A Thoughtless Way to Cut Pell Grants

Stephen Burd


The Pell Grant program is the cornerstone of the federal student aid programs. The program has helped millions of low-income students gain access to college.

But it is on a perilous path. Since 2008, the program’s costs have more than doubled to nearly $40 billion, as demand for the grants has soared, and changes Congress made then to make the program more generous have gone into effect. Over the last two years, the Obama administration and Congress have repeatedly tried to shore up funding for the program in order to maintain the maximum Pell Grant at $5,550. However, the program is now facing a massive funding cliff in 2014, when the supplemental funds Congress has provided to keep it afloat run out.

All of this is to say that policymakers need to get Pell’s costs under control. But in doing so, they must proceed carefully and cautiously to make sure that they don’t do anything to impede the program’s mission of eliminating the cost barriers that all too often keep low-income students from attending college.

Congress, however, appears to be heading in the opposite direction – making decisions about the program’s future in haste in the heat of high stakes budget battles.

Case in point: Lawmakers are on the verge of making changes to the Pell Grant program’s eligibility rules as part of the fiscal year 2012 omnibus appropriations bill that would do a considerable amount of harm to current recipients.

Take, for example, a proposal included in the final budget package that would reduce the number of semesters that students can be eligible for Pell Grants from 18 to 12. At first glance, the plan makes sense as it could encourage students to complete their studies quicker.

There’s a hitch though. The plan that Congress has put forward would apply this change retroactively — meaning that low-income students who are just one or two semesters away from graduating may suddenly find themselves without the aid they need to finish their programs. Instead of promoting completion, the proposal, as currently drafted, would have the exact opposite effect on these students.

So which students would be at most risk of having their educational plans disrupted? According to the Institute for College Access and Success (TICAS), black students and transfer students would be disproportionately affected. Analyzing data from the latest edition of the Department of Education’s National Postsecondary Student Aid Study, TICAS found the following:

  • In 2007-08, African-American students made up 41% of the Pell Grant recipients who received Pell Grants for more than six years. African-American students compose 24% of Pell Grant recipients overall.
  • In 2007-08, the majority (61%) of Pell recipients who received Pell Grants for more than 6 years were attending public or non-profit 4-year colleges. It is likely that many of these students transferred from community colleges or previously attended for-profit colleges and may have been close to completion, since only 35% of first-time Pell recipients attended public and non-profit 4-year colleges.

There is, of course, an easy solution: lawmakers could apply this change prospectively, so that it affects only new students. Congress took this approach in 2008 when it imposed the current nine-year limit on Pell eligibility. [Prior to that, there weren’t any limits on how long students could receive the grants.]

This would be a much fairer way to go, as it would give students ample warning that they will not be able to obtain the grants indefinitely – rather than changing the rules in the middle of the game, as the current proposal would do.

But Congress will not budge on this for one simple reason: applying the limit prospectively will not deliver budget savings any time soon (at least not until 2018, according to CBO) while doing so retroactively would produce $500 million in savings in the current fiscal year.

And apparently that is the only consideration that matters these days on Capitol Hill.

Higher Education
Student Loans and Financial Aid