No To Pell Grants

Universal post-secondary education for all has long been a goal in the United States.  It simply feels good to behind such an egalitarian ideal.  Pell Grants have been a way to assure that even the least financially able can attend college.

Before we start applauding Claiborne Pell or President Obama who has significantly increased grants at equally significant taxpayer cost, we should ask the following questions.  First, what do these grants do to college tuition costs? Without a doubt they raise them, given Econ 101 supply and demand.  The more Pell Grants there are available to students who would not otherwise attend college, the greater the demand for placement, and the higher the resultant cost.

Richard Perez-Pena writing in the New York Times (10.17.12) has noted this trend:

Conservative critics of the Pell Grant program contend that as government pours more money into higher education — whether in grants or loans — the law of supply and demand dictates that it contributes to price increases.

“Could the colleges charge what they’re charging now in the absence of federal aid?” asked Neal McCluskey, an education analyst at the Cato Institute, a conservative policy research group. “The answer is no.”

The second reason why expanding Pell Grants is a bad idea is because there is no performance testing for Pell Grant applicants.  If taxpayer dollars are involved – which they are – then the Pell Grants should go to the best and the brightest, those with the most promise of providing a return to society.  The Grant program as presently conceived, is based only on need rather than the more sensible need plus performance.

Universities with substantial endowments have needs-blind admissions policies.  That is, if you can get into Harvard based on your fulfillment of all admissions criteria, then Harvard will take you whether or not you can afford the tuition.  This is a fair, equitable, and just system which rewards everyone – the university because it is getting the highest quality applicants; the student who benefits from a top-flight education even thought his family has limited resources; and society at large who welcomes a highly-motivated, well-educated graduate.

The Pell Grants should follow the same principle.  Without a doubt this policy would reduce the number of grants given, but the value per taxpayer dollar would be vastly increased.

Mr. McCluskey, the Cato analyst, said Mr. Obama misses the system’s fundamental flaw: that federal aid and loans are often awarded to mediocre students and schools, with poor odds of producing economically successful graduates.

This system would also force a restructuring of university curricula.  As it is now, universities salivating over federal subsidies via the Pell Grants would have to work for their rewards by creating the demanding environment sought by talented applicants.  The worst schools, like the for-profit Phoenix University and Strayer College, would go out of business.  Public universities which are already under pressure to graduate technically prepared and civically educated students (and thus providing legitimate returns on state taxpayer dollars) would have to be even more focused on quality and performance.

Governor Romney, although realizing the inefficient use of taxpayers money on Pell Grants, provides the worst possible suggestion – that the grants be limited to those most in need.  While this policy has political legs, presenting a more egalitarian face to his campaign, it has no internal logic.  By focusing on those most in need, he is advocating the promotion of the likeliest least qualified applicants to the grant program (academic performance has always been correlated with income), and encouraging a program which has no objective, verifiable, and legitimate ends.

President Obama did have one important policy objective – that more poor students attend community colleges where costs are low and the opportunities for a starter education are great.

The administration repeatedly makes the case that more people need to go to college — or back to college — and that much of that education should take place at community colleges. Mr. Obama has sought $10 billion in new aid for community colleges over several years, much of it to teach job skills; so far, Congress has approved $2 billion.

This is a huge missed opportunity, for many lower income families can afford community colleges which have government subsidies already built into them.  Once a student has spent a year or two at these institutions and proven his/her academic merit, then – and only then – should he/she be eligible for Pell Grants for four-year colleges and universities.

The administration also imposed what is known as the gainful employment rule, mandating that schools, mainly aimed at for-profit colleges, meet benchmarks for graduation rates, student employment and debt, or risk losing access to federal loans and aid. The rule was struck down in court this year, but the administration is planning a new version.

This was a step in the right direction, but only if all aspects of the issue are considered can reform happen.  First, Pell Grants should first be made available to top students.  Second, public universities must reform their curriculum so that all students, both grantees and full-freight students, receive an education which will prepare them for productive economic and civic life.  Third, accreditation should be denied post-secondary institutions which do not demonstrate a proven ability to prepare students accordingly.

Pell Grants appeal to the egalitarian sentiments in all of us; but it is about time that we combined a consideration of need with performance.