Pell Knell

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POLITICS APRIL 6, 2011

Pell Knell

In February, Republicans unveiled a plan to cut funding for Pell grants by 25 percent and slash the maximum award by $845—changes that would knock funding to below 2008 levels and, according to education experts I spoke to, devastate students who rely on the program for support. The White House responded by offering a preemptive compromise, asking for more modest cuts in an attempt to claim the political center and maintain the maximum grant at $5,500: It called for reductions of $100 billion over ten years, through the elimination of a rule that allows summer students to qualify for additional Pell grants and the elimination interest subsidies for graduate students. "Cuts like these are never easy,” said Education Secretary Arne Duncan, “but in the current fiscal climate they are the responsible thing to do, and the only way to ensure that we can make the investments we need to secure our future."

This may or may not succeed politically. As the White House plays a game of budgetary Uncle with House Republicans this week, President Obama will at best receive what he has asked for, and at worst acquiesce to drastic cuts that would render its slogan of “Winning the Future” utterly hollow. Yet the fact is that even if Obama wins and manages to preserve most Pell funding, students will lose: With cash-strapped states dramatically reducing the amount of support they provide for higher education, the total pool of funds looks to be shrinking precipitously, and anything short of a serious increase in federal support to fill the gap will curtail the dreams of thousands upon thousands of young Americans.

There is no aggregate figure available totaling all state-level reductions since the beginning of the financial crisis, but we do know that 43 states have made cuts to higher education since 2008, according to the Center on Budget and Policy Priorities. Many of these reductions are gut-wrenching: In Michigan, where state financial aid plummeted by $135 million—or over 60 percent—in the FY2011 budget. Missouri’s FY2011 budget will cut need-based aid by about 60 percent. In Iowa, spending on public universities dropped 20 percent, or $141 million, in the last two years.

In a budget bind, state legislators have long known they can hack at post-secondary education more than other services, because tuition hikes usually cover the funding gap. “It’s basically a way of raising taxes without getting dinged for it,” says Kevin Carey, a researcher at Education Sector, a think tank. Sure enough, tuition at Florida’s eleven public universities has increased by 32 percent in the past two years, while the vaunted University of California has also hiked its tuition by 32 percent since the middle of the 2009–2010 school year. Many others have followed suit.

Indeed, with soaring education costs, the maximum Pell grant does less to help students afford college than it did in 1990. (It currently covers just 34 percent of tuition, fees, room, and board at public four-year colleges, according to the College Board, compared to 45 percent two decades ago.) In these conditions, there is an urgent need for more federal help for disadvantaged students—not less. The administration hopes to tie the maximum Pell grant to the Consumer Price Index between 2013 and 2017, which would amount to an estimated $425 bump, but at this point, that’s simply a wish-list item to be determined largely by future Congresses. (Paul Ryan, who will probably still chair the House Budget Committee during negotiations over spending for 2013, has just announced that he supports dramatic cuts.)

And reductions in education funding have real consequences. According to Sara Goldrick-Rab, who has seen the effects of Pell grants first-hand as Co-Director of the Wisconsin Scholars Longitudinal Study—which tracked 3,000 Pell grant recipients for the past three years—grants like these often make the difference between a college education and dropping out. “I have kids in my study who have parents taking on two or three jobs. I also have kids who are taking on two or three jobs. They are skipping breakfast,” she said. “And they’re getting a Pell, and taking away the Pell is going to make continuing in college impossible.”

If young men and women like the ones in Goldrick-Rab’s study start falling through the widening cracks between state aid and Pell grants it’s likely to have a grievous effect on their chance of holding good jobs in the future. According to a December 2010 estimate by the Bureau of Labor Statistics, the number of jobs that require a bachelor’s degree is expected to grow 17 percent between 2008-2018, while the figure for master’s degrees is 18 percent. Employment that requires on-the-job training (and no degree) will grow just 8 percent in the same period.

Not only will more jobs be available to college graduates, those jobs will be far better paying. A widely cited article by David Card in the Handbook of Labor Economics concludes that, on average, an extra year of education causes an 8 percent to 10 percent spike in that person’s future wages. The value of a college education has been going up over time, too. A 2008 study by Ron Haskins of the Brookings Institution shows that median family incomes for people in their thirties with university degrees rose by about $30,000 from 1964 to 2005. The income of people who only had a high school diploma was essentially stagnant over the same period. And Haskins has also shown that university degrees cause sky-high rates of intergenerational mobility—that is, children who make more money than their parents made. In Haskins’s study, 96 percent of children with parents at the bottom of the income ladder with a college degree earned more than their parents earned. That’s 15 percent more than the children from the same income bracket without a college degree.

It is true that the Pell program itself has grown much more expensive over the past few years, in large part because of the Great Recession. Between 2008 and 2012, an estimated 3.5 million new students will have joined Pell’s rolls, the inevitable byproduct of a grinding recession which has sapped families’ savings and pushed a generation of kids to enroll in school as an alternative to the terrible job market. (Increased enrollment accounts for 40 percent of the program’s recent growth, while the rest was caused by Congress’s attempts, during the Bush and Obama administrations, to address skyrocketing college costs.) But these increases have occurred in the context of major spending reductions at the state level, and as President Obama explained in his State of the Union address, today’s decisions about education funding will determine America’s future economic competitiveness.

Indeed, when Arne Duncan recently testified before the Senate Budget Committee, he justified the White House’s budget request by quoting Obama. “We believe it is absolutely essential to keep investing in education,” Duncan began, “so that, as the president put it, ‘every American is equipped to compete with any worker, anywhere in the world.’” Unfortunately, unless Congress somehow decides to increase Pell funding far beyond what is contained in Obama’s budget, we won’t even be treading water.

Eric-Andrew Gee is an intern at The New Republic.

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posted in: politics, arne duncan, kevin carey, ron haskins, sara goldrick-rab, iowa, michigan, missouri, white house

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