Double the Pell Grant for the best return on investment for students and taxpayers

Double the Pell Grant for the best return on investment for students and taxpayers
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College affordability is a hot topic at kitchen tables across the country. But the conversation takes on a very different tone depending on the earnings of the family at the table.

For middle and upper-income families, the question is: Where will you go to college? For the low-income families served by the more than 490 members of the National College Access Network (NCAN), the question is: Will you be able to go to college at all?

In fact, a low-income student is only half as likely to complete a postsecondary certificate or degree by age 26 as a high-income student, according to the National Center for Education Statistics at the U.S. Department of Education.

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The number of postsecondary institutions that are affordable for Pell Grant recipients — students from lower-income backgrounds — are decreasing, according to new NCAN research. This analysis demonstrates how the college affordability problem plays out across the country even when the average Pell Grant is matched with federal loans, state and institutional grants and part-time work wages.

In the 2016-17 academic year, only 27 percent of public, bachelor’s-degree-granting colleges with on-campus housing offered students, on average, a financial aid package that did not ask them to pay more than their expected family contribution, or the amount that the federal government calculated that they could afford to pay for college.

The picture is not much better for community colleges, often held up as the example of affordability for low-income students. Just under half — 48 percent — of community colleges are affordable for the average Pell Grant recipient who lives off campus.

The Pell Grant is a form of federal financial aid that is based solely on a student’s need. For the 2016-17 academic year, 80 percent of Pell recipients came from families with incomes below $40,000. The maximum grant award — $6,195 for the upcoming academic year — used to cover more than 75 percent of the average cost of attendance at a public four-year university but now covers less than 30 percent.

To ensure students of all socio-economic backgrounds can access higher education — whether that be a bachelor’s degree, associate degree, or credential — and the life-changing benefits that come with it, federal policymakers must focus on need-based financial aid by strengthening the Pell Grant.

This approach would benefit all of us. Economists from the Minneapolis Federal Reserve found that a purely progressive model for financial aid is actually the most economically efficient. In other words, taxpayers get the best return by investing in lower-income students who would not otherwise have attended college, rather than giving aid to higher-income students who would have still pursued higher education even if they had to pay more.

When discussing college affordability, it is crucial to consider cost of living — non-tuition expenses such as housing, food and transportation. The current average Pell Grant only covers tuition at a community college and less than that a bachelor’s-degree-granting institution. At a time when 41 percent of four-year college students have experienced food insecurity, 48 percent of four-year students have been housing insecure and about 22 percent of undergrads are parents, the full cost of college must be taken into account when addressing college affordability.

Unfortunately, many of the college affordability proposals out there today do not address the full needs of today’s students. Free college programs, particularly those that only offer funding for tuition after federal need-based aid is exhausted, do not provide the additional resources low-income students need to seize their college opportunity. What will serve these students best is a strong system focusing resources on those who require them the most through a need-based model. Once all the needs of the lowest-income students are met, then politicians could consider more universal affordability programs.

The federal government should focus on returning the purchasing power of the Pell Grant over the next decade to at least 50 percent of the average cost of attendance at a public four-year institution, which would approximately double the current grant. This planned increase would allow students in all states, pursuing any degree or certificate, to close the affordability gap in covering both tuition and living costs. Further, a stronger Pell Grant will bolster any other equity-minded policy proposals focused on college affordability.

The most effective way to use taxpayer dollars to increase the number of individuals earning degrees and credentials is to invest in low-income students who are left with substantial financial aid gaps under the current system. As the economists from the Minneapolis Fed state clearly, for low income students, “financial aid is the key to attending college; without it, higher education is not an option.”

Kim Cook is executive director of the National College Access Network, whose members in 49 states are committed to helping more students from low-income backgrounds, first-generation students and students of color enter and complete postsecondary education.