Perry Stein at The New Republic discusses proposed higher education cuts in Paul Ryan’s 2013 federal budget. The Ryan budget, which is still under review, makes two key proposals: to increase the interest rates on loans for low-income students, and to cut funding for Pell Grants — “the government’s flagship program in helping low-income students gain access to higher education,” according to Stein. The first proposal is apparently dead on the vine, in part because of an effective Twitter campaign launched by the Obama administration, and in part, one must imagine, because of generalized anxiety over burgeoning levels of student debt. Stein’s argument is essentially that if the proposed cuts to Pell Grants were to go through, the successful campaign to keep interest rates flat might not end up amounting to much of a victory:
Under Ryan’s plan, the maximum Pell Grant award would remain the same as it is now at $5,550 per year, but the eligibility requirements would change so that fewer people would qualify. (He didn’t specify the income limit for eligibility.) And where Obama has increased the maximum Pell grant during his presidency (and proposes to have it rise with the Consumer Price Index for 2013), Ryan calls for the award’s amount to remain stagnant. In other words, under Ryan’s plan, Pell Grants would not keep up with the pace of inflation, and would be worth less in each successive year. Given that college prices will likely continue to rise, this means that needy students will become ever more reliant on loans to pay for their education.
What seems insidious about the Ryan proposal, though not altogether atypical of Paul Ryan, is the strategy of reducing eligibility rather than reducing award levels. One could easily imagine a money-saving scheme wherein awards were capped across the board at a smaller dollar amount but the eligibility requirements were left untouched. But Ryan’s approach would categorically disqualify many prospective college students from the possibility of getting any Pell money from the government (and thereby hurt their prospects of going to college), while leaving others in virtually identical economic circumstances to collect the full $5,500 per year. The distinction would seem to hinge on an as yet undisclosed cutoff in family income, and could turn poor families’ prospects of sending their kids to college into a perverse gambit of proving that their income falls below the Ryan threshold.
It’s not entirely clear to me why Paul Ryan tends to prefer eligibility-reducing schemes to outlay-reducing schemes. The same preference was behind his proposal to increase the retirement age for social security, where very much the same counter-argument could be made that reducing the across-the-board payout maximum would have been just as effective. Part of this tendency, I have to think, stems from a broader conservative belief that reducing eligibility for a social benefit is better than reducing the benefit itself.
A secondary issue, which is not Paul Ryan’s fault, is that the federal government no longer views the business of loaning money to college students as anything close to safe. That apprehension stems in part from the deflating economic value of a college degree; because of the growing density of college graduates in our society, it is getting harder and harder for new grads to achieve an earning level at which they can pay off their debt, which has the effect of leaving lenders (often the federal government) on the hook for longer. This is less of a problem, of course, for students who go into rapidly expanding fields such as engineering and information technology, but on the whole the glut of jobless or underemployed humanities majors is a factor affecting the perceived creditworthiness of college students. But it seems unlikely that any serious legislator would ever propose that government should dispense grants to students on the condition that they pursue a “low-risk” field of study. That would be a safer business model for the government, but it could never gain traction politically and might even increase the barriers for low-income students.
Something has to be done about the student debt problem, but the solution is not just to cut a huge number of people out of federal grant eligibility while maintaining current award levels for everyone else. Lending still has to be the core mechanism for financing higher education, and the key to a solvent lending operation is having reliable borrowers who pay back their debts. So, some constraints clearly need to be applied to federal lending to curb risk, but arbitrarily reducing grant eligibility just seems like another slap at poor people that accomplishes very little.
Mack Lannahan 