money on student loans may sound wildly improbable. Over the last several months we’ve heard repeatedly that keeping interest rates at the current level of 3.4 percent will “cost” the federal government $6 billion. Republicans want to pay for the reduced interest rates by trimming spending from health programs. Democrats want to go after tax breaks for businesses.

But the truth is that taxpayers do quite well by the student loan business. If you think about it just a little, it’s not hard to figure out why: The U.S. government pays almost nothing to borrow money that it lends out to college students at much higher interest rates. The current interest rate on a subsidized Stafford loan is 3.4 percent; on an unsubsidized Stafford loan the interest rate is 6.8 percent.

November 29, 2012

‘Sending the wrong students to college’

by Grace

In lamenting the poor writing skills of his students, Rutgers University Professor Jackson Toby declares that remediation in college is usually too late to help poorly prepared students succeed.  He argues that we are “sending the wrong students to college” and that literacy problems should have been addressed starting back in elementary school.

What college professors have to deal with

… Perhaps a third of the students averaged five to ten errors per page. They had computers equipped with spell-check, but that function couldn’t prevent wrong word usage. Many couldn’t keep straight when to use “there,” rather than “their” or “they’re,” “threw” instead of “through,” “sight” instead of “site,” “aloud” instead of “allowed,” “Ivy” instead of IV (intravenous), and “stranglers” instead of “stragglers.”

Parents have to instill the importance of education from an early age.

Contrary to the mantra that everyone should go to college and that the main obstacle is inadequate financial support from governments, students have to be fairly well prepared for higher education by the time they arrive on the college campus.  Such preparation must begin much earlier in students’ lives, including convincing them that education has to be taken seriously if they aspire to interesting, well-paid jobs.  Parents are more effective than teachers at instilling this message.  Unfortunately, not all parents have their children’s education at the top of their agendas, especially parents with meager educations or serious personal problems.  Poverty alone does not prevent parents from promoting high educational aspirations in their children.

Toby goes on to say that “even parents deeply concerned about their children’s education must find programs in which their children can learn the skills they will need”.  With this I profoundly agree, having seen problems with ineffective curricula and teaching even in affluent suburban public schools.  In the case of parents who can afford it, private tutoring may be the only way their children can learn the right skills.

A pragmatic approach

… Whatever the reasons for inadequate preparation, it is usually too late for remediation in college.  Late-bloomers are mostly a myth.  That being so, it is cruel to tempt all high school graduates to take out large loans to pay for college educations; for underprepared students, loans can be traps.  For underprepared students compelled to default on loans they cannot repay, such loans in the one-trillion dollar portfolio of student loans are a disaster.  The loans are an obstacle to becoming adults, to marrying, buying a home, and raising a family.

It’s better to emphasize vocational training and job preparation at community colleges rather than Pell grants and low-cost student loans.  It isn’t a quick fix, but it’s more realistic.

Of course, Pell grants and subsidized loans are also available for vocational training.  With limited exceptions, government financial aid should be limited to students who are adequately prepared to be successful in college.  If that were the case, there would be different standards for vocational training and for four-year colleges.

Related:  We spend $40 billion yearly on Pell Grants, but we have no idea about results (Cost of College)

November 19, 2012

We spend $40 billion yearly on Pell Grants, but we have no idea about results

by Grace

Lack of accountability:  The government hides results on a program that costs taxpayers billions of dollars each year.

2. How Do Pell Students Do?

Let us move on to the Pell Grant program, on which our nation spends more than $40 billion a year. Surely with such a large expenditure, we would have and publish detailed statistics on how recipients fare in college, right? NO. What is the percent of Pell Grant recipients at four-year colleges receiving their degree within four, five, or six years?  The Department of Education has such data for graduates of every accredited school in the country -why don’t they have it for those receiving the federal government’s largest grant program?

My guess is that the figure is so embarrassingly low that the government doesn’t want it published. I wrote a year or so ago that the Pell Grant graduate rate, after six years, was 40 percent, based on a bit of statistical estimation I did. No one seriously questioned my result. For every two students who -after six years -succeed to get a degree, three fail. Yet spending on this program has expanded enormously in recent years.

Richard Vedder writes about two other “Things Colleges Don’t Want Us to Know”

 What Are the Teaching Loads?

 How Much Do Students Actually Learn?

Related:  Pell spending is down while number of participating students is up (Cost of College)

October 18, 2012

Basic math problem: Too many college graduates and not enough high-paying jobs

by Grace

It may not matter how many more college graduates the United States churns out, many of them will be unable to get well-paying jobs.  The math simply does not work out, according to Richard Vedder.

… one-third is a larger number than one-fifth.  Roughly a third of adults have four-year degrees, but only one-fifth of jobs are in the relatively high-paying fields. That is why we have a small army (115,000) of janitors with bachelor degrees. Rather than adding two million more enrollees at community colleges (as President Obama advocated in the first presidential debate), maybe we should have two million fewer Pell Grants or student loans in order to help, in the long run, to restore balance between supply and demand for college graduates in high- paying fields.

It may sound distasteful to hear someone promote a public policy position that supports less education for low-income students.  On the other hand, encouraging young people who are at high risk for dropping out to take on burdensome debt may actually be the less charitable action in this case.  Even awarding grants to students unlikely to graduate from college may turn out to be more cruel than kind if the next generation will have to deal with the painful deficit generated by this generosity.  It’s a dilemma.

October 5, 2012

Does increasing federal aid cause college costs to rise?

by Grace

Some analysis and commentary on the idea that increasing federal aid causes college costs to rise

Cheap Student Loans Are Awesome and a No-Brainer (Ohhh Yeahhhh) (The Atlantic, Derek Thompson)

Even if student loans are a reasonable investment for government to make, it’s equally reasonable to wonder whether subsidizing college is responsible for higher college costs. As James Surowiecki has written eloquently, tuition is rising for reasons that have nothing to do with Stafford loans. But as Jordan Weissmann has written for us, the economic literature found that funneling money to middle class students has contributed to college costs rising even more than they would have without loans. The evidence is mixed.

Are we subsidizing student debt too generously? (Washington Post)

Yes, federal subsidies do drive up tuition. It’s Econ 101: basic economics dictates that conclusion.  –  Hans Bader, senior attorney and counsel for special projects at the Competitive Enterprise Institute

Why They Seem to Rise Together: Federal Aid and College Tuition (Minding The Campus)

Richard Vedder:

Andrew Gillen masterfully demonstrates that Bill Bennett is right–federal financial aid programs lead to higher tuition. The implications of this and related financial aid effects are profound:

1. The intended income transfers from taxpayers (and, increasingly bondholders) to students have been largely diverted to college coffers; swelling payrolls and leading to armies of new university bureaucrats, million-dollar college presidents, an academic arms race and other pathologies;

2. This, in turn, has thwarted university productivity growth and helps explain why higher education is vastly more expensive than in most other major developed countries;

3. The goal of helping low-income students has not been met, and a lower percent of recent college graduates come from less affluent students than was true in 1970 when Pell Grants did not exist;

4. To the extent that these aid programs have increased enrollments (read Gillen), they have added to the growing disconnect between labor-market realities and student job expectations, creating armies of college graduates who are bartenders, taxi drivers, etc.

5. Enrollment increases, in turn, have contributed to a dumbing down of higher education and to declining standards.

What to do? The federal government needs to wind down its financial aid commitment. Restrict eligibility for aid to truly low-income students. Impose performance criteria for aid recipients: mediocre students will lose aid. Make the college absorb some of the risk for loan defaults–a lesson we should have learned from the financial crisis. Give Pell Grants as vouchers directly to students, not schools. Reinstate private lending options. Unveil new human capital contract approaches that reduce debt reliance. Downsize and reinvent federal programs and allow market discipline to operate more.

All these recommendations are worth considering.

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