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Possible Changes To Pell Grant Program Outlined

The good news for low-income students is that more money has been poured into the Pell Grant program in recent years, helping more students pay for college.

But many policymakers are concerned that the 158 percent growth over four years in the federal student aid program, at an annual cost now of nearly $34 billion, is not sustainable.

The Congressional Budget Office released a report Thursday that chronicles the expansion of the Pell Grant program and discusses options for reforming the program.

In addition to suggestions to revise the 40-year-old program, the CBO lays out alternatives for lawmakers to help low-income students pay higher education including:

  • grant commitments to middle and high school students,
  • forgiveable loans,
  • federal support of state grant programs,
  • and, grants for occupational training.

The argument behind accounts showing grant commitments to middle and high school students is that it might make low-income students and their families aware earlier of the existence of federal financial aid and encourage their families to start planning for college. On the downside, the CBO report notes that a family that qualified for such a program only after a sudden reduction in income while a student was in high school or already enrolled in a postsecondary program could receive significantly less federal aid than it might under the current Pell grant program.

Congress supported a greater investment in Pell grants, most recently raising the maximum grant to $5,645 for the 2013-14 school year. Grants are awarded on the basis of financial need and more students became eligible during the recession, fueling demand and cost of the program.

Last year, nearly 9.4 million students received a Pell grant of some amount. Between 2006-2007 and 2010-2011, there was an 80 percent rise in the number of recipients and a 43 percent real increase in the amount of the average grant during those four years.

As the Pell Grant program grows, concerns have been expressed about the cost of program, the complexity of eligibility rules and application process, as well as how far grants go now in covering the full cost of college. When the program was first established, the grants covered nearly two-thirds of the cost of college, but now only meet about one-third of the expenses as tuition has increased.

The CBO report examined possible solutions to rein in program including:

  • reduce the number of grant recipients,
  • decrease the amounts of the grants,
  • increase the grant amounts,
  • and simplify eligibility criteria and the grant application.
The CBO makes no recommendations on the path that lawmakers should take, but explains how the Pell Grant program arrived at the current crossroads and suggests possible solutions.
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