Point: Increase Pell Grant Funding
At a time when the U.S. government should be investing in its citizens and the country’s overall infrastructure, it is doing the exact opposite. After bailing out the banks and Wall Street, the very institutions and individuals who were responsible for the greatest economic downturn since the Great Depression, the government, both at local and national levels, now faces tremendous budget problems. A new and dangerous set of austerity proposals is sweeping across the country. These budget cuts are affecting universities and community colleges, and forcing them to increase tuition to combat the loss of financial support from government coffers. One critical source of funding for higher education – Pell Grants – is under attack. Pell Grants have long served to support access to higher education for low-income students. Presently, a ferocious fight is taking place in Congress, as Senator Rand Paul and others are proposing to significantly decrease the amount of funding allocated for Pell Grants. If funding for Pell Grants is cut, that would mean denying less-advantaged Americans access to higher education.
Should the proposed federal cuts to Pell happen?
There should not be any cuts to Pell. Such a measure would only serve to hurt low-income students. When it comes to balancing the budget, federal cuts to Pell Grants is not what Congress should be eyeing. Perhaps it would be wise for those who wish to cut Pell to take a more honest look at the cost of the defense budget. We are, after all, in the midst of fighting three wars, and that comes with a hefty price tag. Members of Congress who are in favor of cutting Pell should also take a serious look at the repercussions of continued tax breaks for the wealthiest Americans and multi-billion dollar corporations. For example, some estimates put the subsidies for oil companies at $15 billion to $35 billion a year (official government estimates puts the number at $4 billion a year. The real numbers, however, are notoriously difficult to track down). Meanwhile the annual funding for Pell Grants in 2011-2011 was around $32 billion.
What impact will such cuts have on students?
The most immediate impact of such cuts would make it difficult for students to take advantage of Pell year-round. Many students, especially non-traditional ones or those with full-time jobs, like to take summer courses. The year-round grant has allowed students to get through college more quickly. Moreover, many low-income students in technical and professional training programs – nursing, accounting, paralegal studies, etc. – will be adversely affected by such cuts.
One of the legitimate criticisms of the Pell Grant program is that the for-profit college industry (oftentimes referred to as proprietary or career schools) benefits considerably while contributing little of value to higher education in America. There is a growing body of data that shows that many students do not have success in finding work (if they even graduate – dropout rates at these schools are quite high), and are saddled with high levels of student loan debt. Moreover, a recent study published by The Institute for College Access and Success found that while default rates are on the rise among all students, the default rates for students who attend for-profit schools are significantly higher. For-profits also invest far more capital in marketing than in their instructors. Despite these obvious deficiencies in the for-profit education sector, in the past decade for-profits have seen Pell Grant aid increase eightfold. According to the U.S. Department of Education this sector receives 25 percent of the funds. But the problems with the for-profit industry are not insurmountable. Policymakers should come up with creative solutions that would hold these institutions accountable for their federal funding. Ideal solutions would have the potential of creating incentives for for-profits to invest more in their instructors, improve job placement rates, and lower the student borrower default rates. That would hold the institutions accountable, without hurting recipients of Pell Grants.
What impact will such cuts have on the country's overall education standing?
It is disturbing that at a time when the ability to compete in an ever-changing global economy requires investing in higher education, lawmakers are discussing cutting crucial programs like Pell. An often overlooked factor in maintaining international competitiveness is social mobility. The fastest growing economies in the world, like China and India, who have made massive investments in their educational systems, are witnessing significant socioeconomic changes. There is a correlation between the investment in education and the expansion of the middle class in these two countries. (South Korea is an even more dramatic example of the benefits to investing in education, as the economy has seen significant growth in the last twenty years).
International competitiveness for the U.S. depends upon turning out an educated populace who are equipped to face the challenges of the 21st Century. If programs like Pell are cut even more, that would mean that less-advantaged people would not be able to compete with more privileged Americans. The meritocratic tradition in America has always fostered upward mobility and, at least in the ideal, a level playing field. Cutting aid to higher education will only serve to widen the gap between the haves and have-nots. More than anything, we should be investing more than we already are in Pell Grants, and cutting into the private loan industry (more students are relying upon private student loans to finance their education, and private lenders are notorious for being inflexible when it comes to repayment plans for struggling borrowers).
Should funding for Pell Grants be increased in the future?
While there is data that suggests that increasing Pell Grants does not ease the burden of student loan debt, funding for the program should still be increased. That said, the program should be restructured in such a way that makes it more robust. In addition, there needs to be serious attention paid to the way in which for-profit schools are receiving such aid. This is the benefit of the gainful-employment proposal, an initiative that supports the success of graduating students. How would gainful-employment work? In order to receive federal aid, for-profits would have to provide evidence that their programs are successfully preparing students for the workforce. Again, this holds the institutions accountable, and does not punish the student.
Where should this funding come from?
Recently, President Obama extended tax cuts for the wealthiest Americans which were introduced by the previous administration. In addition, multi-billion dollar corporations are not paying their dues, and many are not paying taxes at all. Moreover, the Wall Street gambles led to the Great Recession, exacerbating already bad budget problems at all levels of government. Indeed, the U.S. is facing a major fiscal crisis. And to add insult to injury, politicians are now telling average Americans that they must accept austerity measures, and are vigorously slashing programs for education, healthcare, and so forth. Such a system is unsustainable, and everyone will eventually pay. That is why there needs to be significant changes to the tax system. If Wall Street is to get away with its reckless – if not illegal – actions that led to the Great Recession, then perhaps they should play a role in investing in Americans. After all, Americans were the ones who bailed them out, so why can’t they thank those taxpayers by investing in higher programs? Les Leopold, the executive director of the Labor Institute and Public Health Institute, suggested just that in a recent article. That is one of many ways in which we could fund Pell Grants and other forms of financial aid for higher education.
By June of 2012, outstanding student loan debt will hit $1 trillion. When the class of 2011 walks down the aisle for their diplomas, they will be the most indebted graduates. Eight-five percent of new graduates will be moving home after graduation day. They are facing a brutal job market, and are saddled with student loan debt. Many of them are looking beyond the U.S. for work. This is not the time to be cutting Pell Grants. This is a time to be investing in it. The vitality of the United States depends upon its talented and educated citizens. All Americans have a right to college. That is why Pell is so fundamental to our ideals, and that is why it matters so much.
