A Plea to Cut Pell Wisely

If Congress must cut college grant program, higher ed economists urge, it should do so in ways that protect needy students and encourage academic progress.
April 18, 2011

WASHINGTON -- These are painful times for supporters of the Pell Grant Program. With deficit-reduction frenzy astir in this city, the federal government's primary financial aid program for needy college students is square in the sights of budget cutters, many of whom profess support for the program but say it has become too big and too unsustainable not to be a target. The program has increased by about 150 percent since 2005-6, from $14.4 billion then to an estimated $34.4 billion in 2010-11.

With Republican leaders in the House having approved a plan that would cut the size of grants by as much as $2,000 across the board, supporters of the program -- who historically have pushed unequivocally for increases in Pell and against any declines -- are searching for alternatives. They now find themselves in the uncomfortable position of figuring out how to cut the program -- a situation more than one higher education official has compared to choosing among one’s children. In its 2012 budget plan, for instance, the Obama administration proposed ending the two-year-old program that allows low-income students to qualify for two Pell Grants in a single award year if they enroll in the summer.

In that spirit, a group of economists who specialize in higher education and financial aid has weighed in with a series of recommendations about how Congress -- if it must rein in federal spending on Pell Grants in the short term -- might do the least damage to the program’s key goals: aiding the neediest students who are capable of success in college and helping them make educational progress.

Their suggestions, delivered in the form of a letter to the College Board, could be controversial, given that they would inevitably benefit some Pell recipients over others, and represent a compromise even within the small group of scholars and policy analysts.

The scholars did not intend to weigh in now, said Sandy Baum, a senior associate at the Institute for Higher Education Policy and senior fellow at George Washington University's School of Education and Human Development, who organized the letter. (In addition to Baum, the signers were Susan Dynarski, of the University of Michigan's Ford School of Public Policy and School of Education; Art Hauptman, an independent policy analyst; Bridget Terry Long, of the Harvard Graduate School of Education; Michael. S. McPherson, president of the Spencer Foundation; Judith Scott-Clayton, of Columbia University's Teachers College; and Sarah Turner, of the University of Virginia's Curry School of Education.)

Last fall, as evidence grew of the program's near-doubling over three years and increasing unsustainability, they began discussions about doing a detailed analysis, with an eye to the future, that would help them "develop a set of detailed creative recommendations that would simplify the program, improve its efficiency and strengthen its capacity over the long run," the letter says. They expected answers near the end of 2011, says Baum, who compared the effort to the Rethinking Student Aid review of the federal financial aid system that she co-led for the College Board in 2008.

But the political environment and immediate budget picture will not wait. "We want to take a longer-term view, with an eye to fundamental restructuring that could happen, but we fear that they're going to just put it on the chopping block now," in ways that could damage access for the neediest students and provide the wrong incentives, Baum said in an interview with Inside Higher Ed.

"We're not advocating cutting, and we think there are better places in the federal budget to cut than in financial aid. But instead of just saying 'don't you dare [cut],' we would like to engage in a conversation." Baum said the researchers hoped to show that "theoretical reasoning can inform the political process."

The changes the scholars propose would alter eligibility requirements in several ways.

One would increase to 15 from 12 the number of credit hours in which a student must be enrolled to qualify for the maximum Pell Grant. A change of this kind, the researchers argue, would align the Pell Grant requirement more closely with what most colleges define as a full-time student, even though federal data show that more than 4 in 10 Pell recipients are enrolled at least 12 but fewer than 15 hours.

The scholars cite a 2009 study by Scott-Clayton showing that a change of this sort would be likely to increase the number of credit hours in which Pell students enroll, and while that would diminish the potential upfront savings from such a change, "these students would then graduate more quickly, reducing the total number of terms for which they would receive Pell funding," the letter states. While critics might complain that some working students cannot enroll for more than 12 hours in a term, Baum said the researchers agree that "if you go full-time, you should get a bigger Pell Grant." Under the group's proposal, she noted, recipients who enroll for 12 hours would still receive 80 percent of the maximum grant.

A second change would decrease from nine the number of years for which a student could qualify for a Pell Grant. Only 3 percent of Pell recipients have grants for more than six years, but cutting the maximum eligibility period to eight or even six years (they don't endorse a specific level) would still "allow time for students who require remediation," the letter says. "This move could provide a clear signal that the program is not designed to subsidize students indefinitely, but to support them to complete their degrees in a timely manner."

The economists also endorse the idea of rolling back some of the changes lawmakers have made in recent years to broaden students' eligibility for Pell Grants, although they urge Congress not to do things that work against the general trend toward simplification that has underpinned the changes.

The researchers suggest, for instance, that Congress may have gone too far in 2009 by increasing to $30,000 from $20,000 the family income at which a student automatically qualifies for a maximum Pell Grant, without calculating his or her expected family contribution. Lawmakers might consider requiring some family contribution (and therefore dropping the maximum Pell Grant) for recipients with incomes at points within that range. "The automatic zero EFC might apply to all those with incomes below $20,000, while there might, for example, be automatic $500 and $1,000 EFC categories for those with incomes between $20,000 and $30,000," the scholars write.

They also suggest that Congress could lower the living or income-protection allowances provided in the Pell program "without sacrificing simplification.... All of these would be painful to students -- but they would not bring with them the additional pain created by an increasingly complicated aid-application process."

The researchers also offer a general endorsement to the idea (embedded in the Obama administration's and Senate's review of for-profit colleges) of "limit[ing] Pell Grant eligibility to institutions committed to student success.... Without weighing in on any particular approach to this problem, we would like to express support for the idea of limiting the availability of funding for programs that offer very poor prospects to students.

"Minimizing the extent to which institutions and/or students can manipulate the system and divert dollars away from their necessary role of increasing meaningful educational opportunities is a necessary component of assuring the long-term viability of the program," they write.


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