Over the last several years, the Warren-Sanders wing of the Democratic Party has succeeded at reshaping the higher education policy debate. Proposals once regarded as radical and unserious, like free college and widespread student loan forgiveness, have moved to the forefront of the national debate.
In issuing its $1.8 trillion American Families Plan (AFP), the Biden administration has called for limited versions of both these progressive enthusiasms, while also pushing to supersize a familiar program with more bipartisan appeal: the Pell Grant.
For years, there have been calls to substantially increase the size of Pell Grants, a federal subsidy awarded to lower- and middle-income undergraduate college students to offset the expense of enrollment. The Pell Grant program traces its roots to the Higher Education Act of 1965 and has required appropriate updates and revisions over time. Now, the Biden administration, though, is seeking to double the size of the grants — to a figure that vastly exceeds what has previously been proposed.
We believe that doubling Pell Grants has promise, if done right. Unfortunately, the Biden administration appears intent on doing it wrong.
Biden’s plan would boost the maximum Pell Grant to just under $13,000, at an added cost of around $30 billion per year. This is a significant outlay at a time when the U.S. Treasury is swimming in red ink. Nonetheless, we believe that doubling Pell Grants has promise, if done right.
Unfortunately, the Biden administration appears intent on doing it wrong.
The Pell program is popular because it appeals to both the left and the right. For Democrats, it offers no-strings funds to low-income students. For Republicans, it funds students rather than colleges, providing a voucher that students can use at the accredited institution of their choice. If policymakers are seeking a college affordability program with bipartisan appeal even in our polarized moment, this is it.
At the same time, it’s worth remembering a simple economic truism: Subsidies cause prices to rise, as they tend to make consumers less cost-conscious. This is especially pertinent when the Biden administration argues that the massive Pell expansion is needed because the grant hasn’t kept pace with inflation.
First off, Pell actually has kept pace with inflation. What it hasn’t kept pace with is the ever-rising cost of higher education, which has grown at a rate that exceeds the level of inflation in almost every other major sector of the economy.
What to make of this? Well, boosting the size of Pell seems like a reasonable approach to promoting college affordability, especially at a time when Democrats are looking to spend hundreds of billions on educational programs that lack Pell’s sensible, student-centered design. But doubling Pell is only reasonable as part of a coherent, sensible approach to addressing concerns about cost and personal responsibility in higher education — not as part of an eclectic grab-bag of giveaways and bad ideas.
Here’s what we have in mind.
First, the rationale for supersizing Pell is that it enables low-income students to attempt a college education without having to take on debt to do so. The proposed size of Pell means that most students will be able to attend two years of a community college or of a local public four-year college without needing to borrow money for tuition or fees. This helps solve the pressing problem of students who attend a year or two of college, depart with debt but no degree and then struggle to find a job that allows them to pay off their loans.
But that raises all kinds of additional questions about the AFP’s $100 billion-plus proposal for “free” community college. If the expanded Pell is going to cover the cost of community college for those with financial need, what problem exactly is the Biden free community college proposal designed to address? After all, on average, Pell Grants already more than cover the cost of tuition and fees at community colleges.
This means that “free” community college is really about subsidizing students who don’t qualify for Pell, leaving taxpayers to subsidize those not in need. Further, given that community college systems are creations of the states, any “free” college plan would require Washington to devise a cost-sharing system that would work across all fifty states. And why would we want to invite federal micro-management and intrusive oversight of a complicated regulatory regime (think: Medicaid), if it can be avoided?
Doubling Pell also points to the perversity of Democrats’ aggressive push to forgive up to $50,000 in student debt. Efforts to boost access should be coupled with a clear signal that those who choose to attend college with taxpayer assistance are expected to make good on their debts. Expanding the no-strings-attached Pell for low-income students is one thing, but bundling it with a taxpayer gift card for those who used public funds to attend law school or pricey private colleges would send exactly the wrong message.
The most important fix here would be to simplify federal borrowing by combining it into a single, easy-to-understand program that allows borrowers to repay an amount that’s affordable based on how much they are earning. The existing set of Income Driven Repayment (IDR) programs, administered by the federal Department of Education, accomplish this, in theory, but their complexity and poor administration have stood in the way of them helping many of the neediest borrowers. With improved access to this kind of financing regime, borrowers should also be given more reasonable limits on borrowing such that it’s harder to take on debt that they predictably won’t be able to repay.
In truth, if we expand Pell, pair it with a coherent approach to IDR and steer away from the faddish embrace of loan forgiveness and “free” college, the affordability and access problems plaguing higher education can be reduced to a manageable size — one that no longer invites grandiose federal schemes.
Beth Akers is a senior fellow in education policy studies at the American Enterprise Institute. Frederick M. Hess is the director of education policy studies at AEI.
This story about Pell Grants and making college affordable was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for Hechinger’s newsletter.