Pell Grant expansion actually hurts low-income students

Free community college, a focal point of President Biden’s $1.75 trillion social spending bill, may be off the table for now. But higher education reformers shouldn’t breathe a sigh of relief yet: This provision was only one of many meant to subsidize the already-bloated American higher education system. One important proposal is an expansion to the Pell Grant program, which has lured millions of academically ill-prepared students into expensive colleges. Expanding this inefficient program hurts not only taxpayers but also the low-income students it purports to help.

The Pell Grant program, established in the 1970s, is a large component of the federal student aid system. Taxpayers pay more than $28 billion to support it. Biden’s plan would add another $550 to the maximum Pell amount, which is currently set at $6,495. According to 2016 data, nearly a quarter of the 7 million Pell recipients receive the maximum amount. By these estimations, taxpayers will be on the hook for another $1 billion. This is likely an underestimation because expanding the limit will be felt down the chain.

Biden’s provision opens the gateways for future expansions. Various higher education groups will be ready to jump at that opportunity. They are already demanding the doubling of Pell grants. Supporters want to return to the days when this aid covered the majority of college costs. They say that the Pell awards have not kept up with the skyrocketing costs of college. But these same advocates ignore the fact that the expansion of federal student aid has contributed to the prohibitive costs of college.

Universities have an artificially high supply of students — we can tell because 40 percent of recent college graduates are underemployed. While many end up doing the same jobs that a high school graduate could do, students are enticed to attend college because a degree is often tied to career and financial success. In addition, the easy availability of federal student loans gives colleges no incentive to lower their costs. Pell Grants encourage low-income students to attend universities, which only adds to the demand for college.

But a college degree does not guarantee financial stability anymore. In fact, an increasing number of non-bachelor degree holders out-earn those with a college education. Respiratory therapists, aircraft mechanics and dental hygienists are some of the fastest growing jobs that don’t require a traditional four-year education. Even though the college degree is losing its competitive edge, many students are still encouraged to enroll — only to walk away with decades-long debt. And for Pell students, the outcomes may be even worse.

Less than 50 percent of Pell students graduated with a bachelor’s degree in six years. Proponents of Pell Grants justify this astronomical dropout rate by attributing it to financial constraints of students and poor institutional resources. However, this explanation isn’t supported by the empirical evidence. Tuition-free Berea College provides an instructive example: Their typically low-income students drop out at the same rate as other low-income students across the country, even though Berea students lack financial constraints. The main reason Berea students drop out is learning about their academic ability — or lack thereof — during college.

This explanation easily applies to Pell students, who historically have scored lower than non-Pell students on standardized tests such as the SAT. Thus, it’s unlikely that increasing the grant size will alleviate the poor academic outcomes of these students. Conditioning awards on academic merit can fix these issues, but supporters of these financial aid programs don’t seem interested in this provision.

Giving more funds to students after the fact does not fix poor academic preparation or other underlying problems. And if taxpayers are going to subsidize a $30 billion program, they should see significantly better results.

Instead of expanding the Pell Grant program, our time and money would be better spent on implementing policies that improve the quality and accessibility of alternatives to traditional four-year degrees. For example, we could encourage more low-income students who have completed high school to enter skill-based fields. Jobs in these areas are not only in demand, but students will see a faster return on investment. This path gives low-income students an actual chance to climb out of their poor financial conditions.

Expanding the Pell Grant system does not give universities incentives to lower their costs. College degrees instead become expensive barriers to a quality life. If we truly want to help low-income students, it’s time to break higher education’s stranglehold on good jobs and social mobility.

Neetu Arnold is a senior research associate with the National Association of Scholars and the author of the report, “Priced Out: What College Costs America.” Follow her on Twitter @neetu_arnold.