With President Obama’s new proposal to greatly expand federal support for community colleges getting all the attention, many on Capitol Hill want to bring back a large program tailor-made for the students who attend these institutions – one that the president himself led the charge to cut.
In late 2008, President Bush and a Democratically controlled Congress fixed one of the Pell Grant program’s biggest flaws. A student who attended full-time for two semesters would exhaust her grant such that if she wanted to attend an additional semester that year (say in the summer) she would have to do so without any federal grant aid. Yet when the calendar flipped to the next school year a few months later, she’d have access to another Pell Grant. The solution to this problem was always obvious: Let her access next year’s grant sooner.
With the 2008 reauthorization of the Higher Education Act, lawmakers finally allowed that to happen. The so-called year-round Pell Grant became available on July 1, 2009, although most grants likely were not awarded until the summer of 2010. Shortly thereafter, the Obama administration -- with the help of Congress -- shocked the higher education community and ended it to solve a budget crisis within the overall Pell Grant program.
Many believe that, despite the elegant simplicity of a year-round Pell Grant, the original version somehow got it wrong thanks to bureaucratic incompetence, abuse, or an ill-conceived design, which caused its costs to explode. Those views are hampering calls to reinstate the policy. Worse yet, the purported flaws in the policy are more myth than reality. Our new paper, “Myths and Misunderstandings: The Undeserved Legacy of Year-Round Pell Grants” (Jan. 22), argues that year-round Pell Grants did not suffer from any design flaws and that many of these explanations are erroneous. We highlight some below.
Many understand that year-round Pell Grants cost far more than budget experts and policy makers expected, implying that unexpected costs were unreasonable. It turns out that those higher costs were not due to some feature of the year-round grant. Every part of the Pell Grant program ultimately cost more in 2010 and 2011 than predicted, driven by a combination of increased benefits, eligibility changes, and the economic recession. Had policy makers never enacted the year-round grant, the cost of the Pell Grant program would still have spiked, peaking at $33.6 billion instead of $35.7 billion in the 2010-11 school year.
Still, many are under the impression that a year-round grant should not increase the cost of the overall Pell Grant program at all, so something must have been wrong. After all, students who use two years’ worth of grant aid on two years’ worth of classes theoretically would receive the same amount of Pell Grants whether they take one year or two to complete those courses.
Federal budgeting principles, however, mean that any year-round Pell Grant program must appear as an increase in spending on Pell Grants equal to the amount of year-round grants disbursed. That is because a year-round grant pulls funding forward from a future, yet-to-be drafted spending bill, and makes it appear on the current bill. Spending on the current bill is thus higher. The effect is no different in a multi-year budget window -- as long as one assumes the Pell Grant Program exists in perpetuity.
The Department of Education is another common scapegoat for the unexpectedly high cost of year-round Pell Grants. Under this reasoning, the department loosened eligibility rules beyond Congressional intent so that more students benefited and received more money. Instead, we found that the department narrowed the scope of the year-round program so much so that its rules were originally viewed within the higher education community as too restrictive.
The department’s rule was stricter than it could have been because it did not allow students to collect year-round grants only because they had exhausted their regular grants for the year, as some desired. Student aid advocates argued that students should qualify for year-round grants simply because they had used up one year’s worth but were enrolling in more classes. The department disagreed and argued that students needed to demonstrate that they were “accelerating” progress toward a degree by some other standard than simply taking more classes.
At the same time, the department’s interpretation was looser than the most restrictive option possible because it made eligibility contingent on students' first accumulating a certain number of credits in a year, not overall progress toward a degree. A student did not need to demonstrate he was going to finish a credential early, in other words. Even so, those provisions were not so loose that they would have dramatically expanded the year-round Pell Grant beyond what Congress intended, nor should they have meaningfully increased the cost beyond initial expectations.
Another erroneous argument one hears often in the policy community is that due to a design quirk, the year-round Pell Grant program provided 50 percent more benefits than intended as students inadvertently received two full Pell Grants in a single year. Costs were therefore higher than expected.
Consider, however, that the department awarded year-round grants by the same calculations used during the rest of the year. A student who earned a school year’s worth of credit and enrolled for an additional semester, such as a summer semester, would receive an additional grant worth no more than what he would receive in any other semester. As a result, the average year-round Pell Grant was $1,700, which was less than half of the average $3,833 annual grant then.
Perhaps the most disingenuous claim about the year-round Pell Grant came from the Obama administration, which argued in early 2011 that the program “has not yet shown any evidence” that it encouraged students to accelerate their studies. That’s true, but misleading. The timing between implementation and the proposed elimination of the policy was such that there could be little evidence to judge the program, positively or negatively, on that measure.
The Obama administration proposed eliminating the program in February 2011, in a budget that was likely developed in the late fall of 2010. Only one round of year-round grants had been issued by that point, mostly in the summer of 2010. That would have given the administration one year’s worth of information about how the year-round program was performing, hardly enough time to gauge whether students had accelerated their coursework. Furthermore, the information would not have provided a perfectly accurate snapshot of the year-round grant. Schools implemented the year-round Pell Grant under their own interpretation of the program that year as regulations produced by the department had yet to take effect.
The timing of the proposal also calls into question whether the Obama administration could have obtained reliable data about the year-round grants issued in the summer of 2010 in time to make its claims in a budget proposal developed in late 2010. If it had obtained such data, it did not release them or any related statistics.
Separating facts from misinformation regarding the year-round Pell Grant will help policy makers enact sensible policy changes in the future. Today’s higher education students increasingly do not fit the profile for which the Pell Grant program was originally designed. The year-round Pell Grant was a much-needed modernization of the program and it should be reinstated.