SPIN METER

College aid bill may fall short

[August 28, 2009]  WASHINGTON (AP) -- President Barack Obama says a bill in Congress would help him send millions more Americans to college. But the measure may fall short of Obama's goal.

The bill would boost Pell Grants for needy students. But it does nothing to curb college costs, which rise much faster than Pell Grants do.

And it spends precious federal dollars on things that don't help pay for college, such as construction at K-12 schools and new preschool programs. Lawmakers have an estimated $87 billion to spend on the legislation, but less than half of the money would go to Pell Grants.

The bill would do some things to help college students. It would ensure lower interest rates for need-based college loans. It would shorten the labyrinthine college aid form. It would provide money for states and schools to improve college access and graduation rates. And it would provide more college aid to veterans.

As a result, it has widespread support and is expected to win approval in the House when lawmakers return from their August break. Then it begins the trek through the Senate.

But even supporters agree that to reach Obama's goal, Congress would have to go much further.

"I think it's a big step, but I don't think it's enough," said Sandy Baum of the College Board, the nonprofit devoted to college access that owns the SAT and AP tests.

A look at what Obama and other Democrats are promising, and at what their bill would actually do:

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THE SPIN:

• "This legislation will also help us reach the goal I set out in Michigan this week to graduate 5 million more Americans from community colleges by 2020." -- Obama

• "It will help us reach President Obama's goal of once again leading the world in college graduates by making college more affordable and accessible." -- Rep. George Miller, D-Calif., House Education and Labor Committee chairman

• The bill "will make college dramatically more affordable for millions of Americans." -- House Education and Labor Committee news release

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THE FACTS:

College in the United States is only getting more expensive, with the cost growing faster than the cost of health care.

The foundation for federal college aid is the Pell Grant, which is for low-income students and, unlike a loan, does not have to be repaid.

When Pell Grants began in 1973, they provided more than enough to cover tuition and fees at a public four-year college, where most students are enrolled. The maximum grant then was $452; tuition and fees were about $438.

That's no longer the case. The maximum Pell Grant last year was $4,731; public college tuition and fees were $6,585. Not every grant recipient receives the maximum.

Community colleges still charge less, about $2,400 on average. Private schools charge a lot more, about $25,000.

Regardless, tuition at every type of college has risen faster than Pell Grants have, and the disparity would worsen under the bill.

That might actually work against Obama's goal.

If college tuition is increasing faster than grants, students may be forced to take on more loan debt, which could have a negative impact on their access to college, industry analyst Mark Kantrowitz said. Kantrowitz argues for doubling the Pell Grant and then indexing it so it grows along with inflation.

Under the bill, Pell Grants would rise slightly more than inflation over the next decade, increasing on average by about 2.6 percent yearly, according to the bill's sponsors. It's the first time lawmakers have ever agreed to a long-term annual increase in the program. Pell Grants have always depended on annual spending bills and on occasion have stayed flat or been cut when lawmakers came under pressure to cut spending.

But the increase Congress is prescribing is less than half the 5.6 percent average yearly increase of Pell Grants over the life of the program. During that time, college tuition has risen more than 7 percent annually.

And the bill's increases may be illusory. They would still depend on whether Congress provides the money to fund them in its annual spending bills.

"It still opens up the possibility of a false promise," said Kantrowitz, publisher of the FinAid.org Web site and the FastWeb.com scholarship search engine.

Experts say that to truly make a difference, lawmakers would need to make Pell Grants an entitlement, like Social Security and Medicaid, to end the program's dependence on the annual spending process. In fact, that's what Obama asked Congress to do in his budget proposal.

Doing so would make Pell Grants a lot more predictable. And if grants were very predictable -- if a student knew in middle school that a certain amount would be waiting for her -- it could have a significant impact on college enrollment, said Baum, a senior policy analyst for the College Board.

But it also would be costly and very difficult to pass amid exploding federal deficits. The White House budget office estimated the cost of an entitlement to be $117 billion over the next decade. On Tuesday, the office said the cost would actually rise much higher, by an additional $27 billion, because more people than anticipated are going back to school and demand for Pell Grants is soaring amid the crippled job market.

Lawmakers don't have that much to spend. They have $87 billion, an amount they came up with by proposing to have the government take over all federal student loans and end subsidies for private lenders.

That amount is not enough to pay for an entitlement. But it would be more than enough to tie Pell Grants to inflation. That carries a $40 billion price tag, leaving Congress with an extra $47 billion to spend.

Miller has spread the extra money across an array of programs that are attractive to members of Congress and will attract support for the bill, including many that have nothing to do with higher education. New preschool programs, for example, would get $8 billion. An additional $5 billion would go for construction at elementary, middle and high schools and community colleges. The bill would also send $10 billion back to the federal Treasury.

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On the Net:

Pell Grants: http://www.ed.gov/programs/fpg/

[Associated Press; By LIBBY QUAID]

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