Unlike welfare, student aid is more than a stopgap.

This week, President Barack Obama announced that he wants to change key parts of the federal system for student aid. Among the proposals is a move to turn Pell Grants into an entitlement program, similar to Social Security. A pair of Planet Money Twitter pals began (quite civilly) duking it out over the issue. We asked Eric Sipple and JL Johnson to take it outside the 140-character box. Johnson opposes the Obama plan -- you can find his response here.

Below, Sipple argues for it:

I was lucky. The savings account in my name was opened when I was an infant, funded by every check, bond and $20 bill slipped into a Christmas card throughout my life. Gifts I got to keep. Money? That went into the college fund, along with whatever extra money my parents had left over after the day to day expense of raising a spoiled only child. My four-year degree took me eight to earn but left me with less than $7,000 in debt. Like I said. Lucky.
The last two decades have seen a drift in the makeup of student financial assistance from grants to loans. When the Pell Grant was introduced in 1976, two years before my parents started my college fund, it covered 72 percent of the typical cost of four-year undergraduate education. By 1997, when I was sending out my college applications, it covered only 35 percent. It wasn't any better in 2006, the year after I finally earned my degree. President Obama's plan to tie Pell Grant increases to inflation is a step toward reversing that trend.
Student financing is complicated enough that I supported myself for two years unwinding the process for borrowers. Sadly, the complexity is only the beginning. The worst part was the sound in people's voices when they realized all the paperwork hadn't been enough. The Stafford Loan and the Pell Grant plus the Perkins Loan would still leave them an expensive private loan short of the fall semester.
Today, affording a college education means more than getting a check to your bursar. It means living for a decade or more with your accumulated debt. I have friends whose largest monthly expense is the student loan repayment they've already extended over 30 years. Thirty years. That's a mortgage. That's longer than those friends have been alive.
Pell Grants can't cure that ill on their own, but boosting them is a start. It helps that we're funding it by ending subsidies to private lenders who for years have used guaranteed loans and preferred lender statuses as advertisement for their private products. Unlike welfare, student aid is more than a stopgap. It's an investment toward more affluent and productive citizens. And since all federal aid requires that students maintain a C average, we can be sure the money isn't just financing Chinese food and Yuengling.
Curious what it would cost today, I looked up the cheapest school I ever attended: the University of Massachusetts Boston. In 2000, it was $4,222. Today a year of the same education would cost me $9,114. Over the same time period the Pell Grant increased by less than $1,500. Even at this inexpensive university, an eligible student would graduate with $18,000 in debt, not counting living expenses, books and fees.
Think about the families my friends are starting with that kind of debt already on their shoulders. How many of their kids have a chance of being as lucky as I was?

categories: Letters

12:50 - May 7, 2009

What is this?

Share