Pell Grants in Trouble, While Panel Proposes Possible Remedies

As if the continuous news coverage of our very troubled economy weren't enough, now it appears our federal financial aid system is seeing some of the action, too. A panel of education professionals and policy experts called Rethinking Student Aid recently released a report offering several remedies to the red tape-laden financial aid system and application process. Among their proposals is linking Pell Grant caps to the Consumer Price Index, a common measure of inflation; an article today in the New York Times points out that college tuition these days is indeed rising faster than inflation. Another recommendation is the implementation of savings accounts for low-income children at the age of 12, well before they are college-bound. The federally financed program would accumulate interest each year and could only be drawn for college-related expenses.

But, to put it bluntly, a new Congress and president aren't likely to adopt any proposal that would up the cost of student financing, even if only slightly. Recently reported estimates from the Department of Education indicate Pell Grants are facing a $6 billion shortfall next year, mostly as a result of a weakened economy and an increase in "nontraditional" students returning to school. In fact, government officials said they saw one of the largest ever jumps in student grant applications last year. And unfortunately, for lawmakers, this will mean appropriating the $6 billion to fill the existing gaps, or cutting back on the amount in grants given. But how viable could the former option possibly be, considering the recent projections of our ballooning deficit?

When the public is faced with such tradeoffs between paying down the deficit and paying more in taxes to fund certain programs, education is the area where Americans seem most willing to pay. Our own study on the problems of soaring costs in higher education, Squeeze Play, found that three-quarters of Americans think that making more grants and tax breaks available to students should be a "very high" priority. While more people than ever have come to value the importance of higher education, fears about affordability and access leave many parents and students deeply troubled. More than half say college prices are rising faster than other expenses, and 62 percent say many qualified students do not have the opportunity for a college education.