Five Things to Know About Pell Grants

This Wednesday, Education Sector will be hosting an event on the future of Pell Grants, the cornerstone of federal financial aid for low-income students. In preparation, we thought we’d highlight the following five things we think you should know about the program:

• Pell Grants are well targeted: In the 2010-11 academic year, approximately 74 percent of the nearly 9 million Pell Grant recipients had family incomes of $30,000 or less, according to the U.S. Department of Education. Meanwhile, a recent Congressional Research Service (CRS) report found that only 1.9 percent of recipients came from families with incomes exceeding $60,000.  Those families typically have multiple children in college.

• The program has not been able to keep up with ever-escalating college prices: Since 2008, annual spending on the Pell Grant program has more than doubled, to nearly $40 billion, and thanks to the Obama administration and Congress, the maximum grant has jumped from $4,731 to $5,550 (and is scheduled to rise again to $5,635 in fiscal year 2013). Despite these increases, the maximum Pell Grant is expected to cover less than one-third of the average cost of attendance at public four-year colleges next year – a level that would be, according to the Institute for College Access and Success (TICAS), “the lowest in history.”

• Because of the program’s size, it’s hard for federal policymakers to get much bang for their buck: In the Health Care and Education Reconciliation Act of 2010, Congress used savings it derived from ending the Federal Family Education Loan (FFEL) program to guarantee inflationary increases in the maximum Pell Grant from 2013 to 2017. However, if policymakers wish to exceed those levels in a given year, they will have to spend between $500 million and $700 million for every $100 increase, according to the CRS.

• Increasingly, colleges are not doing their part: According to a recent Education Department report, the country’s public and private non-profit four -year colleges are now spending a greater share of their institutional aid dollars on trying to attract the students they desire than on meeting the financial need of the low-and moderate-income students they enroll. While many schools use institutional aid to attract the best students in order to raise their U.S. News & World Report rankings, others are using these funds to attract wealthy students to maximize their revenue. “There are good arguments for institutions to make limited and judicious use of merit aid to attract some students who could add to the vitality of an incoming class,” the University of Southern California’s Center for Enrollment Research, Policy and Practice and the Education Conservancy wrote in a report last fall. However, “the practice has grown to the point of significantly reducing the funds to qualified students from lower income households who could benefit from a college education.”

• As a result, Pell Grant recipients take on more debt than other students: Education Department data shows that Pell Grant recipients are “more than twice as likely as other students to have student loans (63% vs. 30%),” TICAS reports. “Among Pell Grant recipients who graduate from four-year colleges, nearly nine out of ten have student loans, and their average debt is $3,500 more than their higher income peers,” the group states.

Please join us this Wednesday, April 11, 2012, as we ask a panel of student aid experts — Jason Delisle, director of the Federal Education Budget Project at the New America Foundation; Jon Oberg, former higher education researcher at the U.S. Department of Education; José Cruz, vice president for higher education policy and practice at Education Trust; and Sarah Flanagan, vice president for government relations at the National Association of Independent Colleges and Universities—to forecast the future of Pell Grants and share their ideas for restructuring the program so that it can more effectively carry out the mission it was created to serve.

We hope you will join us. Register here.