Pell Grants Can’t Save America From Ever-Higher College Tuition Costs

Here’s a sobering chart from Ben Miller showing the limited impact of huge increases in Pell Grant generosity on the actual affordability of higher education:

The red and yellow lines are the Pell grant’s buying power — what percent of a sector’s average tuition and fees and room and board are covered by a maximum Pell Grant. And what these lines show should be incredibly frustrating. In exchange for substantial growth in the program costs, Pell’s buying power at nonprofit four-year institutions has stayed at about 15 percent; at public institutions it declined from 39 percent to 35 percent. If you extend the window back to 1990, the picture is even worse–the buying power of the Pell Grant dropped 10 percentage points at public four-year colleges. Maybe the picture would be slightly better if it could take into account multiple Pell awards for a student, but it wouldn’t get back up to the 45 percent level.

At public institutions, this in part reflects state legislatures’ tendency to disinvest in higher education. That, in turn, is in part driven by shortsightedness and in part driven by rising health care costs tending to squeeze out appropriations for all other functions. At private schools, however, it simply reflects the fact that as currently structured American institutions of higher education have no real incentive to expend energy on improving value. Sometimes colleges do find ways to reduce the cost of providing education, but even when they do so they don’t return the savings to customers in the form of lower prices, they just find new things to spend the money on.

Meanwhile, as Miller says the rate of increase in Pell Grants sparked by the 2006 election can’t continue at this pace. Something more fundamental needs to be done to transform the system.