Quick review: in previous posts, I did the calculations and made a case for a modest Basic Income Guarantee (BIG) of about $800 a month per adult. For the middle and above income quintiles, the BIG would essentially be paid back in taxes. On average, second quintile households would pay back about half the BIG in taxes. The federal budget’s net BIG expense would be paid for by eliminating various government benefits, including TANF, EITC, SSI, and unemployment insurance and reducing other benefits, such as housing assistance. Additional funds would become available through reduced utilization of remaining means-tested safety net programs, such as SNAP, because BIG income would be considered in determining benefit eligibility and amount. The idea is that a modest BIG would eliminate severe poverty but not be so generous as to disincentivize work any more than the current safety net system does. Government programs would still be available to help in extreme cases, e.g., the suddenly or chronically homeless.

In the above scenario, Pell and SEOG grants would be eliminated, as the BIG (worth $9600 a year) could be used towards post-secondary school expenses. However, the reduction in grants would be partly offset by an increase in work-study funding (note that part-time work is not a risk factor for completing college, per What Matters to Postsecondary School Success). An important psychological advantage of BIG compared to Pell grants and tuition waivers is that the BIG is a limited resource with alternate uses – and for someone with a limited income, the alternate uses are likely related to current necessities and for things that have long-term benefit (e.g., car repair, savings cushion for moving). As a consequence, the BIG is more likely to be experienced as “my” money – and we’re much more responsible and budget-minded when spending our own money than someone else’s. This is especially the case when the latter isn’t fungible – that is, it doesn’t have alternate uses – like with student financial aid programs.

Less student aid would have the added benefit of reducing tuition inflation – many analysts have noted that increases in tuition rates track increases in aid amounts, especially in private schools. Increase the Pell grant and tuition goes up. A BIG instead of student aid would eliminate that dynamic.

Note I'm only talking about federal financial aid programs. Even with the BIG, there still would be financial aid for students from other sources, like states and private scholarships.