The blog of the Urban Institute
February 3, 2021

The Federal Government Could Do More to Help Finance Short-Term Occupational Preparation

February 3, 2021

Even as vaccines stop the spread of COVID-19, the pandemic will leave many low-wage workers unemployed and with little prospect of finding long-term economic security without additional training. Adults of all ages will be seeking postsecondary programs they can access without too much investment in terms of time or academic preparation.

But current restrictions on the use of federal Pell grants for short-term programs could put some of these programs out of reach for many low-wage workers.

Only programs of at least 600 hours over 15 weeks qualify for the federal student aid designed to help low-income students pay for college. Even before the current crisis, members of Congress from both sides of the aisle and advocates for adult learners had proposed that the threshold be lowered to 150 hours. Some observers are concerned about opening the door to programs that won’t actually help students get good jobs and harming current aid recipients by spreading limited federal grant dollars too thinly.

Our recent research indicates that the current line between Pell-eligible and ineligible programs is arbitrary. On average, certificate programs increase earnings by about 10 percent above the earnings of similar adults with high school diplomas but no postsecondary experience and by about 20 percent above those with high school equivalency diplomas. Average returns to for-credit programs that are too short to qualify for Pell under current rules are high enough to provide significant benefits to many students.

There is a lot of variation in the outcomes of short-term programs. Students who train in technical fields tend to do quite well. Certificates in culinary arts, cosmetology, and general education rarely pay off. Certificates add more to men’s earnings than to women’s, and credentials from for-profit institutions don’t appear to add the same value as those from public colleges. The many noncredit programs that don’t count toward other academic credentials don’t pay off as well, on average, as those offered for credit, though, again, there is a lot of variation in their value.

But no reliable evidence supports the idea of providing Pell grants to students in 600-hour programs but not to those in 500- or 400-hour programs. Students in some programs requiring just 300 hours are eligible for federal loans (but not grants). But default rates are high for certificate students, especially at for-profit schools, and the data do not indicate any reason the threshold should be lower for loans than for grants.

Expanding Pell grants to cover these programs could open the door to meaningful opportunities for many workers facing limited options. But these students need strong personalized guidance to choose appropriate programs. And already, Pell grants—as well as federal loans—are going to some students in programs that do not serve most of their students well. Stronger, well-designed accountability for institutions participating in federal student aid programs is a prerequisite to making the existing system function better for both students and taxpayers. Indeed, this problem exists now, and should be addressed, whether we expand Pell eligibility or not.

Allowing students in high-quality, short-term programs to use Pell grants is not the only way to increase access to these programs, and it may not be the best way. Community colleges need more resources to support training for high-demand occupations. Occupational preparation programs, whether for-credit or not and offered at postsecondary institutions or elsewhere, could be supported through alternative funding streams, such as resources provided directly to the institutions providing the training or through programs like the Workforce Innovation and Opportunity Act. And employer-based programs that combine work and learning hold great promise. But all of these pathways have potential pitfalls and require accountability.

Along with stronger accountability and better guidance, expanding Pell is a promising route to solving at least a portion of the country’s challenges preparing more low-income workers for remunerative and satisfying careers.

Students in a cosmetology program practice on mannequins at the Board of Cooperative Education Services in Belmont, New York. (Education Images/Getty Images)

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