The Biden Plan to Raise College Tuition

He wants to double Pell Grants, a gift to the higher-education lobby

WSJ editorial.

"Tuition has soared as colleges have raised prices to soak up more government subsidies. Has no one explained this to President Biden? His budget proposes to double the federal Pell Grant, which would drive tuition even higher.

“Pell Grants have been the foundation of low- and moderate-income students’ financial aid for decades,” the Education Department budget says. “However, the value has diminished as college costs continue to rise.” The Administration’s response is to increase the maximum Pell Grant next year to $8,670 from $6,495 and double it by the end of the decade.

Pell Grants were part of Lyndon Johnson’s Great Society and were intended to help the neediest students. But by now nearly 40% of undergrads qualify, and the maximum grant more than covers the average cost of community college tuition ($3,446). Mr. Biden’s boost would make the average tuition at many public four-year institutions ($9,580) free too.

The Pell Grant expansion would cost $229 billion over 10 years, which is more than twice as much as Mr. Biden’s plan for free community college. This would be an enormous windfall for the higher-education industry, no strings attached. Colleges have no incentive to improve graduation rates because the subsidies flow no matter how students fare.

Only 38% of Pell Grant recipients complete degrees in eight years, which is as long as federal data track. That means some two-thirds of Mr. Biden’s $229 billion could go down the drain. As usual, progressives care more about how much government spends than about student outcomes. They also say students shouldn’t be stuck with debt they can’t repay. So in addition to forgiving government loans at the back end, liberals wants to waive college costs for students up front.

Speaking of loan forgiveness: The Administration’s budget also proposes to make student debt relief tax free—forever. Progressives want Mr. Biden to forgive $50,000 in debt per borrower, but discharged debt is subject to federal income tax. The tax bomb for many borrowers could swamp the immediate payment relief. Hence, Democrats’ Covid bill last March exempted from taxation student loans that are forgiven through 2025.

Even if Mr. Biden follows progressive orders, many graduate student borrowers with expensive degrees will still owe the government tens or even hundreds of thousands of dollars. Many have enrolled in income-based repayment plans that let them pay 10% to 15% of their income for 10 to 20 years and then get their remaining balances forgiven.

Yet the eventual tax bills on their discharged loans could be enormous. Many aren’t earning enough to pay down principal so their balances have grown as they accrue interest. The Administration wants to bail out these grad borrowers and exempt student debt permanently from income tax.

Colleges and graduate programs could then charge even higher prices to sop up more government loans. And if students can’t repay? No big deal. Taxpayers will cover that."