Government Investment in Poor Students Pays Off

Oct 6, 2017 at 12:00am ET By Joanna Hughes

Millions of low-income college students in the US receive government Pell grants every year. Now comes a National Bureau of Economic Research (NBER) working paper indicating that these funds have significant payoffs in the future. Here’s a closer look at the findings, along with what they may mean for the future, as reported by MarketWatch.

About the Study

After evaluating students at four-year public universities in Texas who were eligible to receive full Pell grants compared to those who had just missed the cutoff threshold, researchers came to an eye-opening conclusion: Those who’d receive maximum Pell grants were more likely to graduate, graduate faster, earn more money, and eventually pay more in taxes thereby boosting the government’s likelihood of recouping its investment.  

Study author and economics professor Lesley Turner told MarketWatch, “In this population, in this setting, giving these low-income students $700 more in their first year of school basically pays for itself within 10 years.”  

Key Takeaways

Researchers suggest a few factors influencing the phenomenon, including the fact that students receiving full Pell Grants typically borrowed less and therefore enjoyed less stressful college experiences. Additionally, students who received the full funding were also more likely to pursue a degree in STEM fields. Said Turner, “It doesn’t affect the decision of whether to go to college or where to go to college, but it does support student while they’re in college.”  

At the same time, researchers concede that the findings may be population-specific, and that outcomes in different states or types of school might be different.  

Still, the data brings new hope at a time when Pell grants are facing an uncertain future. While the Senate subcommittee recently voted to increase maximum allowances in the upcoming academic year, it simultaneously slashed the program’s reserves by a staggering $2.6 billion. Even worse, says MarketWatch? “Even with the increase, organizations like the Institute for College Access and Success have noted that the grant still covers the smallest share of college costs in 40 years.”    

Joanna worked in higher education administration for many years at a leading research institution before becoming a full-time freelance writer. She lives in the beautiful White Mountains region of New Hampshire with her family.

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