Friday, March 1, 2013

Let’s Push the Reset Button on Pell Grants

By Bruce Ferguson, Candace Moody and Bryan Stone

At a recent workforce conference, a speaker gave his vision for WIA in the next decade: “We should call for the end of the Individual Training Account, and reinvest the funds in the Pell Grant program.”

A bold idea, and dead wrong. Here’s why.

Since Senator Claiborne Pell introduced the federal student financial aid bill in 1965, Pell grants have been awarded to millions of students who couldn’t afford college on their own. Today, about 5.4 million grants are awarded annually, with a maximum award of around $5,000 per recipient, and which are not repaid by the student. We must assume that the Return on Investment for the program comes through the economic gains by students who take advantage of the program. 

According to a 2012 report issued by the John W. Pope Center for Higher Education Policy, The Pell grant program is the federal government’s largest education expenditure and costs taxpayers over $35 billion per year. The report goes on to say, “Although the program started out as a way to provide college access to low-income students, it has grown so vast in recent years that nearly 60 percent of all undergraduates received a Pell grant for the academic year 2009-10. Out of the 16.4 million undergraduate students enrolled in the United States, 9.6 million received Pell grants.”

The program cost has doubled since 2008 (from $15 billion to about $35 billion in 2011), and enrollment has climbed by 50 percent. The United States has held education as a value for generations, and we have many reports touting the increased earnings and employability of those attending college. But the data may be deceptive.

The advantage of college graduates in the workforce makes a compelling case for education. College graduates earn 75 percent more than high school graduates ($80,500 vs. $46,000 annually.) According to the Bureau of Labor Statistics (BLS), workers with a Bachelor’s degree had an unemployment rate of 3.7 percent (seasonally adjusted, January 2014) compared to a rate of 8.1 percent for high school graduates with no college.

But that advantage only holds as long as the student graduates -  and very few students make it to the finish line. According to a January 2013 paper by Richard Vedder, Christopher Denhart, and Jonathan Robe for the Center for College Affordability and Productivity, about 45 percent of students who start college fail to graduate within six years. Having “some college” education but no degree virtually wipes out the earnings gain that graduates experience. On average, non-graduates earn only about $7,500 more a year than high school graduates. But they may leave school with an enormous amount of debt: sunk costs from taxpayer-funded Pell grants, and repayable loans from private and public sector lenders with variable interest rates.

Even those who finish may find that they are not employable in this economy. According to the same report, almost half of all college graduates hold jobs that don’t even require a college degree. Albert Graham, a Jacksonville, Florida native who left to pursue a degree in Information Technology from Bowling Green State University in Ohio, could not find a job when he returned to Northeast Florida after graduation. He discovered, as many IT graduates do, that his four-year degree was not enough to persuade employers to consider him for a job. IT is a complex and essential function in any business, and employers need to be assured that new entrants into the workforce have the necessary applied skills to be successful on day one. It’s not enough to know things; it’s critical to demonstrate that you can do things.

Graham obtained an Individual Training Account (ITA) scholarship from WorkSource, the regional workforce development organization. In Northeast Florida, we fund training for 2,000 – 3,000 individuals each year, at an average cost of $5,000 per grant (our scholarships are capped at $9,000.) After six months of training at a private sector technology school, Graham obtained his Network +, A+, and CDIA (Certification in Document and Imaging Architecture), a COMPTIA certification that leads to careers in enterprise management. He graduated in November, 2012 and was hired in December for a network administrator job paying $40,000 per year plus benefits.

The workforce system’s ITA accounts have a success rate that yield significant returns on taxpayer investment. Here in Northeast Florida, we invested in 797 ITA scholarships in 2012; 94.5 percent of the recipients became certified and found work after graduation. This was down from our 2011 performance, a year in which we graduated 995 trainees with a placement rate of 99 percent. Our regional unemployment rate at the time went from 11 percent to 8.7 percent.

Only thirty percent of Pell grant recipients actually finish their training programs, a rate which means that over 70 percent of the $35.6 billion of taxpayer investment in 2011 did not result in a degree or credential and is not recoverable. There is no data available on how many graduates actually find employment. What accounts for the difference in outcomes?

One difference is the information available to students. Our workforce region will fund scholarships only for occupations and industries that are growing and producing sustainable employment opportunities, and we work carefully with our State labor statistics division to help students make decisions based on current data.  Scholarship applicants must research employment prospects and compare programs, and plan to cover the remaining cost of programs that are more expensive that our spending cap. We carefully screen applicants for academic suitability for their program of choice, and we require them to have a plan for income, transportation and family support during school, all significant factors that contribute to student dropout rates. We also provide staff support and coaching throughout the student’s training to make sure they fulfill their obligations, maintain an acceptable grade point average and help smooth out any issues that may hinder the student’s success.

Rather than pouring more into a failed program with a 30 percent completion rate, why not invest Pell grant funds into the workforce system? We have a system in place to help students make better choices, incur less debt and put out more graduates who can find work. We all know what happens when you try the same thing over and over, expecting different results. Let’s invest Pell grant funds into a system that will get real results.


Bruce Ferguson, Candace Moody and Bryan Stone direct Jacksonville’s Center for Workforce Leadership, an organization dedicated to solutions for America’s talent pipeline. Together, they lead Northeast Florida’s workforce investment board, which served over 170,000 jobseekers in 2012.

1 comment:

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