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Essay argues for revamping Pell Grant to protect the forgotten middle class

The Forgotten Middle Class

January 24, 2012

The Pell Grant Program, enacted in its earliest form in 1972, provides financial assistance to lower-income students who otherwise would not be able to afford college. Award amounts depend on the family’s expected financial contribution and remaining financial need, with a current maximum award of $5,550 per year. Our economy has reaped the benefits of a more educated population as a result. 

However, Pell Grants are no longer keeping up with need, and the problem of affordability is no longer limited to lower-income students. Today, a college education is unaffordable for many students who are considered middle-class, but who do not qualify for Pell Grants. 

More realistic expectations of what families can afford should be reflected in Pell Grant awards. Families with higher incomes, perhaps even $100,000, should qualify for Pell Grants. And families that currently qualify should receive larger grants. 

To help fund this expansion of the Pell Grant program, tuition tax credits should be eliminated. The equivalent of the tax revenue previously lost to the credits should be spent on Pell Grants.

Focus on the Neediest
In a companion essay,
Arthur Hauptman argues
for revamping Pell to
ensure that dollars flow
to the poorest students.

In 2010 Congress created the $2,500 American Opportunity Tax Credit, which is designed to give middle-income families some relief from costs for tuition, fees and course material. Yet I question the usefulness of a tax credit that only benefits families who already have the resources to pay college-related expenses. This tax credit has been most beneficial to wealthier families with an adjusted gross income of $100,000 to $180,000; they received an average credit of $1,773 in 2009.  In comparison, the average credit was $1,572 for recipients with incomes of $75,000 to $99,999; $1,164 for recipients with incomes of $50,000 to $74,999; and $866 for recipients with incomes of $25,000 to $49,999.

Somewhere in between the families benefiting from the tax credit and those eligible for the Pell grant are families who have substantial need, but receive very little or no assistance from either program.

Because tax credit-equivalent funds (approximately $5.5 billion in 2009 but estimated to increase to an average of $9 billion in 2011 and 2012) most likely will not cover the full cost of expanding the existing $30 billion program, the federal government will have to spend more on Pell.

Pressing Need

The facts for today’s students are bleak, as are the implications for future students.

Tuition is skyrocketing. The average tuition at a public four-year university for 2011-12 is $8,244, an 8.3 percent increase from the previous year that also follows a 7.9 percent increase the year before. A longer-term perspective is even more dramatic; tuition at public four-year universities, when adjusted for inflation, is more than 3.5 times greater than it was in 1981-82. Thus, a college degree is roughly 3.5 times more expensive for this generation than the previous generation. 

At the same time that tuition increases are far outpacing inflation, incomes are faltering. The median household income was $49,445 in 2010. When adjusted for inflation, this represents a 6.4 percent decline since 2007 and a 7.1 percent decline since 1999.  Families with declining purchasing power find it even more difficult to keep up with rising tuition. Unsurprisingly, then, the average amount of student debt for graduates of public four-year universities is also increasing, reaching $22,000 per borrower in 2010. Unless these trends change, student and family debt will continue to increase as tuition increases.

It is impossible to identify a specific income where students become ineligible for Pell grants, since awards are calculated based on a number of factors, including family size and the cost of attendance. But it is possible to identify ranges where students will probably not be eligible for Pell grants. Well over half of dependent students with a family income of $39,999 or less receive federal grants (Pell grants are by far the most common, though a small small number of other grants are included). However, less than a quarter of dependent students with family incomes of $40,000-$59,999 receive federal grants, and almost no dependent students with family incomes of $60,000 or more receive federal grants.

Who, then, do we consider to be middle-class, and can they still afford higher education? The $40,000-$59,999 range for comparing federal grant recipients is roughly equivalent to the middle quintile of household income in 2010: $38,044 to $61,735. Some would argue that this could be viewed as the true “middle” class. Yet, the long held notion of middle class has always been associated with norms that include home ownership, retirement savings, and college educations. Many might argue that the fourth quintile, with incomes from $61,736 to $100,065, and even some households in the fifth quintile, with incomes of $100,066 or more, could also be considered middle-class. 

Can these families afford higher education? The average annual cost to attend a four-year public university, including room, board and expenses, is $21,447. At the higher range of the middle quintile, $60,000 is one-third of the family’s annual income for just one child. Yet, the fact that this family would likely have an expected contribution so high as to disqualify the student from Pell grant eligibility seems totally unreasonable. These students still have great financial need!

Widespread opposition to the existing Pell grant program will make expansion politically challenging. However, as President Obama has said, "A world-class education is the single most important factor in determining not just whether our kids can compete for the best jobs but whether America can out-compete countries around the world. America's business leaders understand that when it comes to education, we need to up our game. That's why we're working together to put an outstanding education within reach for every child." 

If we do nothing to help students who are falling into the middle-class abyss, and if college continues to become unaffordable to a growing number of students, we must be willing to accept the consequences of a less-educated workforce at a time when a quality education is more important than ever, not only for the betterment of the individual (intellectually and financially) but for the future of our country. 

 

Bio

Hamid Shirvani is president of California State University at Stanislaus.

 

 

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