Yesterday at Higher Ed Watch, I argued that a federal solution is needed to ensure that colleges use their institutional aid resources to keep higher education affordable for low- and moderate-income students. But why should the federal government get involved?
The reason is simple: the government is already involved, way involved. It spends nearly $40 billion on the Pell Grant program each year to try to remove the financial barriers that prevent low-income students from enrolling in and completing college through the Pell Grant program. Yet colleges are increasingly undercutting the government’s mission by using their institutional aid dollars to try to attract the students they desire rather than to meet the financial need of the low income students they enroll. Worse yet, there is compelling evidence to suggest that schools are capturing a significant share of the Pell Grant funds they receive and using them for other purposes, such as providing non-need-based aid to recruit high achieving and wealthier students. This is one reason why even after historic increases in funding, the program’s impact is so limited: students and families are not receiving the full benefits as intended.
The enormous growth in non-need-based, or “merit” aid, at four-year colleges over the last two decades has come lately at the expense of the neediest students. Low-income students who attend these institutions often face high levels of “unmet need,” defined as the difference between the cost of attendance and the amount of financial aid they receive. Unmet need forces students to take on significant amounts of debt, including risky private student loans. Financially strapped students also frequently engage in activities that lessen their likelihood of completing their degrees, such as working full-time while attending college or dropping out until they can afford to return.