The Problem with Pell

By Watson Scott SwailPresident & Senior Research Scholar, Educational Policy Institute

This week there has been much talk about increased funding for the Pell Grant program in the United States. For those new to this discussion, the Pell Grant, named after former Senator Claiborne Pell, is the federal government’s “foundation” program for student aid, providing need-based aid to low-income students. That roughly equates to those students with annual family incomes under $48k, with those with greater need getting up to the current maximum of $4,050, and those at the top end teetering off significantly toward $0.

The new discussion is interesting because Pell has been largely forgotten for the past four years. Higher education critics have noted that the president has largely ignored higher education during his tenure. And this is mostly true. The president’s focus, in education at least, has been on early childhood reading and No Child Left Behind. At some level, this isn’t a bad choice if a choice had to be made, because if students can’t read, they can’t progress through their academic studies and can’t go to college. So providing support to help America’s children read is important.

But that’s assuming there had to be a choice, one or the other. This administration has suggested, through their actions, that there wasn’t enough funding to do both. And this was before the war. Now there seems to be plenty of money to sustain an effort that almost everyone believes has failed and that many American’s believe shouldn’t have happened in the first place. We can find an extra $375 billion for the war, and also, in the FY08 budget, provide large increases for the military, but we can’t for the life of us provide the necessary funding for education. It’s an argument that gets old after a while. We just can’t take it seriously anymore.

My back of the matchbook calculations show that President Bush has increased the federal government budget by 44 percent since he took over office, using outlay numbers from the US Treasury. During the entire Clinton Administration period, the federal budget grew by 19 percent. Up until the FY2007 budget, the Bush Administration was very good to education, albeit mostly K-12. But the FY2007 and FY2008 budget, if passed, will be a huge problem for federal education programs. Still, Bush raised education funding 26 percent compared to 19 percent for Clinton. But each year that passes the comparison gets closer. For the record, funding for the Department of Defense has increased 76 percent under Bush, or $251 billion, compared to 15 percent under Clinton. That’s just the increase since 2002, Bush’s first budget. Comparatively, the total education budget is estimated at $58 billion in FY2008.

So we’re back to the Pell Grant. It has taken a democratic congress to suggest increasing the Pell Grant after four years of flat funding, which is, for those of you who aren’t policy wonks, a decrease each year by the cost of inflation. But now, in the legacy years, Bush stole the stage from the House Democrats, who approved a $260 increase only days earlier, by suggesting a $550 Pell Grant increase with additional increases each year to 2012 totaling $1,350.

I read some blogs and listservs over the past few days and noticed that student services and financial aid people were “dancing in the streets,” so to speak, about the movement in Pell. Let’s be clear: this was brilliant politicking by the Bush Administration. He has taken control of the Democrats own election issue and now is forcing them to come to the table. Remember, Bush just has to show the way. The Democrat-controlled congress must find a way to actually appropriate all these funds. They have the hardest job of all lawmakers in this regard. Bush wins either way. If the Dems only fund what they suggested, Bush looks good because he asked for more. If the Dems come to the President’s levels, then he wins because he took them there.

But that is the easy part. There still is the little item of how to pay for Pell in wartime. Critics have come out of the closet to say, yes, the Pell increase is good, but not at the cost of eliminating other need-based financial aid programs, which the Bush Administration has proposed. In fact, he is planning on paying for Pell by getting more money savings from the student loan industry and by eliminating the Supplemental Educational Opportunity Grant (SEOG), the Leveraging Educational Assistance Program (LEAP), and the Perkins Loan Program. The Margaret Spellings argument is that this is a way to de-complexify the federal aid system, which, undeniably, is overtly complicated. Even we wonks have trouble estimating and modeling changes in the system. How are parents and students supposed to understand it? Spellings and company figure that pulling these programs together to support a better Pell is a good idea. In theory, I don’t argue with them. I think it makes some sense to do what they’re doing, as long as they ensure that students are taken care of. I guess that’s the hitch for the critics.

Spellings also notes that the Bush Administration is increasing funds for the Academic Competitiveness Grants, which were introduced by Bush last year and provide funds for the first two years of college to Pell recipients who took rigorous course work in high school. Not a bad program, in essence.

The American Council on Education and other organizations have taken stances on the Bush budget. In the piece on February 6, a number of financial aid stakeholders weighed in on the subject, suggesting that funds from SEOG and the other programs are important and we can’t afford to ignore the students that are impacted by these changed.

The gauntlet is down and it is time to deal with the issue of federal student aid. We need to dramatically simplify the system and make it fair for all students. The federal role is to open doors for students who could not do it otherwise and are not properly served by state programs. Thus, low-income students and students with disabilities are historically the target of programs. The Clinton Administration began to move monies to the middle class through the Taxpayer Relief Act of 1997, and then we’ve seen a greater erosion of Pell since. Now that money is back on the table, we need to look at how we can best deliver money to students across the country. The Pell Grant is, in effect, a voucher that students can take anywhere, as is the SEOG. But with the Academic Competitiveness Grant, which is kind of like a super Pell, as some analysts have called it, perhaps this is a better way to go.

I’m sure I’ll get some emails on this, and I think both sides have very valid arguments. But we need to get at the table to build a better mousetrap, because this one doesn’t work very well, for students, parents, higher education, and most importantly, us policy analysts.

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