On the Offensive

Stung by criticism, Education Department officials strongly defend Pell Grant plan and challenge data colleges have used to attack it.
February 9, 2007

Education Department officials are going on the offensive to defend President Bush's proposal to raise the maximum Pell Grant in part by eliminating several other student aid programs, challenging numbers circulated by higher education groups to criticize the plan and insisting that it would most efficiently get more financial aid in the hands of more needy students.

Department officials seem clearly stung by the criticism that college leaders and others have leveled at the proposal contained in the 2008 budget plan President Bush released this week, which calls for increasing the maximum Pell Grant to $4,600 next year and to $5,400 by 2012.

College leaders embraced the idea of bolstering spending on the federal government's primary source of need-based financial aid. But they have attacked the proposal for planning to pay for the Pell increase, in part, by ending the Supplemental Educational Opportunity Grant Program, which provides about 1.3 million students a year with grants that average $770 but can rise to as much as $4,000. In addition to ending funds for SEOG and two other smaller student-aid programs (the Leveraging Educational Assistance Partnerships and Perkins Loan Programs), the administration would pour new funds into the Pell Grant Program

Critics of the president's proposal have widely cited numbers provided by the American Council on Education suggesting that of the 1.3 million students who receive the supplemental education grants each year, about a million of them would lose money in the program's first year. The council's analysis assumes that any student who received SEOG funds of $300 or more would lose out, because the administration's Pell Grant increase would amount to $290 over and above the $260 Pell Grant increase that Congress is poised to enact in its soon-to-be-passed spending bill for 2007.

The catch phrase floating around Washington higher education circles is that the administration is "robbing Peter to pay Pell." Terry W. Hartle, the council's senior vice president for government and public affairs, said: "Every presidential budget, regardless of party, contains at least one bad idea. For 2008, it's eliminating SEOG."

In a telephone call initiated by department officials Thursday, Sara Martinez Tucker, the under secretary of education, directly challenged both the ACE numbers and the premise that the administration is strengthening Pell at the expense of other programs. She argued forcefully that the administration's plan -- which would derive significant new revenue for student aid by cutting lenders' profits -- is very much in the best interests of students from low-income families, while still being prudent for taxpayers as well.

"This budget would advantage need-based aid in a huge way," Tucker said. "The Bush administration is adding $2 billion in need-based aid over last year, and $1.3 million over" Congress's budget plan for 2007. Not only would the administration's plan add significant new funds for Pell Grants, Tucker said, but it would also ratchet up spending on the Academic Competitiveness Grants Program that Congress created in 2005, which provides funds to Pell-eligible freshmen and sophomores who took a "rigorous" high school curriculum and maintain a 3.0 grade point average in college.

Tucker said that the department's own analysis -- in contrast to that of the American Council on Education -- takes into account the new funds that would flow to students through the Academic Competitiveness Grants as well as through Pell. Through that prism, she said, 45 percent of students who receive Supplemental Educational Opportunity Grants would see an average increase of $310 in need-based aid in 2008 (through a combination of larger Pell and Academic Competitiveness Grants).

Despite those larger grants, 36 percent of SEOG recipients would still lose as much as $500 in 2008 (though they would gain that back through the $200-a-year Pell increases the administration has proposed for 2009-12). And the remaining 9 percent of SEOG recipients, Tucker said, would lose significantly under the Bush plan -- but those, she said, are the small minority of SEOG recipients who do not qualify for Pell Grants because they are above the income threshold, and who tend to be at high-priced colleges.

The under secretary said that the latter statistic underscored the Education Department's other major point: that the supplemental grants program is not the most effective use of federal student aid funds. Although college financial aid directors like the program because they say it gives them flexibility to craft awards that best meet the diverse financial needs of their students, the SEOG program has been criticized in the past because its funds go disproportionately to colleges that have been in the federal financial aid programs the longest, favoring private institutions and often shortchanging community colleges and other newer institutions, which Tucker described as more likely to educate needy students.

"When we looked at the numbers, we found that campuses that enroll 70 percent of low-income students only got 40 percent of the SEOG money," Tucker said. In addition, department officials complained that the SEOG program, for every dollar awarded, costs significantly more to operate than the Pell program does, by a margin of 250 to 1.

Taken together, Tucker said, those factors -- that more needy students would benefit than be hurt by the shift, and that the SEOG program is costly to run and isn't well-targeted to the needs of needy students -- make the Bush proposal a wise one. "To the extent that we're trying to focus on increasing need-based aid for students, we're going with the proven winner, Pell." Instead of trying to fix SEOG to make it more fair, she said, "why shouldn't we just go straight to advantaging students through Pell?"

Officials at the American Council on Education said they stood by their numbers, which were drawn from the department's own data, and questioned whether department officials really needed to kill the supplemental grants program to reach their goal of bolstering Pell.

"The administration is basically asking two questions: First, is SEOG effectively targeted and efficiently administered, and second, can you eliminate SEOG without hurting low-income students?," said Hartle of ACE. "They've answered first question 'No,' and the second question 'Yes.' They might be right on the first question, but they're dead wrong on the second."

Hartle cited numbers in the department's own budget documents showing that the number of financial aid awards to students would shrink from about 6.5 million in 2006 (for Pell and SEOG, or 7 million including the other two programs the administration would kill, LEAP and Perkins) to 5.5 million (just for Pell) in 2008. If one includes the Academic Competitiveness Grants in that calculation, the total would shrink from 7.5 million to 6.1 million. (The number of Pell recipients, department officials counter, would grow by about 300,000.)

"I just don't see how you can take away 1.3 million SEOG awards, the vast majority of which go to low-income students, and claim that somehow that only 10 percent will be affected -- it just fails any kind of face validity," Hartle said. "The idea that the answer to the problem of SEOG is to kill it is a little like junking a perfectly good car because it needs good tires."

Although college lobbyists and many student-aid officials are lining up against the administration's proposal, at least one prominent financial aid expert thinks the Education Department may be on to something. Mark Kantrowitz, publisher of FinAid.org and director of advanced projects at FastWeb.com, said that both sides can legitimately cite numbers to back up their views, but that to the extent the administration hopes to eliminate duplication, the proposal makes sense, since the Pell and SEOG programs serve roughly the same income bands.

"If this were a business," he said, the supplemental grant program "would have been consolidated a long time ago."


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