Refinancing the College Dream: Access, Equal Opportunity, and Justice for Taxpayers

2 Finding Justice in Public Finance

2 Finding Justice in Public Finance Social justice is integral to the public financing of higher and other postsecondary education. Both taxpayers and students have an interest in college finance. If the vague notion of “future economic returns” no longer provides a sufficient rationale for federal investment in need-based student aid, then as a society we need a better way to understand the consequences of the decline in public investment. Given that Congress has approved George W. Bush’s plan for a decade of reductions in federal taxes (in the Economic Growth and Tax Relief Reconciliation Act of 2001), a substantial new federal investment in grants is unlikely, unless it is offset by other cost reductions. At best, perhaps states and the federal government can develop a workable collaborative reinvestment strategy. To provide background on the access challenge, this chapter first examines the eroded purchasing power of Pell grants, which provided the foundation for federal need-based aid in the 1970s and early 1980s. I use John Rawls’s theory of justice (1971) to build an understanding of the three dimensions of social justice in college finance: 1. access for the majority, as measured by the overall opportunities to attend college; 2. equal opportunity to enroll, as measured by the growing gap in opportunity between minorities (African Americans and Hispanics) and Whites and between low-income and high-income students; 3. justice for taxpayers, as measured by tax expenditures per student enrolled in higher and other postsecondary education. Before discussing these three sets of measures, I examine the decline in Pell grants over the past two decades. The reduction in federal grant aid after 1980 appears to be linked to a new inequality in the opportunity to attend college for minority students compared with White students and for low-income students compared with upper-income students. Since the increased gap in opportunity corresponds with the decline in Pell grants, the major federal student aid program, it makes sense to start this inquiry by examining trends in the Pell program. 17 jhup.stjohn.000-000_jhup.stjohn.000-000.qxd 5/16/14 8:26 AM Page 17 The Decline in Pell Grants The Pell grant program, created in 1972, is the one federal program with the potential for equalizing opportunity for low-income students. It is the only “portable” federal grant program. A student who is eligible for a Pell grant can take the grant to virtually any college to which he or she is admitted. Predicting demand for Pell grants was difficult, because students with low levels of need were eligible, or “entitled.” The entitlement nature of Pell made the program difficult to evaluate. One indicator of whether aid is adequate to maintain financial access is the percentage of educational costs covered by the maximum Pell award—the amount of aid the poorest student would receive if no other grant were available. In table 2.1, the maximum Pell award is compared with the average cost of attending a public four-year college. This measure illustrates the declining purchasing power of Pell grants. In 1975, the maximum Pell award was $4,048 (in 1997–98 dollars).1 At that time, this maximum grant equaled 85 percent of the average cost of attending a public four-year college. However, the Pell program had a “half cost” provision: the student’s award could not exceed half the cost of attending. Students attending higher-cost (private) colleges could receive the full award. This single federal program essentially created the opportunity for the poorest in society to send their children to college, if they were academically qualified. Since 1975 the purchasing power of Pell grants has substantially declined . Between 1975 and 1995, the average cost of attending a public four-year college rose while the maximum Pell grant declined (in constant dollars). Pell grants increased slightly in 1999–2000 compared with 1995–96. The purchasing power of Pell grants decreased substantially across this period. The maximum percentage of the average cost of a public four-year college covered by a Pell grant fell from 85 percent in 1975 to 35 percent in 1995. The maximum percentage then rose slightly, to 39 percent in 1999–2000. However, the full potential of Pell’s purchasing power was never fully realized by low-income students in public colleges. Until 1986, the Pell 18 UNDERSTANDING THE ACCESS CHALLENGE 1 All dollar amounts in this book (with the exception noted below) are adjusted...