Changes to Pell Grant Program Needed to Target Lowest-income Students

Changes to Pell Grant Program Needed to Target Lowest-Income Students

Pell Grants, federal grants targeted at the nation’s most needy students, have not kept up with college costs. In fact, current Pell awards fall far short in helping low-income students cover their education expenses, according to a recently released report from the Institute for Higher Education Policy.

The IHEP study, “Window of Opportunity: Targeting Federal Grant Aid to Students with the Lowest Incomes,” found that a majority of the 5.2 million recipients of federal Pell grants in 2005–06 still had more than $4,500 in college expenses left to cover, even after factoring in money from their own funds and money from other sources, such as student loans (http://www.nextstudent.com/), employment income, and scholarships.

Current Pell Awards Leave Funding Gap

IHEP researchers found that a majority of the Pell Grant recipients with unmet college costs had family incomes of $40,000 or less. Among dependent students who received Pell Grant awards, 40 percent came from families with incomes of $20,000 or less.

Low-income families earning $20,000 or less typically had an expected family contribution (the amount families are expected to pay toward their child’s college education) of only a few thousand dollars, and 52 percent had an EFC of zero. Yet nearly half of all Pell recipients — who attend schools where the cost of attendance is more than $15,000 — needed to come up with approximately $4,500 above their Pell Grant award to cover their total college costs.

In order to pay their remaining college expenses, these students are often forced to turn to either federal student loans, more costly credit-based private student loans (http://www.nextstudent.com/private_loans/private_loans.asp), or both. But as Inside Higher Ed reporter Scott Jaschik writes, while college loans may be another option for students who need to supplement their Pell Grant aid, “the student population being served is so poor that loans may not be seen as an option by some.”

Report Proposes Changes to Federal Pell Program

The authors of the IHEP report contend that because Pell Grants have not kept up with the cost of higher education and because the most low-income students have a greater need than what the Pell can finance, changes are needed to the policies governing the Pell Grant program.

One option is a change to the Pell award analysis rules that would allow students to report a negative expected family contribution of up to $750. Currently, families are able to list their EFC as less than zero, but the Pell calculation automatically converts that figure back to zero, in effect putting a family with a negative EFC on the same need level as a family with a zero EFC.

While the most needy students are able to receive the maximum Pell award under the current system, the proposed change would allow these students to receive even larger Pell awards, up to an additional $750, after reporting a negative EFC of the same amount.

The IHEP study also proposes raising the maximum Pell Grant award amount and increasing the minimum qualifying financial need threshold for Pell recipients.

IHEP data shows that raising the maximum Pell Grant award would not only expand the number of individuals who would be eligible to apply for the Pell award, but would also increase individual award amounts.

In order to target the neediest students, however, and not just more students, the authors argue that in addition to increasing the maximum award amount, the Pell program should raise the minimum qualifying need threshold for a Pell Grant award. Although this policy change, by requiring a greater level of financial need, would eliminate some of the students who are eligible for Pell Grant aid under the current system, IHEP analysis shows it may be the best means of delivering significant grant awards to the most low-income students.

Learn more about student loans (http://www.nextstudent.com/student-loans/student-loans.asp) and private student loans (http://www.nextstudent.com/).