Pell Grants For Summer Study Eliminated—20K Students Impacted At Local Institutions

The end of the year-round Pell Grant program is here. During the 2010-2011 academic year, the Pell Grant award maximum per student was $5,500. In the 2008 academic year, it is estimated that the average Pell Grant awarded was $2,770, which covered approximately 42 percent of tuition and related expenses in the average U.S. four-year public college.

America’s undergraduate students who are needy can no longer count on Pell grants to fund summer study. At the University of Michigan at Ann Arbor, about 15 percent of students receive Pell grants. At the University of Michigan campuses at Dearborn and Flint, almost 40 percent of students receive Pell grants to fund study, according to information from the National Center for Education Statistics and the Project on Student Debt. At Eastern Michigan University, 27 percent of students enrolled full-time received Pell grants in the 2009 academic year.

At institutions classified as “most competitive,” such as The Ivies, on average 10 percent of students enrolled receive Pell grants. According to a report on Pell grants and family income written by reseacher Donald Heller, “Receipt of a Pell Grant is a good proxy to estimate the income bracket of students.”

The Pell grant has been a mainstay for low- and middle-income students for the past three decades. Most recently, for profit colleges and universities have made the Pell grant student their bread-and-butter. In a June 30, 2011 piece published in The Chronicle of Higher Education, writer Andrea Fuller reports that, “For-profit colleges, which are facing the scrutiny of Congressional hearings and investigations by attorneys general, may have met yet another challenge in the end of the year-round Pell Grant program. Students at proprietary institutions make the most use of the recently scrapped program, according to a Chronicle analysis of U.S. Department of Education data.”

When Congress proposed in February 2011 to cut billions from the Pell Grant program, created more than 30 years ago, the move launched an intense national debate over the grants and what role federally financed aid should continue to play in assisting low-income students in their college careers.

Here’s what six of the nation’s top thinkers in the areas of higher education and public policy think about what the Pell Grant program should look like in the future. 

David Evans, former staff director of the U.S. Senate Subcommittee on Education, Arts, and Humanities, under the late Senator Claiborne Pell:

From its inception, Senator Pell’s idea was a straightforward one: Students without sufficient financial resources who had the talent, drive, and moxie should receive a grant to get a college education. Eligibility would be determined by need, and award amounts would be related to the cost of education at the institution the student attended.

When Pell retired, in 1997, about 3.7 million Americans received Pell Grants. Today, the total is 9 million. The number of Pell Grant recipients who have graduated and become creative, productive citizens is enormous.

Through several economic downturns, people have turned to Pell Grants to pay for a college education. They have seen this as the avenue to better employment and a more secure future. Without question, the program has been one of the un heralded ways out of a recession, but its use has also resulted in enormous funding shortfalls.

Pell Grants also have helped relieve the crushing loan indebtedness of college students. It is far better that we pay for the Pell Grant program than add billions of dollars in defaulted federal loans to the national debt, or have low-income students with little or no job prospects drop out of college. And a Pell Grant is certainly better than the high-cost private loans that have become so prevalent.

The Pell Grant program now dominates the federal education budget. And largely because of that, it is targeted for dramatic cutbacks. Some would argue that the basic structure of the Pell Grant program should be revamped or scrapped. Balderdash. You don’t throw something so successful on the scrap heap largely because it is serving substan tially more students than had been anticipated. That is truly penny-wise and pound-foolish.

Can improvements be made? Yes. Two come immediately to mind. First, Pell Grants should not go to occasional students. Completion and graduation should be the goal. Senator Pell was a strong advocate of recipients’ making satisfactory academic progress and putting a limit on the number of years a student could receive a grant. We should re-examine current requirements to ensure that they are both meaningful and effective.

Second, Pell believed that for-profit institutions of higher education should not rely inordinately on the federal government for their income. He supported restrictive rules that have largely been diluted and discarded. Clearly, a publicly traded, for-profit institution of higher education should not receive more than three-quarters of its income from federal programs.

As we get our economic house in order, changes and cutbacks in various federal programs are inevitable. It is critical, however, that we exercise care in what we do. Need I repeat Senator Pell’s frequently stated belief that the real strength and health of America is found in “the sum total of the education and the character of our people”? I guess I do.

Frederick M. Hess, director of education-policy studies and resident scholar at the American Enterprise Institute:

The Pell is swell. Americans are justifiably fond of programs that help make college affordable today while sticking future taxpayers with the bill. Moreover, supporters reasonably argue that Pell (as is true of every other single domestic discretionary program) has only the tiniest impact on the federal deficit. So the case for inaction is an alluring one, and almost axiomatic in the world of higher education.

But if one believes that serious debt reduction requires that the sacrifice be borne widely, then Pell must take its turn in the barrel. The challenge is to embrace this as an opportunity for fresh thinking. After all, Pell Grants were created in a very different time.

At least four major changes have unfolded since that era. One is an explosion of data on institutional quality and what students actually learn in higher education, and the attendant focus on accountability. Second is the dramatic growth of for-profit postsecondary education. Third is the availability of online learning. Fourth is the massive increase in “nontraditional” students.

The trick is to reconfigure Pell accordingly, so that a smaller grant might continue to effectively promote the familiar mission of expanding college access. One key lever is to foster virtuous changes in student and institutional behavior.

Today, for instance, Pell offers no incentives for institutions to worry about cost-effectiveness. Since Pell dollars are free to a student, institutions are encouraged to set tuition so as to soak up all they can. Meanwhile, the student has no reason to scrimp if tuition exceeds the Pell cap, and only modest incentives to comparison shop below that.

How about transforming Pell into something more like a federally funded education savings account that recognizes the mix-and-match opportunities and lifetime learning dynamic of the 21st century? Students could take courses—online or otherwise—from more than one institution at a time. This would allow Pell to accommodate increasingly customized offerings. Title IV eligibility would obviously need to be rethought accordingly.

Right now, Pell doesn’t encourage either students or institutions to accelerate time to completion. Meanwhile, students don’t benefit from making cost-conscious choices. Here’s a thought: Shorten the eligibility window; reward students who finish their degree or credential in an expedited fashion, as well as institutions whose students finish on time and find employment; and permit students to retain half of any unspent Pell dollars in a dedicated account for future education.

Sandy Baum, an independent higher-education-policy analyst and professor emerita of economics at Skidmore College, and Michael McPherson, president of the Spencer Foundation:

The Pell Grant program will not continue to be effective if we leave it exactly as it is and just push for the highest maximum grant level Congress is able and willing to provide every year.

Total Pell expenditures were three times as high in 2009-10 as in 1999-2000, after adjusting for inflation. The number of Pell recipients doubled—from 3.8 million to 7.7 million—over that decade. A few of the students who received those funds would have been fine with a smaller subsidy. But most would have struggled, and many would not have continued their studies. Still, it would be irresponsible not to carefully examine a program that has grown so large, even if there were no strains on the federal budget.

One approach is to look at individual components of the program and tweak them. The Obama administration moved in this direction with its proposal to rescind access to year-round Pell Grants. We don’t yet have the evidence to know whether access to a second Pell Grant within a calendar year can reduce time-to-degree for a significant number of students. We need that evidence to judge the wisdom of removing the option, just as we also need that evidence to support spending the $5-billion a year it is projected to cost in 2013.

Other provisions we should look at include the number of semesters for which a student can receive a Pell Grant (currently, 18) and the number of credits required for full-time status (the current requirement of 12 won’t get you to a B.A. in four years). Under the present Pell formula, raising the maximum award going to the lowest-income students automatically raises the income limit for Pell eligibility. We should re-examine this link.

But if we really want a Pell Grant program that is viable for the long run, we will have to ask bigger questions. About 60 percent of Pell Grant dollars go to independent students. Should we think differently about eligibility for older students and others not relying on family resources? Many people have expressed concern about the fact that about a quarter of Pell funds go to students in the for-profit sector. That occurs only because such students are low-income: They apply for aid and meet the eligibility requirements. Many of those students are independent and involved in job training rather than broader education programs. Should we fund such students through a separate system?

Of course, the Pell Grant program is never adequate because college prices keep rising rapidly. Addressing that issue is critical, but no fix to the Pell Grant program will provide the solution. We need a program that can continue to make college accessible for students with the most limited resources, even as prices keep rising. We also need a program that is simpler so students can understand easily and well in advance how much aid they are likely to receive.

Jorge Klor de Alva, president of Nexus Research and Policy Center and former president of the University of Phoenix:

The Pell Grant program recognizes that to remain competitive, America must educate the rapidly growing population of low-income students struggling to ready themselves for the work force. However, the program must become something better than what it is today if it is to meaningfully improve its record of successful support of financially strapped students.

Most Pell recipients are overwhelmingly clustered in the least selective institutions, which also happen to receive the lowest taxpayer support per student. Consequently, Pell grantees, who often enroll with one or more risk factors, typically attend postsecondary institutions with limited resources available to improve student retention and completion rates.

In response to this perverse situation, reforming the Pell Grant program calls for a rethinking of what the program should aim to accomplish.

Briefly put, two intertwined policy goals should drive thinking about what the Pell program should be doing. First, Pell Grants should be structured to encourage students to complete their postsecondary objectives, whether a certificate or a degree. Second, they should incentivize colleges and universities to help students reach their edu cational goals.

To address the first aim, Pell Grants should only be awarded as part of a comprehensive financial-aid package—one consisting of loans that become grants after milestones have been reached, thereby providing periodic financial incentives for students to make progress and complete their programs. The objective is to maximize the amounts available to students who are on track to graduate by permitting institutions to limit the amount that students can borrow (thereby reining in unnecessary borrowing) and by recovering funds currently lost to dropouts. This restructured system could increase returns to both taxpayers and students. How might this work?

Analogous to some of the well-known programs of loan forgiveness, students would have incentives to continue their studies by knowing that each loan amount they receive each term would become a Pell Grant at the completion of a minimum number of credits. For instance, and without going into details, a student who completes a credential or a degree, no matter how long she takes, would end up owing nothing because each term’s loan would be transformed into a grant after the completion of, say, each set of 10 credits. A student completing only nine total credits would owe the full amount of that term’s loan, while a student who drops out after completing 18 credits would owe only on the loan amount that was not transformed into a Pell Grant.

To address the second goal, an institution would receive a bonus for each Pell recipient who completes a certificate or degree—a bonus that would have to be spent on improvements to the institution’s retention program.

Michelle H. Brown-Nevers, associate vice president for student services and university registrar at the University of Pennsylvania:

Increasing the number of qualified students who successfully complete post secondary education is critical to the nation’s competitiveness in a global economy.

Since qualified students from lower-income families are less likely to enroll in and complete college, and we know that affordability is one of the major impediments to their college success, it is important to maintain and enhance the Pell Grant program. Although the sim plicity of the eligibility formula results in some misdirection of Pell Grants, that is a reasonable tradeoff given that making the process more complex could discourage participation.

The original Pell Grant program was designed to provide a floor for students with high need by providing them a means of paying for living expenses during their enrollment. We should consider going back to that model, and index Pell Grants to the mean (or median) costs of housing, board, and books, which are somewhat less volatile than tuition and fees. The responsibility of funding tuition and fees for needy students would belong to those that set the tuition and fees: the states and the institutions themselves. That process should be viewed as setting net prices as well as “sticker prices,” and consequently should be done in conjunction with budgeting financial-aid dollars.

Additionally, earlier awareness of the availability of Pell Grants and other financial aid is important to encourage students (and parents) to stay academically focused throughout primary and secondary school. One proposal along those lines that should be carefully considered is communicating periodic projections of eligibility, similar to the way the Social Security Administration provides statements.

One measure of the effectiveness of the Pell program is whether recipients successfully complete their educational programs and obtain a marketable credential. Careful attention needs to be paid to how Pell Grants are awarded to students unlikely to obtain such a credential, while not discouraging schools from taking risks in admitting underserved students.

Pell Grants, and other federal-aid programs, are a critical piece in addressing the national issue of college affordability, but the battle can be won only by a partnership involving the states and colleges, as well as private philanthropy.

Michelle Asha Cooper, president of the Institute for Higher Education Policy:

Some of the more recent critiques of the Pell Grant program argue that it does not provide students with incentives for completion. That point is supported by research showing that a sizable number of college students drop out, often in the first or second year.

While the issue of college dropouts deserves attention, in considering the value of the Pell Grant program it is necessary to acknowledge that various factors limit the program’s effectiveness. For one thing, growth in college costs has outpaced growth in the Pell Grant program. Despite regular increases in funding, the purchasing power of Pell Grants has diminished significantly over the last three decades. In addition, the number of students eligible to participate in the program has grown substantially in recent years, and continued growth is projected, accompanied by an increase in program costs.

Discussions about the need to restructure the program are not new, and numerous proposals exist. Some suggestions include increasing award amounts in the first and second years and decreasing them in subsequent years or decreasing award amounts in earlier years and increasing them in subsequent years. Others look at simplifying the financial-aid process to allow for early award notification for high-school students. Still others suggest adjusting federal need analysis to better aid the neediest students. Performance-based scholarships are also under consideration.

Each of these proposals has some merit, but they also have different goals. Some encourage access, others aim to foster completion. Although both federal and state policies tend to separate the goals of access and completion, that approach is limiting. As we think about the best approach for restructuring Pell Grants, we have to begin with both of these objectives in mind—access and success. But regardless of whether Pell operates under the existing framework or an improved one, the program must be adequately funded to be effective, and institutions must respond to pressure to constrain costs and focus on increasing the educational quality and graduation rates of their Pell Grant recipients. Providing financial assistance to college-ready, low- and moderate-income students is a sound financial investment for our nation, making the Pell Grant program absolutely necessary for students—and for society.