The Price Paid for Keeping the Maximum Pell Grant in Place

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New America Foundation
By: Stephen Burd
April 14, 2011

[Editor's Note: A version of this post ran first on our sister blog, Ed Money Watch]

After months of drama, the White House and Congressional leaders found the money to keep the current maximum Pell Grant in place for the upcoming school year. But this victory did not come without a price -- Congress is on the verge of eliminating a popular policy that allows low-income students to collect two grants in a single award year with the second grant generally used to pay for summer school.

For Obama administration officials, this trade-off was a no brainer. With the Pell Grant program running huge deficits, and House Republicans threatening to significantly cut the maximum award and thereby reduce the grants' purchasing power, providing two Pell Grants to students in a single year seemed to the administration to be a luxury the government could no longer afford.

But to some college officials -- particularly, but not exclusively, at community colleges and for profit schools -- this change, which was made without any meaningful public debate or discussion, is shortsighted. They say that ending the policy will be especially harmful to adult students who, because of their work and family commitments, don't have the time to attend college on a traditional academic schedule.

More Popular Than Expected

Congress created year-round Pell in 2008 with the aim of helping low-income students move through college quicker. Since then, according to Education Department officials, demand for a second Pell has far exceeded expectations. As a result, they say, the "two Pells" rule accounts for 22 percent of Pell Grant program's total cost increase since 2008.

In the program's first year in 2009-10, 800,000 students obtained a second Pell, at a cost of about $1.7 billion. If the policy was allowed to continue as is, the Department estimates that participation would grow to 1.9 million students in 2012-13, at a cost of approximately $4.8 billion.

Year-round Pell supporters say the stronger-than-expected demand for the grants prove the policy's worth.

But Obama administration officials have a different explanation for the program's growth: they say the rules governing the policy are too lax. As a result, they say, students have been receiving these grants for summer courses that often do not accelerate their progress.

A Battle Over The Policy's Purpose

The roots of this dispute go back to 2009 when the Education Department was drafting regulations to carry out this provision. That August, the Department proposed rules that would have required students to complete a full year of credit hours during their colleges' traditional academic year before they could receive a second Pell Grant. "We are proposing these requirements to encourage a student to accelerate the completion of his or her program of study within a shorter time period than the regularly scheduled completion time, i.e., the published length of the program," the agency wrote in the preamble to the proposed rules.

College leaders and lobbyists howled in protest over the Department's stance, which they said ran contrary to intent of Congress. According to a 2009 report in Inside Higher Ed, the lobbyists said that the purpose of the year-round Pell was "not to help students finish college faster than is normal, but to help an individual student finish his or her program faster than he or she would have otherwise." In addition, they said that Congress had not meant to exclude part-time students from the benefit, as the Department was proposing.

"All students should have access to year-round Pell Grants as long as they maintain satisfactory academic progress," the presidents of the American Association of Community Colleges and the National Association of Student Financial Aid Administrators wrote in a letter to Education Secretary Arne Duncan at the time.

These lobbyists took their concerns to Capitol Hill. And, under pressure from lawmakers, the Education Department relented.

In defending the president's proposal in his 2012 budget request to end the "two Pells policy," administration officials say that it was not directed at any one collegiate sector, as Higher Ed Watch and others suspected. They state that colleges in all sectors are using the grants too liberally. (In 2009-10, public 4-year colleges, community colleges, and for-profit institutions each received about 30 percent of the funds, according to the Education Department)

More Horse-Trading to Come?

In the end, growing costs doomed the year-round Pell policy. The administration and Democratic lawmakers were desperate to find the money they needed to keep the maximum Pell Grant at $5,550 for the upcoming school year. Removing the second Pell option was the quickest and easiest way to reduce the cost of the program.

What's most surprising, and potentially disturbing, however, that this was all done without any meaningful public discussion or debate. Instead, the year-round Pell rule was horse-traded away in backroom budget negotiations that were taking place under the pressure of a possible government shutdown. This is hardly the best recipe for making good public policy.

The administration was probably right to favor eliminating the year-round Pell to maintain the maximum Pell Grant at its current level. But in the end this is just a short term solution, as the Pell Grant's budget problems are far from over. Further steps will be needed to get the program's costs under control and potentially to improve its effectiveness. It is still very possible that Congress will choose to reduce the maximum grant in the upcoming fiscal year (2012-13 academic year) given the current budget climate.

In the coming months, there should be a thoughtful debate that examines the benefits and pitfalls of potential policy options. Lawmakers shouldn't decide the program's future in haste, behind closed doors, and in the heat of another high stakes budget battle.

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This page contains a single entry by CFED published on April 15, 2011 3:44 PM.

End of Year-Round Pell Grants Could Lead Many Nontraditional Students to Drop Out was the previous entry in this blog.

How Worrisome Is Student Debt? is the next entry in this blog.

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