The State of Student Aid and Higher Education Equity, 2011

At Higher Ed Watch, we are sorry to report that the state of student aid and higher education equity is not strong.

In this country, we have an increasingly stratified higher education system where more and more students from low-income and working-class families are finding that they can’t afford to attend a four year college — be it public or private — without taking on an extremely heavy debt load. Unfortunately, the way the stars are lining up, things are not going to get better anytime soon and are likely to get much worse. Here are some reasons for our pessimism:

• The Precarious State of Pell Grant Funding

The Pell Grant program, the primary source of federal aid for low-income students, is facing a serious budget crisis even as demand for the grants continues to escalate. This is mainly because money from the 2009 stimulus programs that helped support a maximum Pell Grant award of $5,550 in fiscal year 2010 is all used up. So to prevent a cut in the grant, Congress needs to come up with the $17.5 billion it provided in discretionary funding for the program in 2010 plus an additional $5.7 billion.

The previous Democratic-led Congress tried to protect the program by approving a “continuing resolution” in December that provided funding to keep the maximum award at its current level. But as Higher Ed Watch contributor Jason Delisle has pointed out, the resolution expires in March before any of these funds can be spent.

Making matters worse, the new Republican leaders of the House of Representatives have threatened to push Congress to slash federal spending, and have suggested that Pell Grants may be on the chopping block too. It’s unclear, however, whether they will follow through with this threat, as even proposing to cut Pell Grants carries a huge political risk. The Obama administration and Senate Democrats are just waiting for any opportunity to accuse the Republicans of being anti-student.

But even if House Republicans back down and agree to provide enough money to maintain a maximum award of $5,550 in 2011, supporters of the program will face an even steeper hill to climb when Congress starts working on the program’s 2012 budget. The Congressional Budget Office recently revealed that appropriators will need to find a whopping $37.8 billion just to keep the current maximum award in place.

• Trouble in the States

Federal stimulus money that the government has provided to states for higher education funding over the last several fiscal years is set to run out this fall. As a result, public colleges and universities in many states are likely to face far deeper budget cuts than they have already sustained as a result of the nation’s continued economic slump. In California, for instance, Democratic Gov. Jerry Brown has proposed a budget for the 2012 fiscal year that would slash state spending on higher education by $1.4 billion — with cuts of as much as 18 percent for the University of California and California State University systems.

To make up for lost revenue, state legislators and public college officials have not only been raising tuition and fees, but have also been engaging in other tactics and strategies that disadvantage low-income and working-class students. For example, they are seeking to attract ever-larger shares of higher-paying out-of-state students who tend to come from more-affluent families. They have also been beefing up their international recruiting efforts for similar reasons.

• Counterproductive Institutional Aid Practices

As we have previously written, both public and private colleges are increasingly using their institutional aid dollars to attract wealthier students who can otherwise pay full freight. A 2008 study by the Institute for College Access & Success found that about 49 percent of all institutional aid provided by public four-year colleges and 25 percent provided by private colleges was awarded “in excess of need.” Last year, the research and advocacy group Education Trust found that at public four year colleges, the average amount of unmet need (what’s owed after all grant aid is taken into account) of students from families making $30,000 or less at these institutions now stands at about $10,500, while students from families making more than $115,000 have an average of about $17,500 in “overmet need.” So should it come as any surprise that the proportion of Pell Grant recipients at flagship universities continues to fall?

At Higher Ed Watch, we hate to be the bearer of bad news, but it appears that these factors will only “further increase stratification in our already horribly stratified system,” as the Education Trust’s president Kati Haycock wrote on our blog last year. In other words, the fundamental goal of the federal student aid programs to eliminate financial barriers to college for low-income and working-class students is looking more and more like a pipe dream.

But at a time of such limited resources, what can be done to reverse these trends? We have some ideas that we will share in the coming weeks and months. Stay tuned.