Left unattended, the Pell Grant program will cost $44-billion next year. You could buy seven aircraft carriers with that much cash.
The Obama administration had to confront that harsh reality when it assembled its budget proposal for the 2012 fiscal year. The Pell program didn't even cross the $20-billion threshold until last year. But Congress made the grants for low-income students more generous just as the economy made a lot more students low-income and sent legions of unemployed workers back to school.
In response, the administration proposed killing a newly created Pell Grant for summer-school students. Along with other changes, that would bring the cost down to a still-record $28-billion. Newly elected Republicans in the House of Representatives, meanwhile, were in a less generous mood, proposing to slash the maximum Pell award by 15 percent—the largest cut in history.
The final disposition of Pell will be one of the most closely watched elements of the Obama vs. Republicans budget showdown. But whatever the short-term outcome, this marks the beginning of a new era of federal financing of higher education.
While the Pell program has had ups and downs since its inception, Congress has provided enough money to keep up with both inflation and a surge of new college students. Yet low-income undergraduates are actually much worse off than equivalent students were 30 years ago. A student without a Pell Grant in 1980 paid less out of pocket to attend a public four-year university than a student with a Pell Grant pays today. That's because between then and now, the cost of higher education has grown far faster than inflation.
As a result, the federal government has gone from bit player to major investor in the educational part of higher education, to the point that it's starting to rival states in the magnitude of support.
Consider that according to the Grapevine Project, Illinois State University's annual survey of state financing of higher education, states will spend $76-billion on higher education this year. Then consider the federal government's $44-billion for Pell, nearly $9-billion for the American Opportunity Tax Credit, plus student-loan interest-rate subsidies, 529-plan subsidies, and billions for the GI Bill, and suddenly the state and federal shares aren't that far apart. And if current state-budget proposals are any indication—Pennsylvania Governor Tom Corbett has proposed cutting his state's allocation for higher education in half—the state-to-federal spending ratio will continue to shrink.
Those numbers have consequences. Lawmakers are predictable people: The bigger the checks they write, the more expansive their ideas about how that money should be spent. When federal subsidies rival state spending, federal lawmakers are going to step into the policy void that state lawmakers are rapidly creating.
This new attitude is most apparent in the continuing "gainful employment" debate surrounding for-profit colleges. The University of Phoenix alone took $1-billion out of the Pell Grant program in 2009, and people noticed. Now the Obama administration wants to take the historic step of making receipt of federal financial aid contingent on colleges' proving that their graduates get sufficient economic value in exchange.
Once the government starts asking such new kinds of questions, it generally doesn't stop asking. And as Richard Arum and Josipa Roksa show in their recent study, Academically Adrift, there are many reasons to question how much value even students at nonprofit colleges receive for their tuition.
Neither party has quite come around to this way of thinking—yet. Republicans continue to favor profit-making enterprises on general principle, while Democrats don't want to admit that simply pouring more money into Pell Grants is like dumping more frankfurters on the plate of four-time world hot-dog-eating champion Joey (Jaws) Chestnut.
Such old ways of thinking can be hard to break. It takes a shock, something un-ignorable. Something like $44-billion.
Fortunately, students could greatly benefit from the inevitable new federal role in higher education. Fractured policy among the 50 states, whose public universities exert outsized influence, has resulted in a kind of nonsystem in which colleges and universities aren't held accountable in any meaningful way for how well they educate their students. As the federal government grows into its role as the public-higher-education-financing body of first resort, it should demand far more transparency about learning results from colleges in exchange.
It should also modernize the Pell program to account for different patterns of student attendance. The summer Pell program was a good, albeit very expensive, idea. Some students move through college faster than the traditional four-year calendar, and some slower. Pell does a poor job of accommodating those differences. The rapid growth of online higher education is rendering the time-based, credit-hour-focused concept of attendance obsolete. Financial aid shouldn't force students to fit into an increasingly archaic mold.
The federal government should also start insisting that institutions that receive public subsidies truly serve the public interest. The hard truth is that the colleges that receive the most Pell money per capita are often those that fail to graduate a large majority of their students—not only because the students are hard to serve, but also because the institutions themselves are mismanaged and mediocre. Colleges that are unwilling or unable to help a reasonable percentage of Pell Grant students earn degrees and learn things worth knowing should be shut out of the program, regardless of their accreditation status or academic reputation.
Such ideas have been heresy in the halls of Congress until recently. But you'd be amazed what you can buy these days with $44-billion and change.