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Pell Grants

The Higher Ed Arms Race: How the High-Tuition High-Aid Model Shuts Out Low-Income Students

May 9, 2013
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Yesterday, the New America Foundation's Education Policy Program released "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind." Author Stephen Burd reveals a full-fledged "financial aid arms-race" between private colleges and universities, and a burgeoning one among publics as well. Schools adopt a "high-tuition, high-aid” model that allows them to attract wealthy and high-achieving students to boost their rankings with significant amounts of merit aid – money that could have instead been directed to need-based aid for low-income students. That means that the neediest students are left with an impossibly high tuition bill.

Burd uses data, many of which are available through our Federal Education Budget Project database, on Pell Grant enrollment and net price for the lowest-income students at thousands of individual colleges. The analysis shows that hundreds of public and private non-profit colleges expect the neediest students to pay an annual amount that is equal to or even more than their families' entire yearly earnings. As a result, these students are left with little choice but to take on heavy debt loads or to behave in ways that are demonstrated to reduce the likelihood of earning their degrees, such as working full-time while enrolled or dropping out until they can afford to return. Only a few dozen exclusive colleges meet the full financial need of the lowest-income students they enroll. Nearly two-thirds of the private institutions analyzed charge students from the lowest-income families, those making $30,000 or less annually, a net price of over $15,000 a year.

Many private colleges have small endowments, making it extremely difficult for them to provide adequate support to those students with the greatest need. According to the report, the poorest schools are often the ones that enroll the largest share of federal Pell Grant recipients, but they charge these students high net prices because of their own limited resources. At the same time, many of these institutions provide deep tuition discounts to wealthier students to attract those high-achieving students to the school.

This is not just a question of institutional wealth, though. Some of the country's most prosperous private colleges are, in fact, the stingiest with need-based aid. These institutions tend to use their institutional financial aid as a competitive tool to reel in the top – and the most affluent – students to help them climb the U.S. News & World Report rankings and maximize their revenue.

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We created an interactive graphic that groups institutions into four categories based on whether they charge low-income students a high or low tuition and whether they enroll a high or low percentage of Pell recipients. We also used data from the Department of Education, FEBP, and The Chronicle of Higher Education to determine the number of endowment dollars available per student.

We can see from this graphic, for instance, that Washington & Lee University enrolls a very low proportion of Pell students (eight percent) and charges the lowest-income students over $14,000 a year in tuition after Pell Grants and financial aid. That’s an average tuition bill of over half of a family’s total income. What's worse is that Washington & Lee has a relatively large endowment of around $450,000 per student. 

While the problem is not as extreme among public universities, it is rapidly getting worse. As more states cut funding for their higher education systems, public colleges are increasingly adopting the enrollment management tactics of their private college counterparts - to the detriment of low-income and working-class students alike.

In many states, public institutions are following the same high-tuition, high-aid model – and in some cases, including in Pennsylvania and South Carolina, the neediest students are facing net prices more than double what they are charged in low-tuition states such as North Carolina. At Penn State University, for example, in-state students attending the university's flagship campus in University Park pay about $16,000 in tuition and fees annually, which is double the average tuition charged at all national public four-year colleges and universities examined in his paper. Despite the fact that Penn State spends nearly $14 million a year on institutional aid, its lowest-income in-state students pay an average net price of nearly $17,000, the fifth-highest of any public institution this report examines. In other words, Penn State's neediest students do not appear to be getting any discount relative to other students at all. At the same time, about 6 percent of the school's first-time freshmen received an average of $3,800 in so-called "merit aid" in 2010-11.

Schools like Penn State seem to be using their pricing autonomy to gain an advantage as they fiercely compete for the students they most desire: the "best and brightest" students - and the wealthiest. These actions fly in the face of national goals to increase access to higher education and help more students earn high-quality degrees.

Over the past several decades, a powerful enrollment management industry has emerged to show colleges how they can use their institutional aid strategically in the pursuit of high-achieving and affluent students. And worse yet, there is compelling evidence to suggest that many schools are engaged in an elaborate shell game: using Pell Grants, the primary source of federal aid for low-income students, to supplant institutional aid they would have provided to financially needy students otherwise, and then shifting these funds to help recruit wealthier students. This is one reason that, even after historic increases in Pell Grant funding, the college-going gap between low-income students and their wealthier counterparts remains as wide as ever.

A Better Way to Measure a College's Commitment to Serving Low-Income Students

May 9, 2013
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[Yesterday the New America Foundation's Education Policy Program released "Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind," a report that presents a new analysis of little-examined U.S. Department of Education data showing the "net price" – the amount students pay after all grant aid has been exhausted – for low-income students at individual colleges. This is the second in a series of posts related to the report's findings. Read the first part of the series here.]

Until recently, it has been very difficult to assess how well individual colleges are serving low-income students. Policymakers, researchers, and journalists have mostly had to rely on a single measure to do so: the proportion of Pell Grant recipients each college enrolls.

While this dataset provides a useful tool for comparing colleges based on their record of admitting low-income students, it does not tell us anything about the schools’ commitment to making college affordable for these individuals. For example, if a college enrolls a large number of Pell Grant recipients but doesn’t come close to meeting their remaining financial need, it may be setting them up for failure.

Simpson-Bowles: Reform Student Loans, Fund Pell Grants

April 23, 2013

Alan Simpson and Erskine Bowles, of the famed Simpson-Bowles commission (officially the National Commission on Fiscal Responsibility and Reform) that the Obama administration tapped to generate ideas to reduce federal budget deficits, are out with a new wide-ranging proposal. Titled A Bipartisan Path Forward to Securing America’s Future, the report was published by the Moment of Truth Project, which is itself affiliated with the Committee for a Responsible Federal Budget, an organization previously housed at New America.

The report includes higher education reforms that they say will create $35 billion in savings through 2023. These reforms mirror some of the ideas outlined earlier this year in the Education Policy Program’s report, Rebalancing Resources and Incentives in Federal Student Aid. Unlike the latest Moment of Truth Project report, though, the New America Foundation report argues that the savings these proposals generate should be reinvested fully in more effective and higher-quality postsecondary education aid. (The Path Forward proposal reinvests most, but not all of the savings into higher education aid.)

One way that Path Forward finds big savings is through eliminating the in-school interest rate subsidy, which defers accrued interest on the borrowers loans until after graduation. This is basically identical to New America’s proposal to eliminate Subsidized Stafford loans.

According to the Moment of Truth Project report, the subsidy is poorly targeted and that money can be better spent by funding the Pell Grant program. The authors argue that income-based repayment is a far better benefit to struggling borrowers, something we made the case for in Rebalancing Resources and Incentives. The deficit reduction report writes:

Another $15 to $20 billion could be generated through a number of more targeted changes such as adopting the President's proposal to reform Perkins loans, lowering Guaranty Agency Compensation Rehabilitation loans, repealing Grad PLUS loans, equalizing loans for dependent and independent students, creating a two-tiered income-based repayment system, and reducing or discontinuing funding for underperforming for-profit schools.

The authors go on to note that such reforms would fix the Pell Grant funding cliff, something we also accomplished in the Education Policy Program report. The authors further note that "by providing mandatory funding to cover much of the projected shortfall in the Pell Grant program, this option would limit the pressure on the Appropriations Committee" to make deep cuts in discretionary programs or to decrease the benefits Pell provides. In 2014, Congress was pleasantly surprised by a Congressional Budget Office estimate that showed a surplus had accumulated in the program over the past several years, permitting lawmakers to flat-fund the program at 2013 pre-sequester levels. Still, costs of the Pell program are expected to increase rapidly over the next several years, demanding a long-term solution.

The report also endorses a proposal first offered by the Education Policy Program’s Jason Delisle. Recently highlighted both in President Obama's fiscal year 2014 budget proposal and in a bill proposed by Republican Senators Coburn, Burr, and Alexander, the plan would interest rates on federal student loans to the rate of 10-year Treasury notes, plus a mark-up. As the commission notes, this addresses the interest rate problem more gradually than a bump from 3.4 percent to 6.8 percent – and it would permanently resolve the annual debate over setting the rates by creating a long-term policy subject to the market, not lawmakers’ whims and political interests.

In the Education Policy Program paper Rebalancing Resources and Incentives in Federal Student Aid, we recommend nearly all of these fixes as part of a larger reform to make federal student aid more equitable and rational. And we did this in a budget-neutral way – that is, we used savings found in some programs to increase funding for other programs, or to create completely new ones. While the new Simpson-Bowles report would use some of the savings to fund the looming Pell Grant program shortfall, the authors would also redirect a portion of the savings to deficit reduction.

Our proposal included a broad array of reform proposals, covering loans, grants, tax expenditures, transparency, and other federal aid issues, and it is meant to be seen as an entire package, not a menu of options, because each component of aid affects the others. We stand by that belief, but we are pleased to see other groups arrive at the same conclusions that we did in reforming the federal student aid system: Policymakers can better spend the significant resources they have already committed to federal student aid programs to benefit students, taxpayers, and other education stakeholders.

Key Questions on the Obama Administration's 2014 Education Budget Request

April 11, 2013
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President Barack Obama submitted his fiscal year 2014 budget request to Congress on April 10, 2013. The New America Foundation has reviewed the president’s proposals and generated a list of key questions that policymakers, the media, stakeholder groups, and the public should ask about the proposals.

Early Learning and PreK-12 Education

1. The president’s budget proposes to partner with states to provide high-quality pre-kindergarten programs for all low- and moderate-income 4-year-olds, funded with $75.0 billion over 10 years through a 94-cent increase in the federal tobacco tax. The corresponding budget documents provide some guidance on how quality will be defined, mentioning full-day programs, small class sizes and low child-adult ratios, but they are silent on other issues. How specifically will quality be defined? Will pre-K teachers be required to earn bachelor’s degrees or demonstrate specialization in early childhood education? What about states that want to make more investments in pre-K, but cannot meet the match required by the federal government? What safeguards will be put into place to ensure that the funding would not become another siloed funding stream?  And will any guidance be issued to encourage states to – in the long-term – fund pre-K and kindergarten the same way 1st through 12th grade are funded?

2. The president’s proposal includes $300 million for the Promise Neighborhoods program, a $240 million increase over last year. Some of the program’s funds will reside under a new inter-agency header, Promise Zones, in which housing, criminal justice, education, and economic growth efforts are all deployed within a single geographical area. The number of awards will be split between planning grants and implementation. Is the administration counting on sustaining this higher level of funding for the program moving forward? Should a relatively new program bring on so many new communities, rather than focusing on deepening services for existing grantees?

3. The president proposes $300 million for new competitive grants to encourage high schools to strengthen college and career readiness by redesigning traditional programs and creating partnerships with community colleges and employers so that students graduate with college credit and career skills. How would the Department of Education identify high-quality models that are likely to improve students’ postsecondary readiness, and would certain criteria be prioritized?  Would grantees be required to match any of the funding? 

And how would the High School Redesign competition interact with similar proposals? Dual enrollment, Advanced Placement (AP), early college high schools, and other accelerated programs would be supported in the president’s proposed $102 million College Pathways and Accelerated Learning initiative. The administration would simultaneously overhaul Career and Technical Education programs within high schools that operate under the Perkins Act through a $1.1 billion budget request. And an additional $32 million would supplement Perkins funds to address local workforce needs and support adult learners by allowing them to earn high school and college credit through dual enrollment. How would the department ensure these efforts complement, rather than compete with, one another? 

4. The president’s budget request includes $659 million for a School Turnaround Grants program. This would maintain spending for state School Improvement Grants (SIG), but would also expand the program to include all priority schools under No Child Left Behind (NCLB) waivers and add $125 million in competitive funding for districts to build capacity and maintain progress in schools nearing the end of their 3-year SIG interventions. Will the department issue guidance to encourage schools to add early learning efforts, like pre-K and full-day kindergarten, as part of school turnarounds? And what will the criteria be for districts applying for the new capacity-building grants? How will the department define successful district strategies to support persistently low-achieving schools? Districts’ lack of capacity has been one prominent criticism of the SIG program, but given that over $3 billion has been spent on SIG already, is the additional $125 million too little, too late?

5. The president proposes $215 million for the Investing in Innovation program (i3), an increase of $66 million. But nearly all of the increase ($64 million) would go toward a new program called Advanced Research Projects in Agency-Education (ARPA-ED) modeled after similar efforts in the Departments of Defense and Energy. The i3 fund provides competitive grants to school districts, nonprofits, and consortia to implement, validate, or scale up promising reform efforts. Would the i3 program continue to focus on certain reform initiatives, like teacher and leader effectiveness, or would the program shift focus to other areas, including early learning and student achievement in STEM subjects? Would ARPA-ED share the i3 focus? And how will the Obama administration ensure that ARPA-ED avoids redundancy with the Institute for Education Sciences?  

6. The president proposes to flat-fund the Assessing Achievement program at $389 million, which would replace State Assessments funding in NCLB. The Common Core assessment consortia, PARCC and SmarterBalanced, have been supported with $360 million in 2009 stimulus funds, set to expire in the fall of 2014 – before the tests are fully administered in the spring of 2015. The two consortia would be eligible to compete for an additional $9 million in funding under Assessing Achievement, while the remaining $380 million would be allocated by formula to states. Given pressure for additional assessments in PreK-3rd grade and untested subjects, technology upgrades and increased bandwidth, formative assessments, improved test security, aligned curriculum and professional development, and other supports, will states have sufficient resources to transition to the Common Core assessments while also maintaining and improving their other assessments? And is $9 million sufficient to complete and sustain the work of the Common Core assessment consortia during their first year of full implementation? What guidance will the department provide to help states and the consortia prioritize their activities heading into the critical 2014-15 school year?

Higher Education

7. The president proposes expanding the recently enacted, more generous Income-Based Repayment plan for federal student loans, Pay As You Earn, to all borrowers rather than just new borrowers as of October 1, 2007, and eliminating the tax on loans forgiven for borrowers. Last year, the New America Foundation argued for those exact policy changes – provided that Congress and the administration first address the perverse incentives and windfall benefits the program will provide to graduate and professional students and the schools that enroll them.                

If Pay As You Earn is expanded to all borrowers and loan forgiveness benefits are made tax-free, as the president is proposing, isn’t it even more important to rein in the program’s windfall benefits and perverse incentives? Does the administration have any thoughts on how to address these issues while maintaining the program’s benefits for lower-income and lower-debt borrowers?             

8. The president proposes setting interest rates on student loans at the 10-year Treasury note plus an additional 0.93, 2.93, and 3.93 percent for Subsidized and Unsubsidized Stafford and Grad PLUS loans, respectively.  The rate would adjust every year for newly issued loans based on the Treasury rate, but is fixed the life of the loan. The proposal closely mirrors one originally proposed by the Education Policy Program’s Jason Delisle.

Unlike Delisle's proposal, the interest rate in the president’s budget for Subsidized Stafford loans is lower than those for other loans. However, the Income-Based Repayment program makes the lower rate on Subsidized Stafford loans an unnecessary benefit, given that loans can always be paid as a low percentage of income regardless of the interest rate. What is the justification for the lower rate? Why provide an extra benefit for borrowers when Income-Based Repayment is available for struggling borrowers? Couldn't the budgetary resources used to provide the lower rate be put toward the Pell Grant program instead, where they are certain to help low-income students?

9. The president proposes a program that would allow non-accredited providers of learning to receive federal funding for two-year degrees that are both free to the student and high-quality, with demonstrable outcomes.  The goal of Pay for Success is to provide students with alternate pathways for high-quality, low-cost higher education.  Providers would front the costs and be reimbursed only when and if students succeed. This would allow learning acquired and/or certified through means as varied as MOOCs, work-based training, AP exams, and more to be packaged together to create a free, coherent, high-quality competency-based degree.

The budget documents indicate that demonstrated competencies, passage of field-appropriate licensing tests, and job placement are possible indicators of success. How will these indicators be determined? Will the agreed-upon indicators be transparent? How will the outcomes be verified? Will additional measures include acceptance of the two-year degrees for transfer by four-year institutions? How would this work if the “degrees” are not accredited? If students can demonstrate competencies and the outcomes are solid, what would be the justification for not accrediting these new degree programs? How would findings from this experiment on an outcomes-focused delivery model inform the broader conversation around higher education quality?

10. Providing students and families with better information in order to help them make more informed college-going choices is a recurring theme in the budget. It is highlighted as an area for state reform in the proposed $1.0 billion Race to the Top College Affordability and Completion competition and given as an example of an area to study under a $67.0 billion proposed higher education/financial aid research and evaluation program. And the president unveiled his College Scorecard in the 2013 State of the Union address to provide better, more actionable data to students in a user-friendly manner. Yet one of the main indicators on the Scorecard—employment—is essentially blank. Although the department has said that it is working to provide the information, it is not clear how or when that will occur. Given bipartisan interest in better postsecondary outcomes data, what is the department’s plan to provide accurate employment data to students? Does the president plan to make the Scorecard mandatory? If so, when? If the department wants to encourage states to provide better information, shouldn't it also lead by example?


Syllabus: Week of March 3, 2013

March 8, 2013
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Welcome to the Syllabus, a weekly guide that provides insight into what’s happening in higher education.


Poor Scholars Hit by Money Squeeze From Wealthy Colleges, Janet Lorin

It’s the classic game of bait and switch: Low-income student gets accepted to a selective, high-tuition/high-aid college, only to have institutional aid taken away once awarded an outside scholarship. This practice, known as displacement, reduces the grant aid awarded to students who win outside scholarships, giving aid to other students. Furthermore, many students find they can’t apply their scholarship funds to summer savings requirements. At Barnard, for example, students must save about $2,200 over the summer to help cover costs of their education that cannot be covered by scholarships. The National Scholarship Providers Association, a group whose 320 members include the Gates, Coca-Cola Scholars, and Michael & Susan Dell Foundations, argues that if a college rescinds funding because of outside scholarships, it “takes away a reward that the student earned through hard work and concentrated effort.”

The Impact of the New Pell Grant Restrictions on Community Colleges: A Three State Study of Alabama, Arkansas and Mississippi

February 27, 2013

A new study by the Education Policy Center at the University of Alabama finds that enrollment at community colleges in Alabama, Arkansas, and Mississippi declined significantly in the fall of 2012 due to recent changes made to Pell eligibility. The report’s authors argue the eligibility changes caused thousands of students to lose Pell grants and they predict many more thousands will lose their Pell grant funding in the coming year. Using data from the U.S. Department of Education and survey results from financial aid administers at all 63 of Alabama’s, Arkansas’ and Mississippi’s community colleges, the report argues that students in these three states are particularly sensitive to changes in  Pell eligibility criteria and that reductions in Pell aid as a result of such eligibility changes adversely affect students’ academic futures.

Among the report’s findings:

  • It is estimated that two out of every three full-time students receive Pell grants in Alabama, Arkansas, and Mississippi, indicating their importance to higher education access for students in the Deep South.
  • Declining community college enrollment, the authors argue, is a direct effect of the 2012 changes to Pell eligibility which included (1) reducing the maximum time a student is Pell-eligible from 18 total semesters of full-time enrollment to 12 total semesters; (2) lowering the income threshold for receiving an automatic zero expected family contribution from $32,000 to $23,000; and (3) restricting students without a high school diploma or GED from receiving a Pell grant.
    • These changes were enacted to address rapidly rising costs associated with the Pell program resulting from more generous eligibility criteria in prior federal higher education legislation and a substantial increase in the number of Pell applicants and recipients during the recession.
  • Enrollment declined at more than 75% of two-year colleges in Alabama, Arkansas, and Mississippi in the fall of 2012.
  • Over 5,000 students in these three states lost their Pell grants in the fall of 2012 and nearly 17,000 are estimated to lose their Pell grant in 2013.
  • Before these changes in Pell eligibility, community colleges in the Deep South saw an across-the-board 6% rise in enrollment from 2008-2011 due an increase in the number of students who qualified for a Pell grant.
  • Survey results from financial aid administrators at all 63 community colleges in the Deep South indicate:
    • Most administrators favor lowering the maximum Pell award if it would mean fewer student eligibility restrictions and regulations on how it can be used.
    • A large majority view the now-defunct year-round Pell grant program as an effective tool to increase student completion at their institutions.
    • Overall, administrators of financial aid would like to see a phased-in implementation of the new time limits for Pell eligibility to mitigate the negative impact on students. 

President Obama’s Bold Plan To Reshape American Higher Education

February 13, 2013

As a rule, speechwriters put the most dramatic parts of a president’s agenda front and center in televised speeches, leaving the boring policy details to the supplemental notes. Last night, the Obama administration did the opposite: the higher education section of the State of the Union address was much the same as last year’s, focusing intensely on college affordability and putting institutions on notice that the gravy train of public support for rising prices would have to end. But the truly earth-shaking policy initiatives were left for the supplemental policy document  released directly after the speech, in which the Obama administration proposed the biggest change to federal higher education policy since at least the Higher Education Amendments of 1972.

Those laws created what would become the Pell Grant program for low-income students, which has grown to a $40 billion pillar of government support for higher learning. The Pell grant is a voucher system--any eligible student can use their grant to pay tuition at any accredited college of their choice.

The key words in that sentence are “accredited” and “college.” There are lots of ways to learn, but Pell grants can only be used to purchase learning from organizations that fit the model of colleges as we know them today. And who decides, legally, what a “college” is? Accreditors, a group of independent non-profit organizations run by...colleges as we know them today. By controlling access to Pell grants, student loans, and other forms of financial aid, existing colleges determine the price, structure, and character of higher learning. This regulatory monopoly has had severe and sadly predictable negative effects on price and innovation in higher learning. To compete on a level financial playing field, you have to teach, spend, and ultimately charge like established institutions.

The Obama administration wants to change all of that:

Syllabus: Week of February 3

February 8, 2013
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Welcome to the Syllabus, a weekly guide that provides insight into what’s happening in higher education.


American Council on Education Recommends 5 MOOCs for Credit, Steve Kolowich
The Chronicle of Higher Education

While there has been a lot of buzz about Massive Open Online Courses (MOOCs) over the past few months, there has been little headway in figuring out a sustainable business model or how to award credit. The credit question just got easier to answer this past Thursday when the American Council on Education (ACE) endorsed five MOOCs. But it will still be up to individual institutions to grant the credit. So far one institution—Excelsior College—has said it will not accept them. The college’s president, John Ebersole, commented, “We would hope that ACE would support a more rigorous process as is the case with other forms of noncredit instruction.”

NAICU Has Bad Apples Too

February 7, 2013
Rotten Apple

There are bad actors in every sector of higher education. But the National Association of Independent Colleges and Universities (NAICU) would like you to believe otherwise. During a panel discussion with Congressional staffers at their annual conference, private college presidents expressed frustration with increased federal scrutiny and regulation. They argued that problems with debt and default are just for-profit problems, not private nonprofit problems. A Republican staffer for the House Committee on Education and the Workforce, Brian Melnyk, agreed in part saying, “There are some bad actors among for-profits,” but he added, “bad actors can be found in every sector of higher education.” This comment was not well received. Several audience members yelled, “Name them.” Melnyk declined. But I won’t.

In October, the Department of Education released the first official 3-year cohort default rates (CDR) for postsecondary institutions, which measure the percentage of students who have defaulted on their federal loans within three years of leaving college. Having a rate above 30 percent starts an institution on the road to federal student aid sanctions. And although institutions with 3-year CDRs over 30 percent are overwhelmingly for-profits (73 percent), private nonprofits still account for 11 percent of the schools. Of that 11 percent, almost half are NAICU members.

New Pell Grant Estimates Buy Time, Long-Term Fix Still Needed

February 7, 2013

The Congressional Budget Office this week released updated cost projections for the Pell Grant program – and the estimates show an unexpected surplus over the past several years. The figures are much awaited because they dictate what lawmakers must allocate to the program in the upcoming fiscal year 2014 appropriations process if they want to keep the program running at its current level of benefits and with existing eligibility rules.

In 2010 and 2011, those estimates sparked panic. The program was burning through money faster than anyone expected, prompting Congress and the Obama administration to shift funding from other programs and cut parts of the Pell Grant program itself three separate times. (A more complete history and funding table is available here.)

The funding emergency was exacerbated by the fact that congressional lawmakers and the Obama administration had tried to maintain a large increase in the maximum grant, first funded without any long-term funding plan by the American Recovery and Reinvestment Act of 2009. The latest round of temporary funding was set to dry up in 2014, leaving a $5.8 billion hole in the program. In 2015, the number would jump to $8.7 billion, and stay at about that level indefinitely.

Luckily for procrastinators in the White House and on Capitol Hill – and for Pell Grant supporters – the latest Congressional Budget Office estimates have come to their rescue. According to CBO, the program was actually overfunded the past few years, leaving a surplus of $9.2 billion. The CBO doesn’t give much explanation as to what changed. For that we’ll have to wait for the president’s budget request due in late March.

But this means that Congress can fund the Pell Grant program with the same appropriation it provided in 2012 for two more fiscal years without supplemental funding or eligibility changes. Moreover, the fiscal year 2015 appropriation needs to be only $1.4 billion larger, rather than $8.7 billion larger, because lawmakers can apply a big chunk of the $9.2 billion surplus to that year’s funding. (To be sure, a $1.4 billion increase will be no easy feat, given that lawmakers must now contend with spending caps on appropriations enforced by sequestration.)


Still, for the long term, the Pell Grant program needs a funding plan. Come fiscal year 2016 and each year thereafter, lawmakers will need to increase the annual appropriation between $7.2 billion and $4.9 billion, depending on the year (see above table). If not, lawmakers will have to drastically reduce the maximum grant or change eligibility rules. Favorable estimates from the CBO can delay the day of reckoning, but they won’t solve the underlying problem: Temporary funding is only temporary.

As a final note, Pell Grant supporters – who no doubt are excited about the new estimates – should understand that lawmakers could steal the Pell Grant surplus to pay for something else. There is some tricky accounting involved here. Technically speaking, Congress could use the surplus to supplant regular appropriations funding this year (or in 2014) for Pell Grants, and then spend the surplus on some other program. The temptation to carry out such a scheme will be intense given the ongoing budget battles on Capitol Hill. That would jeopardize college aid to millions of students from low-income families. And it would make the tough spending choices and eligibility changes Congress and the Obama administration made to shore up the program in the recent years all for naught.

Got that, Congress? Don’t steal the Pell Grant surplus. We’re watching.


2/7/2013: Table was updated to correct the 2015 Pell Grant funding shortfall.

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