Address the Root Causes of Pell Grant Costs Before Cutting It

There Are Alternatives to Slashing College Assistance for Low-Income Students

The Pell Grant program is in constant jeopardy these days. Proposed cuts to Pell were a part of the last round of budget negotiations, and some plans for dealing with the debt ceiling advocate substantial reductions. Cuts to the program seem so inevitable, in fact, that many higher education officials are turning to questions of how—not whether—cuts will affect the students who rely upon these grants. But there are other ways to deal with this valuable program’s cost increases than rushing to cut it.

The Pell Grant program provides grants of up to $5,550 to low- and lower-middle-income students to attend college. The amount of money a student receives depends upon his or her family’s expected contribution to paying for college (based on a federal formula), the amount of credits for which the student enrolls, and the price of tuition at the college.

Pell funding is a perennial target for two reasons. First, the sharp increase in the program’s cost over the last few years led policymakers to believe that it’s on an unsustainable path. Second, high dropout rates at for-profit colleges and community colleges led many to question the program’s effectiveness. But these problems are caused by factors outside of the Pell budget—and we should be tackling those issues instead of slashing the program.

Let’s look a little closer at cost. The Pell Grant program’s cost more than doubled over the last three years to a grand total of more than $36 billion. That kind of growth may set off alarm bells but it’s not as bad as it seems. About 22 percent of that growth was due to the summer Pell Grant program, which the president’s 2012 budget already proposed to eliminate.

Another 40 percent of the change is due to increased enrollment in the Pell program. The following chart illustrates just how steep the growth in the number of Pell recipients was.

Experts agree that students would need to be excluded from the Pell program to achieve any meaningful cost reduction. But if Pell is meant to be a program to provide college affordability and access to low-income students then cutting funding is not the right answer. More than 60 percent of Pell Grant recipients had family incomes of less than $20,000 for the 2009-10 school year.[1]

Congress, therefore, should take a good look at what it can do about the factors causing the rise in Pell program costs rather than cutting funding without regard to the consequences. For instance, the increase in Pell program participation coincides with the deep financial difficulties facing our nation. So a more logical way to decrease spending on Pell would be to continue programs that help with our economic recovery and get people into jobs with a sustaining wage so that they will not qualify for the program.

Proponents of cutting Pell also worry that too much of the money goes to students who do not finish their educational programs, that students use the money at low-quality for-profit colleges, or that increases in Pell spending only serve to increase college tuition. But cutting funding isn’t a solution to these problems, either.

Decreasing the amount of money each student receives or the number of students who are eligible to participate in the program won’t mean the participants are any likelier to graduate or choose higher-quality programs. And it won’t do anything to address the steep trajectory of college prices driven by colleges competing for students by adding services.

Congress instead should increase the purchasing power of Pell by encouraging colleges to reduce their prices and increase the return on the grant’s investment by requiring colleges to provide high-quality outcomes for their students.

Better information about how colleges spend their money and the quality of the services they provide will go a long way toward pressuring institutions to justify or reduce their high prices. And Congress should require colleges to demonstrate that their Pell students are actually achieving the kind of college success that the program was created to achieve.

The Pell Grant program makes postsecondary education and training accessible to millions of low-income students each year—training that helps prepare them for today’s competitive job market. With unemployment above 9 percent, we should be using every avenue available to get more Americans into stable employment. Congress should be looking to address the factors that make Pell spending so high rather than simply cutting its bottom line.

Julie Margetta Morgan is a Policy Analyst at American Progress.


[1]. National Center for Education Statistics, Federal Pell Grant Program End-of-Year Report, 2009-2010.