GOP Budget Slashes Pell Grants

Pell Grants Cuts Based on Faulty Premises

Paul Ryan’s cuts to Pell Grants are based on faulty premises and leave students responsible for rising college costs, writes Julie Margetta Morgan.

"We basically have the student loan issue worked out," Sen. Harry Reid (D-NV) told reporters on Tuesday. The deal would keep the interest rate steady on federally subsidized Stafford loans. (AP/J. Scott Applewhite)

The House Budget Committee’s recently released budget proposal contained unprecedented cuts to funding for the Pell Grant program. The Pell Grant program is in need of serious evaluation, but like many measures in Rep. Paul Ryan’s budget, this one slashes funding for a program low-income families rely on without justification, while claiming the cuts will somehow make the program stronger.

The Pell Grant program is a means of access to higher education and social opportunity for low-income families. It is also an important part of developing a workforce that will meet the demands of our economy.

The House Budget Committee’s report states that a return to 2008 levels of spending on Pell is necessary to target the grants to the “truly needy” and curb rising tuition. The size of the Pell program is certainly a concern in a time of tight budgets. But the solution should be far more nuanced than an arbitrary proposal to travel back in time.

Rep. Ryan’s notion that huge cuts to spending on Pell are good for America is based on two faulty premises. First, Ryan seems to believe that some Pell Grants currently go to families who are not truly needy. This is simply untrue. In 2008 75 percent of dependent students who received Pell Grants had family incomes of less than $36,150, and 77 percent of independent Pell recipients had family incomes of less than $26,000.

It’s true that changes to the Pell formula in 2008 gave more students access to the maximum Pell Grant, changing the income threshold from extremely low to very low. Would Rep. Ryan really say that a family making $20,000 is “truly needy,” but a family that makes $30,000 is not?

Ryan’s second premise is that rising spending on Pell Grants causes rising tuition. Ryan cites dated and questionable research claiming that at a small subset of colleges, the increase in Pell results in a matching increase tuition. But the true drivers of tuition hikes are well documented. Decreased public subsidies at state colleges put more responsibility on individuals to cover the costs of education at public schools. And private universities competing for students has spurred increased spending, which results in higher tuition at those schools.

The rising cost of the Pell Grant program is concerning, but the true reasons for the cost increases suggest that fixing Pell requires much more thought than Rep. Ryan gave it. One of the biggest sources of increased spending on the Pell Grant program is the growth in enrollments in the program. There were only 6.1 million Pell Grant recipients in 2008; by 2012, there will be an estimated 9.6 million recipients.

As long as students are using these grants effectively, the uptake in enrollments is a good thing for both individuals and our workforce. Rather than limiting eligibility as Ryan suggests, we can control costs by incentivizing program completion and ensuring federal dollars cannot be used at institutions that have no intention of providing the education they promise.

Another source of increased spending on Pell Grants is the increase in the maximum Pell Grant, from $4,731 in 2008 to $5,550 in 2010. This accounts for about 25 percent of the growth in Pell Grant costs. The increase is an attempt to keep college affordable for low-income students, driven by rising tuition.

Rather than looking to the real sources of tuition increases—institutions—Ryan places the blame for rising tuition solely on Pell. The Ryan plan makes the rising cost of college the student’s problem while leaving colleges free to charge as much as they want. The way to get a handle on the maximum Pell Grant is not by punishing students; it’s by creating incentives and accountability measures that hold colleges and universities responsible for their rising costs and their effectiveness as the stewards of taxpayer money. Unfortunately, Republicans oppose the Department of Education’s efforts to hold for-profit colleges accountable for their use of federal financial aid dollars. They would rather make low-income families pay than risk wealthy companies losing even a dollar of the money they receive.

The Ryan budget uses the wrong data to come to the wrong conclusions and thus its solutions are faulty. What’s more, these solutions will impede America’s ability to compete globally and they will increase income inequality by denying deserving students the opportunity that college affords to pursue the American Dream.

Julie Margetta Morgan is a Policy Analyst with the Postsecondary Education Program at the Center for American Progress.

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Julie Margetta Morgan

Director of Postsecondary Access and Success