Pell Grants: Soaking Taxpayers and Creating Debt Slaves?

pell_loansby James A. Bacon

Earlier this month the Hechinger Report found that a large percentage of the beneficiaries of federal Pell grants to students from low-income families never graduate. The study also found that the federal government, despite spending $300 billion on the program since 2000, doesn’t keep track. The feds have doubled their commitment to the program since the 2007-2008 school year with absolutely no idea of what results they are getting.

Uncle Sam may be flying blind, but Virginia is not. The Commonwealth has been collecting the data for years and reports the results for every public and private university in the state, reports the VLDS (Virginia Longitudinal Data System newsletter. According to Tod Massa with the State Council for Higher Education for Virginia, “Virginia knows more about the success of students in all the Title IV financial aid programs, which are not ours, than the federal government does.”

Pell grants for low-income students provide awards of up to $5,775 per student. Graduation rates for Pell recipients in Virginia can be seen here.

For all first-time, full-time college students entering a Virginia institution in the 2001 school year, 60.3% graduated within five years compared to 43.4% for Pell recipients. The graduation rate varied widely between institutions, however. The more elite the institution, the higher the graduation rate. For instance the Pell graduation rate within five years at the University of Virginia was 85% for freshmen enrolled in 2001, while it was 20% at Norfolk State University. (View data for individual institutions here.)

The disparity in graduation rates raises the question of whether the program is inducing poor students to attend college when they have no business doing so, either because they are unprepared for college-level work or because they struggle to pay the tuition, fees, room and board. A nearly $6,000 grant covers about a third or fourth of what it costs to attend a public university in Virginia. It would be interesting to know how many Pell recipients end up taking out student loans. It would be even more interesting to know how many Pell recipients end up saddled with student debt without the degree credential that would help them pay it off.

Virginia has the data to undertake such an analysis. The fact that the U.S. Department of Education does not is just disgraceful. It’s not often that a government wealth-distribution scheme can both squander your tax dollars and propel thousands  of would-be beneficiaries into debt slavery.


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  1. Steve Haner Avatar
    Steve Haner

    First, I must reveal I’m a vice president and lifetime member of the Tod Massa fan club, and am planning on putting in a bill to prevent VRS from letting him ever retire. He is just too valuable an analyst. Many a preconceived notion of mine ended up in a round file thanks to Tod.

    Stunning news that the federal government doesn’t even track the graduation results of Pell recipients, but then, as you note, it depends on what the goal of the program is….if the goal is to subsidize enrollment, it is a whopping success. I’m sure they track enrollment. If the goal were to subsidize graduation, it would probably be structured very differently. Imagine if the money were paid directly to the school only as the student progressed, with the final and largest installment withheld until graduation? A pay for performance model? Imagine the howling.

    But then you’d have to worry about social promotion and graduates who really hadn’t earned the degree. As if that doesn’t happen now…

    Would it make sense to narrow the program to a more targeted group, more likely to succeed, and give larger grants to reduce the fiscal stress? A good question.

    This cohort of students is challenged. In many cases they do disappear because the Pell grant hardly covers the whole cost and they cannot deal with the gap. They succeed at the elite universities because 1) those are the better prepared students and 2) many of those schools provide additional support and mentoring and even financial aid. I think it is fair to worry many of Pell dropouts also end up in debt and I’d be curious to know if Tod could answer that question.

  2. Steve Haner Avatar
    Steve Haner

    But before you throw the baby out with the bath water, thousands and thousands of students on Pell over the decades have graduated and I suspect that the return to the taxpayer on that investment has been highly positive. As noted, at some schools the completion rates are stellar. Once you are through ranting, Jim, what would you have us do? Reform, yes — repeal, no.

    1. No, I’m not advocating the repeal of Pell grants. But I am saying that we should conduct some rudimentary analysis to see if the program is working as intended. My hunch is that the program probably should be more selective and/or attach the kind of strings that you discuss in your previous post. $30 billion a year is a lot of money, even for the federal government. Let’s make sure it’s doing what it’s supposed to do. If it isn’t, let’s cut it back.

  3. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    My guess would be that the Federal government will never track results from Pell program and/or limit the Pell program because, unfortunately, the program is more about buying the votes of citizens and about the Federal Government gaining undue and pernicious influence over those who administer and teach at our nations colleges and universities, than it is about educating our nations students.

    I say this with full knowledge that the Pell program has done great good for a substantial number of those who “self-qualified” for it, instead of those unfortunates who had public money peddled to them by schools using students as debt laden Cash Cows to fill seats and fill the coffers of their exploitative “schools.”

    Far too often the schools get the money and give nothing in return while their students waste valuable time in college only to carry away unnecessary debt without the education to pay it off.

  4. LarrytheG Avatar

    re: ” The more elite the institution, the higher the graduation rate. For instance the Pell graduation rate within five years at the University of Virginia was 85% for freshmen enrolled in 2001, while it was 20% at Norfolk State University.”

    I’d want to know more about this before making decisions.

    I’m NOT in favor of giving marginally performing high school students loans to finance failure.

    on the other hand – I’m not in favor of walking away from those that could succeed if they got remedial help to make up for what they did not get in K-12.

    When I first signed up for Community College, I was given an entrance assessment – and it came back not so good.

    but instead of rejecting me – they said I could enroll but had to start in remedial class and catch up.

    As most can probably tell. .. I still have bad study habits and tend to hit the “comment” button before reviewing for grammar errors!

    I’m frankly a little surprised the Feds don’t capture the data – they do it for everything else from the Clery Act to NCLB.

    All this really tells me is that some/many lower income kids do not graduate with the level of competencey needed to go on to higher ed.

    not just in Virginia:

    ” Maryland schools have been leader in Advanced Placement, but results are mixed”


    ” For federal and state education officials who have invested $400 million in taxpayer dollars over the past decade to subsidize AP exams for bright, low-income students, the stakes are even higher.

    So far, the expansion has not lived up to its promise. It has not delivered vast numbers of students from low-performing high schools to selective colleges with credits in their pockets, helping to bridge the academic gulf between the nation’s rich and poor. Too often, students who haven’t been prepared in earlier grades flounder in AP classes, or are awarded A’s and B’s in the courses and then fail the AP exams.

    The high grades for course work can lull students into a false sense of security, said Steve Syverson, a board member of the National Association of College Admission Counseling and a former dean of admissions at Lawrence University in Wisconsin. Many students arrive at college with AP courses on their transcripts, but with skills so low they must take remedial classes.”

    not surprisingly – the Conservative groups have noticed this and are making the point that APs for lower end K-12 is a scam that is awarding pass rates for AP that are proving inflated when these kids hit college and fail.

    In a way – you cannot blame parents nor kids who have been led to believe that if you don’t go to college – you’re not going to get sufficient education from high school to get a decent job – there is no real Vocational Ed that leads to a viable job.

    the college fail is a symptom of a worse problem and that is entire schools that are low performing – in districts that have high performing schools. The kids in the high performing schools go to college and succeed. The kids in the low performing schools go to college and crash and burn because they don’t have college level skills in basic competencies – reading, math and science.

    they “get” graduated to meet the goals of SOLs/NCLB, but they don’t have college or job-ready educations.

  5. Hey LarryG
    Ya’ think the problem of the kids in the lower performing schools has anything at all to do with the fact that those kids are stuck in those schools. You know, the ones where the per pupil cost is more than at the high performing schools? Have you ever checked the college readiness of the kids at say, Paul Adam’s Provident St. Mel in the Henry Horner projects of Chicago versus the public schools surrounding it. Paul sends 98.6% of his kids to college and they succeed, albeit not quite at a 98.6% rate, but usually not because they aren’t ready. And his per pupil cost is probably half what it is in the public schools. Paul’s parents, most who live paycheck to paycheck, show up on Friday afternoon at the school”s pay window to pay the next week’s tuition, so they are highly motivated parents. But I wonder what would happen if parents who live in the area but aren’t so motivated as the ones who show up every Friday could give Paul a voucher for the entire semester. Just sayin’

    As always, the problem is the confusion between a public education and a publicly-provided education. Right now, they are the same, and it’s a monopoly that those in the low performing school kids can’t escape. Get with the program, Larry, and stop implicitly defending the public education monopoly.

    1. LarrytheG Avatar

      You’re not paying attention CrazyJD. I’m ALL FOR competition from non-public schools as long as two things are true:

      1 – they have to take all comers from all demographics
      2 – the are held to the same academic standards as public schools

      other than that- do it.

      what I’m opposed to is cherry picking the demographics and little or no real accountability much less using a standard between the two.

      how about that?

      the non-public will not be paying for all the non-academic bells and whistles that public schools do so
      in that regard – they may well prove that public schools are not spending money for the most important things and private schools will – and parents will have to use their own money for the extras.

  6. “Virginia has the data to undertake such an analysis. The fact that the U.S. Department of Education does not is just disgraceful. It’s not often that a government wealth-distribution scheme can both squander your tax dollars and propel thousands of would-be beneficiaries into debt slavery.”

    Of course the feds should do the kind of analyses that Virginia does. But lacking such analysis on a national basis how can you conclude that the feds are squandering our tax dollars and sending beneficiaries into “debt slavery”? How can we conclude anything, other than that we need to know more? Lacking data, I guess it’s always best, or at least fashionable, simply to assume the worst and to blast the feds.

    1. LarrytheG Avatar

      well.. damned if you do….. etc…

      if the Feds collected such data (and I’m not sure they do not) – the naysayers would be harrumphing about bureaucrats wasting money on stuff they ought not be doing to start with.

      what I’m waiting for with great anticipating is when the GOP candidates start getting real questions about what they think the role of govt is or is not…. beyond their silly pandering to the far right folks.
      I wonder how many Cabinet Agencies will make the list of “we should close it down” – this go around!

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