The Pell Grant program has been the foundation of Federal student aid since it was created in 1972. The program provides student assistance grants based on need to low-income students to help pay for college education. Students from all 50 states rely on the Pell Grant program to pursue their educational goals.
Nearly 70% of Pell Grants go to students with a family income below $30,000 and 90% to students with a family income below $50,000. Pell Grants are especially critical as a means of paying for college for students of color, with nearly 60% of Black students and 50% of American Indian, Alaska Native, and Hispanic students receiving Pell Grants each year.
Despite its success and bipartisan popularity, the Pell Grant program has not kept pace with the rising costs of college. In the 1970’s, when the program was created, a Pell Grant covered more than 75% of the cost of a four-year degree at a public college. Today, a grant covers only 30% of that cost.
Last June, to remedy the waning efficacity of the program, the Pell Grant Preservation & Expansion Act of 2021 was introduced in both Houses of Congress. It would build on the current program by increasing the maximum annual Pell Grant by $400 to $6,895 for academic year 2022-23. The Act would also initiate a five-year rollout to double the full amount of the Pell Grant from its current level of $6,495 to $13,000 annually.
If enacted into law, the Act would also:
• Set the maximum Pell award at $9,000 for 2023-24. It would then ramp up by $1,000 per year until reaching a level of $13,000 in 2027-28.
• Expand the program to include “Dreamers”, and
• Restore lifetime program eligibility for individuals to 18 semesters rather than the 12 semesters currently allowed.
The Pell Grant program is the logical medium through which to increase Federal assistance to low-income students. Pell is an established, operational, proven program. If President Biden and Congress double the grant, it would cover about 56% of the typical Cost of Attendance (COA) of a four-year public college degree. This would increase the share of public four-year colleges affordable by Pell recipients from 25% to 80%. Doubling the grant would transform the program back to what it was intended to be when the original legislation was enacted by Congress and signed into law by President Nixon in 1972.
Criticism of the Plan to Double the Pell Grant
There have been objections. For example, a recent Wall Street Journal editorial asserted that, in the past, “Tuition has soared as colleges have raised prices to soak up more government subsidies.” The WSJ observation that colleges used increases in Federal aid programs as a covert rationale for raising their tuition is correct, although colleges would cite other reasons. In other words, the concern that colleges will simply gobble up the latest Federal aid largesse is legitimate. What is clearly needed at this point is a plan that would assure that a doubling of the Pell would be safe from college administrators.
A Proposed Solution
David Ferreira, writing in the May 17 edition of Inside Higher Education, proposes such a plan. He states, “We should roughly double the maximum annual Pell award, but significant structural and regulatory reform also needs to take place in tandem to lessen future student loan debt. Under my proposal, Pell awards would only go to institutions where 80 percent of the cost of attendance can be covered through a combination of Pell Grants and state, private and institutional grant aid. In essence, a student receiving the maximum Pell amount should only have to take out loans to cover no more than 20 percent of the cost of attendance.”
About 30% of all students enrolled in undergraduate programs in the U. S. receive Pell Grants. If colleges had to meet requirements like those in Ferreira’s plan in order to receive Pell funds, high-cost colleges would be forced to lobby for increases in state support, work with their foundations to raise funds for the college’s own aid programs, significantly lower tuition, or forego revenue from 30% of their market. Not many colleges are in a position to ignore such a large percentage of their potential enrollees.
The average in-state tuition and fees (without room and board) at a public four-year institution is $13,900, according to the National Center for Education Statistics (NCES). For a student who lives off campus with their family, the average COA at a public four-year institution is $19,900 (or $5,500 above tuition and fees). A $13,000 Pell award would cover more than 80% of this cost without the need for additional state or institutional aid.
In contrast, NCES estimates the average COA for students attending a public four-year college and living on campus as $25,500. For these students, a college would need to discount tuition or find other forms of aid for $7,400 to adequately supplement Pell in order to cover 80% of COA. Added state or institutional aid would be needed to fill the gap.
With respect to private four-year colleges, some will be able to comply with the 80% threshold while others will not. NCES estimates the COA for students living with family while attending a four-year private nonprofit college to be $42,200, with $36,700 of that amount being tuition and fees. As reported recently by Inside Higher Ed, the current average tuition discount is around 50%, A 50% discount gets tuition and fees down to $18,350. For students living with family, that brings the COA to $23,850. The college would need to find other forms of aid to reduce the cost by another $2,410 to reach the 80% threshold. If it means a college would lose the ability to enroll 30% of potential students, most of them will devise ways to bridge such a modest gap.
For practical purposes, Ferreira’s plan would limit the choice of colleges for Pell Students. Students would be unable to use Pell funding to attend an ineligible school, but would still be able to attend an ineligible college without using Pell funding, if possible. The purpose of Pell is to enable low-income students to attend high-quality, affordable colleges, but not necessarily to attend any college.
While doubling Pell without a plan like Ferreira’s would provide immediate relief for low-income students, it would fail to prevent a perpetuation of the long-standing student debt crisis. It has been shown that increases in Federal student aid are linked by cause and effect to increases in tuition. Without policy controls in place, there’s no reason to assume that the same outcome won’t befall a doubling of Pell Grants.