Pell as a Paycheck

July 28, 2011

For a Pell Grant recipient at a college with low tuition and fees, the beginning of a new semester can bring a windfall: a check in the hundreds of dollars representing the difference between total financial aid and the cost of attendance.

Many students use the check to pay for their books, or to buy a laptop or other equipment to use during their studies. For others, it covers living expenses while they are enrolled. A new project from the Institute for College Access and Success and MDRC, a policy research organization, wants to use the leftover money in a different way: as a biweekly paycheck for students.

The project, dubbed “Aid Like a Paycheck,” just wrapped up its first year as a pilot program at Mt. San Antonio College, a community college east of Los Angeles. Researchers say that, while it’s too early to tell if distributing surplus money from Pell Grants will encourage students to finish their degrees, or hasten college completion, early results are promising.

“The brass ring, of course, is higher completion,” said Thomas Brock, director of young adults and postsecondary education policy for MDRC. But other benefits could improve faster degree completion, because students who are receiving a “paycheck” may be more likely to give their studies more focus, he added.

Tuition and fees at Mt. San Antonio College are low: $36 per course for California residents, with an additional $11 activities fee. Since some students are eligible for the maximum Pell Grant, $5,550, the leftover money -- even after buying books and supplies -- is substantial. Students were invited to volunteer to receive the extra in two-week paychecks. They also received some extra money from the Gates Foundation for a laptop or other big-ticket purchase on the first “paycheck,” Brock said.

The first group of 140 students began receiving checks last fall. While it’s too early to tell what the effect will be, the feedback from the students has been positive, the project’s directors said. Students have said that being paid to stay in college makes them take their studies more seriously, and that they have pared back hours on outside jobs, giving them more time to focus on school. The researchers hope this will translate into improved completion rates later on.

“If you can frame aid as a way to help support your time at school, because going to school is an important job, perhaps you can help improve outcome,” said Lauren Asher, president of the Institute for College Access and Success.

Although tuition and fees at community colleges are low, that doesn’t mean the students are free from financial pressures, she said. Many struggle to cover living expenses, whether for themselves or their families. Students frequently work one or more jobs while enrolled full-time, and students often “stop out,” ceasing to attend for a year or two in order to earn more money.

“Do they feel like they’re a student first and also working, or a working person who happens to be going to school?” Asher said. “There are all these time factors that play a big role in student success.”

Distributing the aid as a paycheck was meant to explore what it means for students to “put themselves through school” by working, and what role student aid plays in that equation. Students were also encouraged to open a bank account and use direct deposit, which encourages financial literacy, Brock said.

So far, students have indicated that they liked the idea of receiving a regular paycheck, and that they worked fewer hours, he said. Students also liked that they had a predictable amount of money coming in, Asher said.

MDRC and the Institute for College Access and Success plan to report on the study’s pilot phase in early 2012. For now, they are considering expanding the idea to other states and campuses, and have also discussed “aid like a paycheck” with the Education Department as an alternative way of distributing Pell Grants.

Illinois has expressed interest in distributing state grants as a paycheck, Brock said. Michigan has suggested disbursing student loans -- which would lead to a bigger “paycheck” and could also raise questions about whether it encourages students to borrow responsibly.

Some colleges might be reluctant to issue checks every two weeks, which can add time and expense, Brock said. But the pilot phase indicated that it could be done.

“It’s really too soon to tell what the impact might be, but there are some promising signs,” Asher said. “Really, the goal is to help support choices that correlate with increased success.”

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