On Tuesday, the Senate considered a proposal that would expand Pell Grants (federal aid meant to help low-income students attend college) to cover year-round tuition.
In theory, part-time and full-time students who have increased access to Pell Grants would be encouraged to finish their degrees faster and graduate with less debt. Unfortunately, the proposal to expand Pell Grants ignores the root cause of the high college costs and will likely make a college education more expensive for everyone.
Currently, the Pell Grant program costs taxpayers $30 billion every year. Congress experimented with summer Pell Grants back in 2010, but the Obama administration cut funding for the program in 2012. The Department of Education wrote that it had significant concerns over the program’s effectiveness, explaining:
Thus far, however, the costs of this initiative have far exceeded expectations, and significant concerns exist that in the aggregate program completion rates have accelerated only marginally, if at all. In light of the extraordinary costs of this initiative, and before any additional costs are incurred, the administration believes it is prudent to thoroughly study whether the benefits generated are sufficient to justify the expense.
This rare display of fiscal conservatism on the part of the Department of Education was supported by President Barack Obama, but met with much opposition in Congress. Now, Congress will consider expanding Pell subsidies, which is expected to cost taxpayers $1.33 billion.
Not only is expanding the Pell Grant program to cover summer courses unlikely to improve the circumstances of college students, but expanding the Pell Grant program is just bad policy.
Historically, expansion of Pell Grant recipients has shown to have negative long-term impacts on higher education costs. In a recent study, the Federal Reserve Bank of New York found that every Pell Grant dollar that an institution receives leads to a tuition increase of 40 cents.
Additionally, Lesley Turner at the University of Maryland found that institutions capture about 12 percent of all Pell Grant aid, meaning that the colleges and universities use money from Pell Grants to increase their costs, rather than passing savings along to students. Expanding Pell Grants has only increased the costs of college tuition and making tuition increasingly unaffordable.
Increased federal subsidies in higher education have not encouraged students to make smarter financial decisions. In fact, such policies have done quite the opposite.
Increased access to federal aid has encouraged many students to take out sizeable loans and study course material that provides them with few marketable skills. Federal aid with low interest rates and attractive repayment plans remove the immediate financial risk of taking out a loan, often with little concern for how this loan will be repaid.
This could explain why Americans now have over $1.4 trillion in outstanding student debt and 51 percent of employed 2014 college graduates are in fields that do not require their degree. If we wish to encourage students to make better financial decisions in college and finish their degree on time, restoring a robust private lending market will provide more financing options for students while ensuring taxpayers are not increasingly on the hook for defaults.
At the same time, we should remember that a four-year brick-and-mortar college experience is not the only path to middle class stability.
Rather than putting more taxpayer dollars into the higher education system, a practice shown to make college more unaffordable, we should support policies that drive down the cost of college so that individuals can afford higher education without turning to the government for help.
This can be achieved by encouraging more private lending in the marketplace, where lenders can hold students accountable for their course of study and time spent getting their degree, and by better targeting Pell—as opposed to expanding it—to ensure it is working as intended to meet the needs of students who truly need financial assistance.
The number of Pell recipients has more than doubled under the Obama administration. Another expansion will continue to grow government subsidies in a way that only exacerbates the college cost problem, to the dismay of all students who attend.
