Upping the Ante on Pell Grants

Let the bidding war begin.

Three days after Democratic Congressional leaders crafted a 2007 budget plan to raise the maximum Pell Grant by $260, to $4,310, Education Secretary Margaret Spellings announced that President Bush's 2008 budget would call for increasing the maximum grant by another $290, to $4,600, next year and to $5,400 over five years.

After four straight years of stagnation in the federal government's primary financial aid program for needy students, the sudden burst of competition -- strongly reminiscent of the final years of the Clinton administration -- greatly pleased college leaders and advocates for students.

For many of them, though, the elation was muted by the fact that administration officials declined to provide details about how they would pay for what they called the "largest Pell Grant increase in three decades." (The maximum grant rose from $452 to $1,050 in 1974-5, the program's second year.) In advance of Thursday's announcement, speculation had been building among college lobbyists that the White House would propose a Pell Grant increase, but would pay for it largely with money snagged by ending other student-aid programs, including the Supplemental Educational Opportunity Grant Program, which provides about $770 million a year to low-income students.

Education Department officials said Thursday that they could not comment on that or any other aspects of the president's plan. Every $100 increase in the Pell Grant costs the federal government about $380 million to $400 million.

"All of us view Pell as the anchor of the whole [need-based student aid] system, so now that it's clear that Congress and the administration see that, too, we applaud this announcement," said David Ward, president of the American Council on Education, the umbrella group for higher education. "We hope this is, in the aggregate, an increase in need-based aid and not simply a redistribution. Until we know that, our joy is tempered. But we'll take the good news while it lasts."

Momentum to increase the Pell Grant has been accumulating in recent months, amid a blizzard of reports about insufficient access to higher education for students from low and moderate income families and, especially, in the wake of the clarion call by Spellings's own Commission on the Future of Higher Education to raise the purchasing power of the maximum Pell Grant to 70 percent of the average in-state annual tuition at a four-year public college (it now rests somewhere in the mid-40s).

College leaders, who have watched as Spellings and the Education Department have moved aggressively to carry out some of the commission's tougher recommendations on accountability and accreditation, have eagerly waited to see whether she and President Bush would deliver on the Pell proposal that they hold dear.

In a speech at a higher education conference Thursday North Carolina State University, Spellings said that she and the president would. "For low-income, mostly minority students, college is becoming virtually unattainable. States, institutions and the federal government -- we all must increase need-based aid. The president plans to do just that. When he unveils his budget next week, the president will call for the biggest increase to the Pell Grant Program in over 30 years," she said. It will provide, she added, "real money that will help more low-income kids realize the dream of a college education."

Most college leaders and student aid advocates seemed to be enjoying the political battling for headlines and for the hearts and minds of students and families. They said they were thrilled that the Bush administration -- which for four straight budgets had signed off on budget deals that kept the maximum Pell Grant frozen -- had gotten on board the pro-Pell train, joining Democratic leaders like Sen. Edward M. Kennedy (D-Mass.), head of the Senate education committee, who has proposed increasing the maximum Pell Grant to $5,100 next year.

David S. Baime, vice president for government relations at the American Association of Community Colleges, noted that the administration's proposed 2008 increase of $550 would cover 25 percent of the average tuition at a community college. "I think it's spectacular, and truly good news for needy students," he said.

Happy as they were about the administration's open embrace of Pell, many college officials said their enthusiasm would ebb if, as expected, the White House plans to pay for the Pell increase largely by reshuffling money from existing programs. (It is possible that at least some of the funds to finance the increase would come from savings drawn from "mandatory" parts of the federal budget, such as fees paid by lenders, since that's how the Democrats plan to pay for their own Pell increase.)

In the last several years, President Bush has proposed ending or slashing funds for programs like the Perkins Loan Program, the Leveraging Education Assistance Program, and the TRIO Programs for needy students in his budget blueprints, only to see Congress fend off most of those cuts in the final spending bills. But the programs, including Pell, have stagnated, with no increase in the maximum grant since 2002.

This year, college officials expect the administration to again take aim at all of those programs as well as the Supplemental Educational Opportunity Grant Program, which provides additional funds to the neediest of students, usually on top of their Pell Grants. About 1.3 million students received the grants last year, at an average amount of $766, according to the Student Aid Alliance. Killing the SEOG program to increase the average Pell Grant by a few hundred dollars would, among other things, result in some SEOG recipients getting less aid than they do now.

While college leaders don't relish a Bush budget that takes aim at all of those aid programs, some of them foresee a potential scenario in which Congressional leaders embrace the Bush administration's increase for Pell and fight off its proposed cuts in other student aid programs, resulting in an all-around victory for students.

Even if they see that scenario as overly rosy, several college lobbyists said they were pleased, at the start of a new round of annual budget negotiations, to see the White House join the bidding with an aggressive proposal. Hearkening back to a round of significant Pell Grant increases that occurred the last time the U.S. had a divided government -- in the late 1990s, when an embattled, second-term Clinton administration was going toe-to-toe with a combative Republican Congress -- thoughts of a high-stakes poker game dance through their heads.

"By putting down a marker at that number, they really do raise the expectations in a way that can dramatically change what legislators try to do," said Baime of the community college association.