When was the last time the American economy contracted as dramatically as it did last spring? In 1946. At the end of World War II, factories producing aircraft carriers and munitions shut down, just as 16 million young veterans headed home in search of employment. The economy shrank by 11.6 percent in 1946 (compared to 3.5 percent in 2020).
Congress came up with one very clever idea to help the American economy quickly bounce back. The GI Bill offered a free education to those millions of returning veterans, a creative stimulus package that provided an enormous lift to the American economy. We should do that now by greatly increasing federal financial aid to poor and middle-class students.
The GI Bill benefit was enormously popular, to the surprise of many at the time. Half of those returning veterans made use of the opportunity — 2 million to go to college and 6 million to vocational school. (That number would have been higher, but segregation cruelly limited educational options for Black veterans.)
The economic impact of the GI Bill went far beyond curbing unemployment. It provided a permanent boost to America’s ability to compete in an increasingly global marketplace. Between 1940 and 1950, the number of Americans holding a degree more than doubled.
Why did that matter so much? Because before 1945, most people led lives fairly determined at their birth, with opportunities not much broader than those of their parents. The GI Bill brought the poor and working class (to the horror of some elite university presidents) flooding into college. And those students thrived.
The GI Bill funded the education of 14 Americans who would go on to win Nobel prizes, 91,000 future scientists, 238,000 teachers and 450,000 engineers. Not only did that make American ideals of meritocracy far more real, it also represented self-interest. It turns out that investing in the minds and capacity of Americans would result in countless economic dividends and further launch the American economy as the new superpower.
During this crisis, we are hurtling in the opposite direction. 2020 created a similar dramatic shift in the percentage of Americans going to college, but this time for the worse. The best available data estimates that freshman enrollment declined by about 13 percent in fall 2020, and that figure is even higher for students hoping to be the first in their family to make it that far.
I wish this steep drop represented a massive “gap year,” but the evidence suggests that the vast majority of those students will never go to college, their futures permanently derailed by the crisis. And not just their futures. Because if we continue to squander the talent of those lost students, it will have a long-term impact on our economy and ability to compete globally.
As Congress considers the most targeted form of stimulus, why not provide a long-overdue increase to federal financial aid? Right now, most Pell Grants are awarded to families earning less than $30,000 a year (with partial grants available to families below $60,000 a year.) Those grants cover only $6,345 at most, not nearly enough to provide meaningful opportunity. The “buying power” of federal financial aid has declined sharply over time.
The COVID stimulus packages provided aid to higher education institutions themselves (aid essential to help them survive this crisis) and some pass-through funds to help current students, but it leaves out those who will never make it that far.
The federal government currently spends about $30 billion on Pell grants, so doubling Pell, as many advocates and legislators have supported, would be expensive. But, for what it’s worth, the GI Bill paid for itself in about three years, in the higher earnings (and thus taxes) of those college-educated veterans. They used their higher earnings to buy homes and cars — and strengthened the U.S. workforce at a critical time during its recovery.
As Congress looks for ways to stimulate the economy as efficiently as possible, it should revisit a strategy that has already proven to be successful. Investing heavily in higher education not only greatly expands opportunities for students who otherwise might not be able afford a college education, but it would also jumpstart the American economy following the worst financial crisis in a generation. In an increasingly knowledge-based economy, education is infrastructure just as important as highways and bridges.
Tania Tetlow is the president of Loyola University New Orleans. Previously, she served as professor of law, senior vice president and chief of staff at Tulane University. Before joining academia in 2005, Tetlow's legal career included service as a federal prosecutor and work as a commercial litigator. She is a magna cum laude graduate of Harvard Law School.