Killing Pell Grants to Save Them?

Basketball Buddy and Education Secretary Arne Duncan went before the Senate Appropriations Committee this week to talk about the increased funding that the Department of Education has requested in next year's budget. You can read all about it here.

One part of the discussion with Alabama Senator Richard Shelby caught my eye. No, it wasn't the criticism of Race to the Top,which certainly is a flawed program. It was the discussion of Pell Grants, which are grants of federal money to help economically disadvantaged students afford college and break out of the cycle of poverty.

Pell Grants, at risk in the ongoing debt-ceiling negotiations, figured prominently in the conversation. Duncan and Harkin said that cuts to the program have already been made, but expanding its funding its necessary. Increasing poverty and the recession have created greater demand for Pell Grants, making them key to eliminating college entrance barriers among underprivileged students.

"If we scale back on Pell access, we'll simply have a lot less people going to college," Duncan said.

The proposed spending plan calls for a $5.6 billion discretionary spending increase in Pell Grants.

Shelby had harsh words for Pell Grants' increasing cost to government, which he said has doubled since 2008.

"We are on the brink of breaking our commitment to students who wish to attend college because the Pell Grant program is on a fiscally unsustainable path," Shelby said. He said that new laws that expanded eligibility coupled with the recession made the program more costly. "We cannot continue to throw money at this problem," he said.

When Harkin repeated his maxim that cutting Pell funding would be "like turning a chainsaw on yourself," Shelby responded that no policymakers "want to chainsaw any program that's going to sustain our education system."

But, he argued, the reality of the country's financial situation means "we're all taking a chainsaw to our budgets right now."

I don't know, Senator Shelby, I think the last thing to do to demonstrate our commitment to students who wish to attend college is to gut or kill a program designed to make that possible.

Although I grew up in a working class home, I did not qualify for Pell Grants by basically "thismuch" but I was able to cobble together a great education through scholarships, loans and work-study funds. But Pell Grants serve a growing population-- from 1999 to 2008, the number of high poverty public schools increased from 12 to 17 percent of all US public schools, and the number of poor students increased. Since that time the real effects of the current recession has really kicked in, so I am afraid that those numbers are probably higher by now. Students who graduate from these schools will need a substantial amount of financial support in order to be able to afford college, especially given that state funding cuts to post-secondary schools has merely accelerated the already dizzying yearly increases that colleges have made since the 1980s.That is a reality that Senator Shelby apparently does not want to face as to why the funding for the program has been-- and should continue to-- increase.

College graduates earn more on average than high school graduates. Our society receives a return on its investment hundreds of times over when it invests in a better educated work force-- and helps create a more stable democracy and just society, as well. Funding for college education especially is an investment in our future.

Cutting funding to Pell Grants is crazy.

How have Pell grants changed lives?

Former Senator Claiborne Pell has passed away after a long battle with Parkinson's disease.

Claiborne Pell, 90, a six-term Rhode Island Democrat who rose to be chairman of the Senate Foreign Relations Committee, died Jan. 1 at his Newport, R.I., home. He had had Parkinson's disease since 1994.

A Yankee Brahmin and former Foreign Service officer who was virtually unbeatable at the polls in a largely Catholic, blue-collar state, he was best known for his sponsorship of the 1972 program that has helped 54 million low- and moderate-income students attend college. He also sponsored the legislation that founded the National Endowment for the Arts and Humanities.

He was committed to maritime and foreign affairs issues, strongly in favor of abortion rights, a consistent vote for labor and an ardent advocate of arms control and the rule of law in international affairs. First elected to the Senate in 1960, Sen. Pell was aloof, diffident, courteous and self-effacing. Unfailingly polite, he also had quirks, such as jogging in a tweed coat. One of his favorite sayings was "I always let the other fellow have my way." Eccentric and occasionally absent-minded, he was asked during a 1990 election-year debate what legislation he had sponsored that specifically benefited Rhode Island.

"I couldn't give you a specific answer," he averred in a famous reply. "My memory's not as good as it should be."

He went on to win reelection by a margin of almost 2 to 1.

The qualities that endeared Sen. Pell to the voters of Rhode Island also endeared him to colleagues on Capitol Hill.

Senate Majority Leader Harry M. Reid yesterday called him "a great American and a giant of the Senate. Any student who has ever received federal aid has Senator Pell to thank for his or her education. The Pell Grants he created revolutionized our education system for generations of Americans who might not otherwise be able to pursue higher education."

...Claiborne DeBorda Pell was born in New York on Nov. 22, 1918. The family had lived in New York since colonial times, and its holdings once embraced much of Westchester County and the Bronx. Among his ancestors was the founder of the Lorillard Tobacco Co. Five of his forebears, including his father, Herbert Claiborne Pell, served in Congress. His father went on to be U.S. minister to Portugal and then Hungary during the presidency of his friend President Franklin D. Roosevelt. When Claiborne Pell was 9, the family moved to Rhode Island and settled in Newport.

Sen. Pell graduated from Princeton University and received a master's degree in history from Columbia University in 1946. During World War II, he served in the Coast Guard in the Atlantic. After the war, he joined the Foreign Service. His positions abroad included a period in Genoa, Italy, where he was a consular officer. His foreign languages included French, Italian and Portuguese.

He participated in the 1945 San Francisco conference that drafted the United Nations charter and was a staunch defender of the institution throughout his life, often carrying a copy of the charter in his pocket.

In the 1950s, he went into investment banking in Rhode Island. He also became registration chairman of the Democratic National Committee. When he decided to run for the Senate in 1960, he demonstrated his prowess on the hustings by defeating two former governors for the Democratic nomination. He was helped in the general election by his strong ties to John F. Kennedy.

He was one of the principal figures in creating the government-financed college grants originally known as "Basic Educational Opportunity Grants." The awards, renamed Pell Grants in his honor in 1980, are the federal government's largest need-based grants to college students.

Sadly, I was not able to gain a Pell grant to go to school, even though we were blue collar. But I know people who did get to go to college dues to Sen. Pell's legislation. Does anyone have any testimony?

Sen. Pell was a true iconoclast. Let's hope that our government now turns more attention to making college affordable for everyone who has the ability to succeed.

College: the great gatekeeper

As a mother, I feel the anxiety building, and this is years away for us, which makes it all the worse, if you consider the trends.

An independent report on American higher education flunks all but one state when it comes to affordability — an embarrassing verdict that is unlikely to improve as the economy contracts.

The biennial study by the National Center for Public Policy and Higher Education, which evaluates how well higher education is serving the public, handed out Fs for affordability to 49 states, up from 43 two years ago. Only California received a passing grade in the category, a C, thanks to its relatively inexpensive community colleges.

The report card uses a range of measurements to give states grades, from A to F, on the performance of their public and private colleges. The affordability grade is based on how much of the average family's income it costs to go to college.
Almost everywhere, that figure is up, according to the survey. Only two states — New York and Tennessee — have made even minimal improvements since 2000, but they're still considered to be failing. Everywhere else, families must fork over a greater percentage of their income to pay for college. In Illinois, the average cost attending a public four-year college has jumped from 19 percent of family's income in 1999-2000 to 35 percent in 2007-2008, and in Pennsylvania, from 29 percent to 41 percent. Low-income families have been hardest hit. Nationally, enrollment at a local public college costs families in the top fifth of income just 9 percent of their earnings, while families from the bottom fifth pay 55 percent — up from 39 percent in 1999-2000.

And that's after accounting for financial aid, which is increasingly being used to lure high-achieving students who boost a school's reputation, but who don't need help to go to college. The problem seems likely to worsen as the economy does, said Patrick Callan, the center's president. Historically during downturns, "states make disproportionate cuts in higher education and, in return for the colleges taking them gracefully, allow them to raise tuition," Callan said. "If we handle this recession like we've handled others, we will see that this gets worse."

Scott Cristal of Columbia, Mo., said he wasn't surprised by the study's findings. Cristal, who has sent two daughters to college and has another two yet to pay for, said that he is trying to expand his business to help pay the tuition bills, but that it's been hard because of the slowing economy.

"We're going to play it by ear, be optimistic, hope for the best and just ride it out as best we can," Cristal said. "I think that's what everybody in America's doing right now."

States fared modestly better in other categories such as participation, where no state failed and about half the states earned As or Bs — comparable to the report two years ago. One reason for the uptick is that more students are taking rigorous college-prep courses, the study found. In Texas, for instance, the percentage of high schoolers taking at least one upper-level science course has nearly tripled from 20 percent to 56 percent.

But better preparation for college hasn't translated into better enrollment or completion, with only two states — Arizona and Iowa — receiving an A for participation in higher education.

And the discrepancy in enrollment between states is still great: Forty-four percent of young Iowans are in college, while just 18 percent of their counterparts in Alaska — one of three states to get an F in the category — are enrolled.Callan said the United States is at best standing still while other countries pass it in areas like college enrollment and completion. And as higher education fails to keep up with population growth, the specter lurks of new generations less educated than their Baby Boomer predecessors.

"The educational strength of the American population is in the group that's about to retire," Callan said. "In the rest of the world it's the group that's gone to college since 1990."

The credit crunch is certainly going to affect the number of families who will be willing -- or able-- to mortgage their lives to send their children to college. I wonder if anyone in higher education has thought of that?

The Student Loan Squeeze

Students needing loans for college next year need to do more than keep their fingers crossed on this issue. According to the NY Times:

The government announced plans Friday to expand purchases of the student loans it backs in an effort to head off a potential shortfall next year.

While student loans are typically considered among the most secure assets — especially ones that carry government guarantees — the fear that has spiked financing costs for mortgage and auto loans has spread into student loans as well.

While students are still able to obtain federally backed loans, the credit crisis has hurt the lenders that provide them. Dozens have stopped offering the loans, blaming market conditions.

The initiative by the Education Department is intended to make it easier for these loan companies to obtain financing. In the 2009-10 academic year, the agency will purchase loans, as it has this year. The agency will also pledge to be the buyer of last resort for loans purchased by a private intermediary in an effort to foster investment in the student loan industry.

Tens of billions of dollars in loans may be eligible for the programs, according to the department. “We were able to provide stable, reliable funding for students this school year,” Margaret Spellings, the education secretary, said in a telephone interview. But the government is acting now to try to head off problems that could affect plans for next year, she said.

“Institutions, lenders and kids and families are thinking about financial aid issues for the next school year,” Ms. Spellings said.

Congress has authorized the Education Department to buy back loans made from 2003 to 2010, although the agency has not made full use of the authority. The government hopes that by serving as a buyer of last resort for student loans, it will attract investors who have shunned the loans. A private company, assured of a fallback buyer, could buy the loans and borrow from private investors to keep operating.

Student loans, like credit cards and mortgages, have long been financed by selling bonds to private investors. But in recent months, investors have shown little interest in purchasing either lenders’ bonds or their federal student loans, despite their government guarantee.

Student lenders have carried loans made years ago on their books, unable to sell them. When some student lenders saw their financing costs spike on older government-guaranteed loans they were waiting to package and sell that put more stress on the troubled industry. The government hopes that providing a new source of financing for those loans will ease some of the pressure.

“They have these government-guaranteed loans and nobody wants to fund them,” said Sameer Gokhale, an analyst at Keefe, Bruyette & Woods in New York. “The government is agreeing to buy more of the loans to give more liquidity.”

“It goes to show how irrational the securitization markets still are,” he added. “We aren’t talking about an asset class that has anything to do with subprime.”

The lenders’ inability to sell loans hinders their ability to make new loans.

“If the lenders sold them, they could take the proceeds and presumably have the capital to lend out,” Tim Ranzetta, founder of Student Lending Analytics, an independent research firm. He said that some large lenders were carrying billions of dollars in loans made before 2008 on their balance sheet.

Sallie Mae and big banks like Citigroup and JPMorgan Chase, which make thousands of government-subsidized student loans each year, stand to benefit the most from the government’s program. But so will dozens of nonprofit student lenders that are caught in the same bind. The government’s action will not resolve all worries about student lending. Student loan borrowers this year are finding it more difficult to obtain private loans, which are not guaranteed by the government and which typically carry higher interest rates and less favorable repayment terms.

Financers like Sallie Mae, the student lender, have raised the credit standards that borrowers must meet. Others have stopped making private loans entirely. According to Finaid.org, a financial aid Web site, 37 lenders have stopped making private loans and 107 have stopped offering federally guaranteed loans.

So far, the government’s student loan financing program has supported more than 40 percent of all federal loans disbursed this year, meaning that the government has bought, directly or indirectly, about $9 billion in loans, according to the Education Department.

Edward M. Kennedy, the Massachusetts Democrat who is chairman of the Senate Education Committee, praised the Education Department’s move. “We need to do everything we can to prevent students from becoming the next victims of the financial crisis,” he said in a statement, adding, “Next year, we need to take a closer look at these programs to insulate them from fluctuations in the market so students’ ability to access loans is not threatened.”

One of my old college roommates and I were reminiscing the other day, and we realized that during the time we were in college, tuition nearly doubled. Costs keep spiraling; college presidents keep raking in the dough; more and more instructors are part-time faculty; and classes are getting ever larger.

If education is truly valued, students will find a way. But pricing college out of the middle class by shutting off loans is short-sighted in the extreme.

An intriguing theory regarding the spiralling cost of college

Could our country decrease the number of H-1B visas if college were more affordable? Here's the theory from Jim Rapoza:

Now that the U.S. Congress is in session, we are once again seeing a push by the major technology companies to get an expansion to the H-1B visa program. As always, we are hearing the same complaint that America isn't producing enough qualified engineers and computer scientists to fill the needs of major American companies.

In the past I argued that it seemed crazy to say that there aren't enough technology workers available, when every one of us knows a few highly skilled technology workers who are either unemployed or underemployed.

But I do agree with the technology companies on one point. America isn't producing enough new qualified technology workers. And the main culprit is our failing higher education system.

I personally know a young man who is currently working toward an accelerated bachelor's and master's degree in engineering. An honors student in high school, he is currently in his sophomore year at a state school where he is maintaining grades consistently above a 3.5 average.

So far, so good. Sounds like a perfect future candidate for those desperate tech firms. But this year he seriously considered dropping out of the program and may face a similar decision next year.

What's the problem? As a middle-class kid living at home with his single mom, he can barely afford to continue at the state college he is attending.

Sure, as an honors student he received a decent number of scholarships. And he gets a good amount of student loans. But the scary thing now is that even at a state school, this young man is facing a bill well over $12,000 per semester. With the scholarships barely making a dent in this bill, by the time he gets his master's he could be facing a student loan debt over $100,000.

This boggles the mind. Twenty years ago I attended a private university for much less than this. And at that time friends of mine attending these same state schools paid very little per semester and left college with almost no student loan debt.

How could things have changed so much? The state school system was supposed to be the path to success for the middle class. Now they can't afford to attend without mortgaging their future. It would be one thing if salaries had grown similarly, but a kid getting out of college today isn't making that much more in initial salary than those who graduated in 1990.

And, oh yeah, it doesn't escape the notice of this young man that a majority of his professors come from overseas, where in the vast majority of cases they attended college for free. Can you believe that we are raising a generation of bright kids who sit around wishing they had been born in another country so they could get an education in the field that they love?

I look at the amount of money that some of these technology firms are putting into pushing to get H-1B visas expanded (and to expand their own presence in other countries) and I wonder what that money could do if it were redirected to help the future technologists of America.

How many kids who are now thinking about leaving could finally get their degrees without the fear of crushing debt? How many future technologists who have given up on even attending college could feel safer making the decision to get a science degree?

In a recent statement in support of expanding H-1B visas, Roger Cochetti of the Computing Technology Industry Association said, "It's all part of keeping America competitive."

Well, I'm sorry, but when it comes to keeping America competitive, the key battle isn't in letting in more smart people from other countries; it's in making sure that the future smart people from here don't end up getting left behind.

Amen. When I went to a private university in the 1980s, with the help of loans and scholarships, I managed to eke out a degree even though we were a one-income working class family. It really wasn't a question of not being able to afford college, since I had also been accepted at three state schools that were rolling in oil money. Now I see my students facing the prospect of 10 times as much debt as I accumulated just to go to a regional university.

Most of the pressure seems to be states cutting back on their support of higher education in their budgets, or at least that's what the officials at these colleges claim. It's ridiculous. A state that cuts back on education soon finds itself short of educated workers.

It's elementary.