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Government Gives Away Billions In Grants To Students Who Never Graduate

In "Who Is Stoking The Trillion Dollar Student Debt Bubble?," we highlighted the rather disconcerting fact that in 2014, the US government gave out some $16 billion in loans to students attending colleges that graduated fewer than a third of their students after six years. 

As WSJ suggested, accrediting agencies are part of the problem. "One problem may be that the accreditation game suffers from similar conflicts of interest as those which caused ratings agencies like Moody's and S&P to rate subprime-ridden MBS triple-A in the lead-up to the crisis," we argued. 

In the end, the disbursal of billions in federal aid to students attending schools where they’re unlikely to graduate is, like lending to students that attend for-profit colleges that the government is fully aware will likely one day be shut down, just another example of the misappropriation of taxpayer funds. 

Well, if you needed further evidence of this, look no further than the Pell grant program.

As NBC reminds us, "Pell grants are given to low-income families and, unlike student loans, do not need to be paid back - [they] are the costliest education initiative in the nation."

Well, the costliest until the across-the-board debt forgiveness, but in any event, it turns out that despite the fact that taxpayers have dumped $300 billion into the program since 2000, "the government keeps no official tally of what proportion of those who receive the grants end up getting degrees."

Now, a new report from The Hechinger Report shows that billions in taxpayer money is (literally) given away to students who never graduate. Here’s more:

A Hechinger Report analysis of Pell grant graduation rate data from a cross section of colleges and universities — which is not otherwise publicly reported anywhere — suggests that billions of dollars in taxpayer-funded Pell grants nationwide go to students who never earn degrees.

 

And while some schools with large numbers of Pell recipients have strong graduation rates for those students, the ones receiving the biggest share of the money often do not.

 

In a quirk of federal policy, individual institutions do have to disclose the graduation rates of their students who receive Pell grants, when asked. And while some resisted doing so, or released them only in response to public-record requests, the Hechinger analysis of 32 of the largest private and 50 of the largest public universities — and tens of thousands of Pell grant students — shows that more than a third of Pell recipients at those schools hadn’t earned degrees even after six years.

 

“We’re talking huge amounts of money and huge numbers of people,” said Richard Vedder, an economist and director of the Center for College Affordability and Productivity.

 

Pell grants cost taxpayers $31.4 billion in fiscal year 2015, more than double what was spent on them in 2007. Since then, the maximum award has increased by more than $1,200 per student per year and the number of students applying for the grants is up by 7 million.

 

The program has grown so fast that Republicans have proposed freezing the maximum annual Pell award at the current $5,775 for the next 10 years. The money given to the students first goes to the college to pay tuition and fees, and anything left over can be used for books and living expenses. Unlike loans, Pell grants do not have to be repaid, whether or not a student ever graduates.

 

Most recipients of Pell grants come from families earning less than $40,000 a year.

 

In January 2014, Congress gave the Department of Education 120 days to produce, for the first time, Pell grant graduation rates for every university and college in the country. The department finally released the months-overdue report in November, but did not break down the information by institution, citing problems with the data, and was only able to analyze 70 percent of Pell recipients. Only 39 percent of the 1.7 million students in its sample earned a bachelor’s degree in six years.