Quite simply, Pell Grants are not supposed to be for the middle class. As the U.S. Department of Education’s website makes clear, Pell is supposed to be for “low-income undergraduate and certain postbaccalaureate students.”

So why characterize Pell as a benefit for the middle class? Because lots of people consider themselves to be in that group — which federal politicians rarely define — and policymakers want their votes.

Unfortunately, as Rep. George Miller (D-CA) recently demonstrated, saying Pell is intended for the middle class also makes it a valuable weapon in waging class warfare.

“Pell is the reason they are able to go to college and get ahead,” Miller said in response to congressional Republicans purportedly looking to trim the program as part of debt reduction. “It’s a shameful excuse and an attack on middle class families.”

Other than their usefulness in browbeating those who’d dare propose education cuts, Pell Grants are, at best, of limited value. Yes, they are needed by some people to go to college, but that’s because they are largely built into college prices. Basically, give me a dollar more to pay for school and my college will charge me another buck.

Of course it’s not just Pell that influences prices — there are lots of other sources of aid, and colleges confront numerous variables that affect their costs — but subsidize something and prices will go up. And boy, do they go up in higher education!

One last consideration is crucial but rarely mentioned. One of the great political benefits of Pell is that to recipients it’s free dough — no need to pay it back. That lets politicians play Santa Claus, not the mean banker who sinisterly comes after you to return student-loan money, plus interest. But keep in mind what, in most cases, college is ultimately for: to enable attendees to greatly increase their earnings. In light of that, how can politicians justify simply giving away money from taxpayers? Quick answer: They can’t.

Were you or I to do that it would be called “stealing.” When government does it, apparently, it’s called “helping the middle-class.”

C/P from the National Journal’s “Education Experts” blog.

Pell Grants Best for Buying Votes is a post from Cato @ Liberty - Cato Institute Blog

Want to know a major reason Washington won’t make the cuts we need? Because winning elections is largely about getting “middle-class” votes, and just about any program can be spun as a savior for that big — but rarely defined by politicians — chunk of Americans.

Case in point, an animosity-stoking assertion uttered last week by House education committee Ranking Member George Miller.  As reported by CNN, the subject was the possibility of a cut being made to the federal Pell Grant program:

Rep. George Miller, a California Democrat, defended Pell Grant funding on Friday, calling it the “great equalizer” for millions of students.

“Pell is the reason they are able to go to college and get ahead,” Miller said. “It’s a shameful excuse and an attack on middle class families.”  

Now, what’s wrong with this assertion (other than its obnoxiousness and assumption that Pell doesn’t mainly enable colleges to raise their prices)? According to the U.S. Department of Education’s  description of Pell – and the long understood intent of the program — it isn’t for the middle class. It is for “low-income” Americans:

The Federal Pell Grant Program provides need-based grants to low-income undergraduate and certain postbaccalaureate students to promote access to postsecondary education.

So much for Pell-trimming proposals assaulting the middle class. Buy maybe Rep. Miller was doing more than just inaccurate, uncivil political posturing with his comments. Maybe he was revealing a dirty little secret: While Pell is better focused on low-income students than many federal aid programs, over time politicians increasingly aim all education efforts at the big mass called the middle class. Maybe Miller was accidentally acknowledging that aid for the poor morphs into aid for the not-poor because, well, that’s where the votes are.

Look at Pell, which, again, is relatively well targeted. In the 1975-76 school year, 1.2 million students received grants (table 1). By 2009-10, 8.1 million did — almost seven times more! Meanwhile, overall enrollment in degree-granting institutions grew from about 11.2 million in 1975 to 20.4 million in 2009, less than doubling.  Almost certainly, there has been less precise targeting to truly low-income students. Indeed, about 6 percent of Pell recipients (table 3-A) in 2009-10 came from families making at least $50,000 a year, or about the median household income in 2009.

Such expansion has been seen in K-12 education, too, though one wonders if Pell is singled out for big bucks in the debt-ceiling deal because people get Pell personally, unlike elemetary and secondary aid which goes to states and districts. Regardless, federal K-12 funding has spread farther and wider over the decades as politicians have sought to keep money coming even as their districts have lost people, and as allocations have become less and less focused on individual students. 

When waging class war, a powerful weapon is to portray your political enemy as intentionally hurting the most vulnerable people: the poor, children, etc. But the winning strategy? Sending money to the middle class, and capturing their precious votes.

In Class War, It’s the “Middle” Ground that’s Key is a post from Cato @ Liberty - Cato Institute Blog

A couple of days ago I blasted President Obama for, in repugnant tradition, using “education” as a political weapon, invoking it to scare Americans into demanding increased taxes for “the rich.” House Speaker John Boehner, thankfully, did not abuse education similarly in his rebuttal. But his proposal for raising the debt ceiling illustrates just how weak the GOP’s commitment is to returning the federal government to its constitutional — and affordable — size. And I say this not because of the relative puniness of his proposed cuts, but what the proposal would do in education, the only area it specifically targets: increase funding for Pell Grants.

Now, I know what many people will say to this: Pell is a de facto entitlement; it has a big shortfall; and Boehner’s bill would offset the Pell increase by eliminating federal student loan repayment incentives and grad student interest subsidies. And do you just hate education, McCluskey, or poor people?

On the first points, yes to all of those, and the CBO even projects that over ten years Boehner’s bill would achieve some savings from his student-aid moves. But ten years is a long time, during which a lot of things — especially spending increases – could happen. And the seemingly forgotten fact of the matter is that we have a $14.3 trillion debt and are sooner or later going to need big, tough cuts. And though Pell Grants sound so nice – they give poor kids money to go to college! – they should be eliminated for several reasons well beyond  frightening fiscal reality:

1. They are unconstitutional: None of the Federal government’s enumerated — and only – powers say anything about paying for college.
2. They are inflationary: Maybe Pell Grants, because they target low-income students better than federal loans and tax-based aid, aren’t the biggest drivers of tuition inflation, but research suggests they are a driver, especially at private institutions. There is also good reason to believe that schools target their own aid dollars to other, better-off students when they can use taxpayer dough for low-income ones.
3. They take money from real human beings — taxpayers — to make others rich: Okay, maybe not rich, but as higher ed advocates will quickly tell you, on average a person with a college degree will make roughly $1 million more over her lifetime than someone without one. There’s a lot of play in that number, but the point is generally correct: A degree helps to significantly increase earnings. How, then – even absent a mind-blowingly colossal debt – can we justify taking money from taxpayers, many of whom did not go to college, and just giving it away to others so that they can get a lot wealthier? At the very least Pell should be made into a federally backed loan program — recipients should at least have to return taxpayers’ “investment” – which Boehner could have put into his bill.

Republicans might not be as quick as Democrats to rattle education-tipped missiles, but they’re fully committed to keeping them in their arsenal.

Republicans Employ Education Weapons, Too is a post from Cato @ Liberty - Cato Institute Blog

After House Republicans’ weak first attempt at offering cuts to gargantuan federal spending — a proposal that included nary a flick at education-related outlays — and the Obama administration’s hinting that it would leave education totally untouched, there is a tiny bit of good news: Both the GOP and the administration are apparently willing to trim funding putatively intended to help educate people. But these are just tiny bones they’re throwing to people who know that the federal government likely does zero net good when it comes to actually educating people, and that there is no acceptable excuse not to make big cuts to federal “education” programs.

House Republicans, for their part, scheduled lots of education programs for shaves in their second attempt at making a reasonable budget proposal. All told, though, the cuts would amount to only about $4.9 billion out of a total Department of Education budget of about $63 billion. For those keeping track at home, that’s just a 7.7 percent cut.

Now, maybe that would be reasonable if ED-administered programs worked, but as we at Cato’s Center for Educational Freedom have laid out repeatedly, they do not. Overall, they pour money into already cash-bloated K-12 and higher education systems; insulate public elementary and secondary schools from ever having to compete for and earn their money; and fuel rampant college tuition inflation by constantly increasing aid that lets schools raise their prices with impunity. Perhaps the most telling sign that the House GOP is not serious about really cutting Washington down to size, though, is that the laughable Exchanges with Historic Whaling and Trading Partners program is not on their chopping block. If you won’t pick off this ridiculous, almost-on-the-ground-it’s-hanging-so-low fruit, you simply aren’t really trying.

For the Obama administration, while the details of their proposed cuts aren’t yet out, early Fox News reporting says the administration will propose cutting Pell-Grant spending by $100 billion over ten years. That’s a bit surprising, because President Obama has made getting as many people to graduate college as possible — regardless, sadly, of whether that means there’s actually greater learning – a key education goal. Moreover, constantly growing Pell has long been a way for federal politicians to demonstrate that they ”care” about educating all Americans. So, maybe, one cheer for the administration.

Unfortunately, as is often the case when it comes to budgeting, this might be a trick. An unnamed administration official reportedly told Fox that the administration will propose keeping the maximum Pell at $5,550 a year and would realize savings by ending year-round Pell eligibility. With year-round Pell, a student could get two grants in a calendar year for taking a regular academic-year load as well as summer school. According to the Fox News story, the ”official said the costs” of year-round Pell ”exceeded expectations and there was little evidence that students earn their degrees any faster.”

So why’s this potentially a trick? The budget experts could no doubt give you lots of reasons, but knowing education policy I can safely say one thing: It is far too early to say whether or not the year-round Pell would help students earn their degrees any faster. Why? Because year-round Pell was only instituted in 2008, much too recently to have any useful empirical data about its effect on graduation rates. It also seems likely that this will produce no savings regardless because students will still take Pell grants for the same number of total credit hours.

Of course, the main problem with Pell is that it enables schools to ratchet up their tuition rates, capturing all the aid and not making students any better off. Even bigger than this, though, is that almost certainly because spending on education plays so well politically, the administration is ignoring the same screaming reality as the House GOP: Federal spending on education does little if any educational good! Add to that the unconstitutionality of federal involvement and there is simply no acceptable argument – including a desire to “win the future” — for not eliminating federal spending done in the name of “education.”  Indeed, if we want to win the future, ending bankrupting spending we know does zero good is absolutely imperative.

A Bone Is Nice. Actually, No. is a post from Cato @ Liberty - Cato Institute Blog

A battle over higher education loans is coming to a head as Democrats consider including the ill-titled Student Aid and Fiscal Responsibility Act in reconciliation legislation. In one corner, we have private education loan lenders who enjoy the generous subsidies and loan guarantees provided by Uncle Sam. In the other, we have policymakers who want to cut out the middleman by having the Department of Education provide direct loans.

Critics of SAFRA correctly point out that the alleged savings of nationalizing student loan subsidies are a sham. The Congressional Budget Office has scored the nationalizing portion of the bill as saving $67 billion over ten years. However, in a letter to Sen. Judd Gregg (R-NH), the CBO acknowledged that when the cost of default risk is factored in, the alleged savings drop by $33 billion. Yet, taxpayers won’t realize any savings because the legislation adds $80 billion in additional spending for Pell grants and other programs.

For taxpayers, the unpalatable choice is nationalization or crony capitalism—subsidizing private businesses. The real answer is for the federal government to get out of the higher education subsidy business altogether, as a Cato essay argues.

The following are some key points from the essay:

• The effect of subsidy programs, in part, is to impose taxes on blue collar workers—who have not attended college—to pay for the tuition of future white-collar professionals. Why should the government subsidize future high earners at the expense of average working people?

• Federal student aid programs transfer wealth from taxpayers to academic institutions. That’s because the rise in student subsidies over the decades appears to have fueled inflation in education costs. Tuition and other college costs have soared as subsidies have risen. College cost inflation induced by federal aid probably hurts low-income families—the people that federal aid was supposed to target—more than others.

• Federal aid has probably helped increase student enrollment, but many of those additional students may not have been ready, or suited, for college. This is evidenced by the rising shares of college students who require remedial work, and the fact that institutions have lowered their standards to adapt to the rise in second-rate students.

• Increasing top-down control and subsidization of higher education from Washington is creating a threat to the strength of the American system. As we have seen in K-12 education, the growth in federal subsidies is usually accompanied by calls for more oversight, micromanagement, and rising levels of red tape imposed by Washington.

• Federal student loan and grant programs have been subject to waste and fraud for decades. The Pell grant program (which SAFRA would enlarge) costs taxpayers hundreds of millions of dollars per year in fraud. Another ongoing problem is the high default rate on student loan programs.

Higher Education Subsidies is a post from Cato @ Liberty - Cato Institute Blog

Everyone has heard that China is leaving us in its dust when it comes to producing college graduates, and if we don’t do something drastic to catch up they’ll crush us economically as well. Indeed, it’s a driving force behind efforts to ramp up federal higher education intervention.

As President Obama proclaimed when introducing his American Graduation Initiative, which is now part of the ironically titled Student Aid and Fiscal Responsibility Act:

By 2020, this nation will once again have the highest proportion of college graduates in the world….Already we’ve increased Pell grants by $500. We’ve created a $2,500 tax credit for four years of college tuition. We’ve simplified student aid applications….A new GI Bill of Rights…is beginning to help soldiers coming home from Iraq and Afghanistan to begin a new life — in a new economy.  And the recovery plan has helped close state budget shortfalls…at the same time making historic investments in school libraries and classrooms and facilities all across America.  So we’ve already taken some steps that are building the foundation for a 21st century education system…one that will allow us to compete with China and India and everybody else all around the world. 

Now, while a college education could furnish important learning that helps drive innovation and economic development, it could also be as worthless as conferring a bachelor’s degree on a dog. What’s important is that people actually learn things of value, not simply that they get degrees. But a funny thing happened in China…

Yesterday, news broke that China’s top education official has been sacked. Reports the New York Times:

Facing rising criticism over the quality of schools and a crush of jobless college graduates, China’s legislature announced Monday that it had removed the minister of education after six years on the job and replaced him with a deputy.

China has been cranking out college graduates at a breakneak pace, but the quality of the education has become highly suspect and, perhaps more importantly, there haven’t been nearly enough jobs to employ all the newly credentialed. In other words, simply producing more graduates — no matter how much it has frightened some people in America – has largely been a waste.

The obvious lesson from this should be that it’s foolish to simply make massively expanding the ranks of degree holders a national goal. But that doesn’t compute for many U.S. politicians, despite abundant evidence that we don’t need heaps more graduates anymore than China does. It’s getting elected that matters most to politicians, and as long as voters keep believing that government is opening the door to the middle class simply by pushing more and more people to college, politicians will keep wasting taxpayer dollars on unnecessary degrees.

So let’s hope that both voters and politicians will learn China’s clear college lesson: Fixating on degrees is not very smart. Failing that, let’s hope that we at least don’t have any rioting… 

If China Jumped Off A Bridge, Would We Do It Too? is a post from Cato @ Liberty - Cato Institute Blog

The Student Aid and Fiscal Responsibility Act (SAFRA) is expected to head to the full House of Representatives for a vote tomorrow, and as it does there is yet another Congressional Budget Office estimate upping its expected cost. The bill that sponsor George Miller (D-CA) shamelessly says will be a taxpayer-money saver continues to be exposed as very much the opposite.

As you might recall, Miller has been touting SAFRA as legislation that would fund all kinds of new or expanded federal programs while allocating $10 billion to deficit reduction. But the CBO has never agreed with that. First, the CBO identified a likely net cost to taxpayers of about $6 billion over ten years, and that was without including any deficit reduction. Then it estimated that SAFRA would cost an additional $33 billion after accounting for lending risk. And now, CBO estimates that the cost of expanding Pell grants could be almost $11 billion greater than originally estimated. If you add all of those things together, the cost of SAFRA has flipped from a promised $10 billion savings to a $50 billion loss.

In fairness, the last estimate comes from a change in the baseline used for Pell outlays, going from March to August 2009. The increased cost estimate could very well reflect a higher-than-usual Pell expense because of the economic downturn, and the additional cost would not materialize if and when things improve. Nonetheless, this just adds to a very clear message about SAFRA: Far from relieving taxpayers, it’s going to deliver yet one more punishing blow.

Full House to Vote on Lie of a Bill is a post from Cato @ Liberty - Cato Institute Blog

Understandably, the public is a little preoccupied right now with efforts in Washington to “reform” health care by making it much, much worse. Fortunately, people are starting to notice that a congressional bum rush is heading right toward them — maybe they’ll be able stop it in time. Unfortunately, that is giving Washington a chance to sneak some other stuff by us.

In particular, I’m thinking of the just-introduced Student Aid and Fiscal Responsibility Act. It’s been largely ignored so far, save a little chatter about the community college stuff it incorporates. In a simpler time, it would have generated a lot more copy. After all, it will:

• end federally backed student loans that come through private companies, and instead make Uncle Sam the universal lender;
• greatly increase Pell Grants and peg their growth to the rate of inflation plus 1 point;
• balloon the federal Perkins loan program;
• authorize $5 billion over two years for elementary and secondary school facility projects, with a focus on “green” efforts;
• authorize $10 billion over ten years for Early Learning Challenge Grants; and
• furnish $12 billion for community colleges.

Not all of this, I should say, is terrible. Getting rid of the Federal Family Education Loan Program — which backs loans coming from ostensibly private companies and guarantees lenders a profit — is a good thing. But replacing it all with loans directly from D.C.? That’s a bad thing.

To be fair, transitioning from guaranteed to direct lending could save some money, especially in the short run, eliminating various fees and guarantees Washington pays to lenders under FFEL. But those savings almost certainly won’t be the $87 billion over ten years supporters claim, a number that is no doubt overstated as a result of budget chicanery and how quickly government grows. And don’t expect taxpayers to benefit from whatever savings are ultimately generated. According to the proud declaration of SAFRA sponsor George Miller (D-CA), only $10 billion of the projected $87 billion savings is slated for deficit reduction. The rest — breathtaking deficit be damned! — is going to standard, feel-good government spending, including school “modernization” projects and “early learning” grants

Which brings me to the community college components, which have, unlike the rest of the bill, been getting some media play. I wrote about them earlier this week, noting especially that they make little sense in light of Bureau of Labor Statistics numbers showing that positions requiring on-the-job training will grow in much greater numbers than jobs requiring at least an associate’s degree. What I didn’t mention was the dismal performance of community college students, who take remedial courses in droves and complete their programs at very low rates.

Ah, but we’re told that this new legislation, backed wholeheartedly by the Obama administration, is going to reform community colleges. As David Brooks celebrates in his column today:

The Obama initiative is designed to go right at these deeper problems. It sets up a significant innovation fund, which, if administered properly, could set in motion a spiral of change. It has specific provisions for remedial education, outcome tracking and online education. It links public sector training with specific private sector employers.

Now, I thought Brooks was supposed to be a seasoned political observer, but he seems to have swallowed the reform-y rhetoric hook, line, and sinker. He’s seasoned enough, though, to give himself an out with the qualifier, “if administered properly.”

He’s gonna’ need that out, though the reform failure probably won’t be primarily administrative; the legislation itself offers gaping holes through which schools can escape real reform. To get “innovation” grants, schools would simply have to agree to do such nebulous, input-centric things as provide “student support services” and implement “other innovative programs.” In other words, they’d need do nothing meaningful at all.

Unfortunately, this bill will probably become law. Few politicians or interest groups are standing firmly against it, and with health care storming the public’s front door, few people will notice SAFRA tiptoeing through the back. Combine that with the few people who are writing about the bill giving it little critical thought, and its passage seems assured.

How’d That Get in Here? is a post from Cato @ Liberty - Cato Institute Blog

By proposing to eliminate the Federal Family Education Loan Program, President Obama has raised a pretty big ruckus in the relatively staid world of higher education policy. For the uninitiated, FFELP uses taxpayer dollars to essentially guarantee profits to participating financial institutions, and to keep student loans cheap and abundant. 

Since neither corporate welfare nor rampant tuition inflation are really good things, getting rid of this beast would be a welcome move. Unfortunately, the president wants to replace FFELP with direct-from-Washington lending and to plow the savings into Pell Grants, so there’ll be no savings for taxpayers and probably very little beneficial effect on college prices. 

As I wrote on NewMajority.com in May, no one should expect big lenders to get kicked off the federal gravy train:

[T]he Obama administration is saying they’d keep private companies as servicers of loans to maintain quality customer service. Of course, this could very well be worse than the status quo: It will likely keep at least the biggest current lenders (read: Sallie Mae) at the political trough, but Washington will be THE lender for all students.

Right I was! Or, at least, signs of my prescience keep getting brighter:  Despite Obama promising to go to war against an ”army” of lenders’ lobbyists, the U.S. Department of Education just awarded Sallie Mae and three other big lenders lucrative contracts to service federal loans. So while smaller leeches could very well be removed from their supply of taxpayer blood, the biggest will keep on sucking!

The Biggest Leeches Always Live is a post from Cato @ Liberty - Cato Institute Blog