Monday, January 26, 2009

The Problem With the Pell Grant as an Economic Stimulus

Andrew Leonard has a post over at Salon defending a little piece of the stimulus package which would raise the average Pell Grant by $350, to $5350. He argues that this is an effective short term stimulus, because it's equivalent to putting money in the pockets of low-income families who are sending students to college ( the Pell Grant is means tested); and it's an effective long-term stimulus as well because it will help more people stay in school, from where they'll go on to better careers.

You'd think I'd be all for this, and I am in favor of increased higher education aid. But the system is so broke that throwing in more cash is unlikely to help poor families or the economy in the short term.

First, Colleges tend to raise tuition in economic downturns, and this one is no exception. It's likely that the extra Pell Grant money will simply be applied to higher tuition bills, going to supplement decreases in state support for universities.
Second, colleges are not subject to any sort of oversight as to whether they allocate aid to serve students on the basis of need rather than merit. So they could take the extra Pell Grant money and give it to a specific student who has the right ethnic, sports, or extracurricular background for their mix, and pass over another student who is just as qualified and for whom that grant money would make the difference in whether they can attend college at all.
Finally, Pell Grants are usually only part of the picture for students trying to pay for college. They use other grants and loans as well. And a higher Pell Grant award may simply result in the student being able to borrow less in subsidized federal student loans, keeping the overall picture exactly the same.

So it's hard to see how the extra Pell Grant awards will really result in more money going into the pockets of low income families. Reforms to make college more affordable--like publishing tuition increases and demanding some accountability from colleges to cut costs--might actually be more helpful.

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