Undermining Pell, Redux

September, 2014

Washington -- The New America Foundation has published a second round of analysis of how tuition and financial aid policies help or (increasingly) hinder low-income student access to higher education. In Undermining Pell Volume II, Steve Burd writes:

For years, colleges complemented the government’s efforts by using their financial aid resources to open their doors to the neediest students. But those days appear to be in the past. Over the past several decades, a powerful enrollment management industry has emerged to show colleges how they can use their institutional aid dollars strategically in order to increase both their prestige and revenue.

Worse yet, there is compelling evidence to suggest that many schools are engaged in an elaborate shell game: using Pell Grants to supplant institutional aid they would have otherwise provided to financially needy students, and then shifting these funds to help recruit wealthier students. This is one reason why even after historic increases in Pell Grant funding, low-income students continue to take on heavier debt loads than ever before. They are not receiving the full benefits intended.

Overall, too many four-year colleges, both public and private, are failing to help the government achieve its college-access mission. They are, instead, adding hurdles that could hamper the educational progress of needy students, or leave them with mountains of debt after they graduate.

Will this new analysis, which demonstrates the problem is getting worse, have any more impact on Congress and the Department of Education than the first one did? Probably not. After the first study, I offered a blog criticizing Congress for creating a financial aid system that invites colleges to manipulate federal funds away from help for the low-income. Which resulted in an invitation to me by authorizing committee staff to visit the Hill for a chat. I was told I was wrong about staff not reading the report; they did. But I was also told that Congress would take no action because there was nothing Congress could do in the face of the powerful Washington-based higher education lobby.

Having once been a part of that lobby, as well as Congressional staff and Department of Education staff, I disagree. American higher education is sufficiently in trouble such that another business-as-usual, chummy legislative reauthorization of the Higher Education Act with the senescent, out-of-touch higher ed lobby will likely accelerate the already alarming growth of student indebtedness, a national problem affecting the whole economy. Moreover, many colleges during the next six-year reauthorization period will find themselves unable to keep up with the enrollment management and money laundering schemes tolerated if not encouraged under current federal law, and will be faced with shuting their doors.

It is no secret that many who toil at colleges and universities -- likely a large majority -- are troubled by the behaviors they believe they are forced into by the very success of their control of Congress: chasing rankings prestige at the expense of their missions; loading up the financially-needy with debt while awarding so-called merit aid to the dubiously (but well-off) meritorious; selling their institutional souls to outside funding sources. Occasionally a college president will shout "Stop us before we kill ourselves!", but no one in Congress is really listening.

The New America Foundation proposes mild carrot-and-stick adjustments to current federal law as a way to address the problems. These measures are better than nothing, but Congress would be better advised simply to face up to the failures of its current programs and act boldly to reform them.