Conditional Pell Dollars Miss Students Who Need Them Most

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SPRING 2014 / VOL. 14, NO. 2

Education reform is a well-intentioned effort to improve outcomes for all students that is undercut by a misguided focus on achieving those goals on the cheap. The proposal I’ve been asked to discuss, which would condition Pell Grants on “college readiness,” is just the latest example. This idea is redundant and expensive, and will decrease the Pell’s cost-effectiveness by exacerbating an existing trend toward retargeting aid to students who are less affected by it.

Let’s start with the facts. As it stands today, the federal Pell Grant program requires students to complete secondary school; no student can receive the Pell unless she has a high school diploma. Until July 2012 there was an alternative way to obtain the Pell via a standardized “ability to benefit” test. That no longer exists. In this sense, the college-readiness standards for Pell are stronger than ever and will be even stronger if the Common Core State Standards initiative has its way with the high school diploma. Moreover, the Pell Grant also includes a satisfactory academic progress standard that ensures that students who are failing to make decent grades in college do not keep the award. Typically set at a C average (2.0), close to the mean grade-point average (GPA) of Pell recipients, that standard revokes funding from tens of thousands of students every year.

Whether or not increasing standards is a positive step in the right direction depends on one’s perspective. If you are concerned about the American dream, aiming to ensure that hard work and talent, rather than family background, determine children’s opportunities, this is a move in the wrong direction. The chances of obtaining a high school degree (and thus being eligible for the Pell Grant) remain highly unequal based on family income and wealth, and ending any second-chance alternative pathways to federal financial aid reinforces that stratification. But it’s already been done.

In today’s world, we must be concerned with what we get for our money, and Pell dollars are no exception. For this reason, it is instructive to return to the creation of the Pell Grant and its explicit purpose: “the right of every youngster, regardless of his family’s financial circumstances, to obtain a postsecondary education.” Note the focus on “obtaining” the education, not merely “accessing” it. In this critical sense, the Pell Grant is meant to support students as they move from college entry to college completion, and yet for the last 30 years, that purpose has been all but forgotten.

Moving students from low-income families from initial college entry to the completion of degrees requires that Pell Grants effectively reduce the costs of attendance so that students are able to work less and study more, and can overcome financial obstacles in their way. Its purchasing power has declined to the point that it does not do this. Moreover, research indicates that low-income students who obtain a high school diploma but are not in the top echelons of their school are the most likely to need and benefit from financial assistance: they require extra time to devote to schoolwork and yet are more likely to have unmet financial need, since so-called “merit” aid rarely flows to them.

When need-based financial aid programs like the Pell Grant are evaluated, researchers tend to find that students reformers might not deem “college ready” obtain the greatest returns from the effort. For example, Mark Schneider of the American Enterprise Institute found that in both Texas and Louisiana aid worked best for the students who faced a lot of unmet need partly because they did not qualify for aid based on their academic profiles. These students, however, are not the focus of programs in their states. Similarly, economists Bridget Long and Ben Castleman found that Florida’s Student Access Grant boosted college attainment the most for students who graduated in the top 25 percent of their high school graduating class but did not qualify for Florida’s Bright Futures merit aid program. Raising the bar on academic requirements for the Pell Grant would thus seem to reduce program effectiveness, not increase it.

One of the greatest challenges facing our nation is the increasing stronghold that family income has in determining college attainment. University of Michigan scholars Martha Bailey and Susan Dynarski found that among people born in the early 1960s, there was a 31-percentage-point income gap in the chances of bachelor’s degree attainment, with just 5 percent of those from poor families completing college compared to 36 percent of wealthy students. Over the next 20 years, the gap grew to 45 percentage points primarily because the attainment of the wealthiest Americans raced ahead (up to 54 percent completing college), while Americans from more modest means made far smaller gains (increasing their chances to just 9 percent). The consequences are a reduction in America’s labor force productivity, future increases in spending on the social safety net, and a loss of tax revenue.

Restricting the federal Pell Grant to students who are well prepared for college would make this bad situation worse. The K–12 system remains overwhelmingly unequal, and chaining Pell eligibility to it even further ensures that both ends of the educational process remain unequally distributed. It transforms the Pell Grant from a policy aimed at transforming lives to one that simply rewards students lucky enough to be born into situations where their families are able to seize good high-school educations for them.

Let’s be honest: adding such merit criteria to Pell Grants will merely make the program cheaper. We can look to history to tell us this. Consider the last merit-based Pell Grant, the Academic Competitiveness Grant (ACG). When implemented in 2006, the ACG restricted the provision of this supplemental Pell Grant to students who took rigorous high-school coursework, as assessed by a rubric that had to be manually verified and followed by financial aid officers. The lessons from the ACG are instructive: it served far fewer students than expected, added substantially to administrative costs, and was widely viewed as a failure. The program was ended in 2011 during a period of budget cuts.

Clearly, if the ACG criteria were imported into the main Pell Grant program, far fewer students would be served, and costs would fall. But so would its cost-effectiveness. In fact, improving the Pell’s cost-effectiveness requires actions in exactly the opposite direction. America needs more of its low-income families to send their children on for postsecondary education so that they can join our workforce, pay taxes, and build healthy families for future children. Focusing only on the “talented tenth” of Pell recipients will be a disaster, leaving millions of other students behind. That is a financial risk we cannot afford to take.

The data suggest that removing the Pell Grant from less-prepared students will not compel many of them to forgo college. Instead, they will enroll, and without grant aid, they will take on debt, even more than they already do. Their debt will become our debt, as they fail to repay, go into default, and become part of underground economies that do not pay taxes and exact substantial strain on our neighborhoods and communities. There is no escaping the cost of educating these students at the postsecondary level in today’s economy; there is merely the question of whether to pay now, or pay later.

If the goal is to increase the cost-effectiveness of the Pell Grant program rather than simply cheapening it, policymakers should refocus their sights on the real problem: we spend a lot on financial aid but spending alone is insufficient to make college truly affordable. The purchasing power of the Pell Grant has been devastated. When created, the Pell Grant covered nearly 90 percent of the costs of attending a public college or university, but today it covers barely 30 percent. Students from working poor families, earning an average of $16,000 a year, are asked to fork over as much as $12,000 a year—after taking grant aid into account—in order to finance attendance at a public bachelor’s degree–granting institution. Is it any wonder that some drop out? The real culprit is not a lack of academic preparation, but instead the actions of state legislatures, colleges, and universities that hike up the costs of attendance, underinvest in need-based financial grant aid, and spend the least on support services at the schools where students possess the greatest economic and academic needs.

Creating a cost-effective Pell Grant that promotes both access and completion requires adding state and institutional accountability and increasing spending on the Pell and the federal work-study program. In sharp contrast to K–12 education, where the federal government contributes at most 10 percent of revenue yet has strong accountability demands, in the postsecondary arena colleges and universities receive up to 90 percent of their support from student financial aid and yet are asked to do very little in return. We need to restore the purchasing power of the Pell Grant by bringing states and institutions to the table and driving down college costs. Financial aid will never keep pace with uncontrolled costs of attendance, and it should not have to. We must provide incentives for states to move toward providing two years of community or technical college at no cost to families. The federal government should match these commitments by expanding the federal work-study program, especially at community colleges. Raise the bar by ensuring that every Pell Grant recipient has access to a minimum of 20 hours per week of on-campus employment: they will gladly work to earn the support, and increased college contact has positive benefits for their academic progress as well. Require schools to provide all students with supportive staff to help them construct realistic schedules and financial plans, and ensure that they are screened for eligibility for all forms of financial aid and public benefits each year to support their college attendance. Finally, adjust the calculation of need so that it is possible for the expected family contribution to drop below $0 for the most severely poor students; this will allow them to accept as much financial aid (and subsidized loans) as they need to ensure their college costs are covered. Only then can we expect students to really focus, work hard, and finish their degrees. Certainly, these kinds of changes are much more difficult than simply cutting students out of the program, and they will take more time to achieve, but they will also lead to the creation of the cost-effective Pell Grant program that the nation deserves.

Sara Goldrick-Rab is an associate professor of educational policy studies and sociology at the University of Wisconsin.

This article is part of a forum on Federal Pell Grants. For another take, please see “Target Aid to Students Most Likely to Succeed,” by Isabel Sawhill.

Comment on this article
  • Brian Simmons says:

    Interesting articles. Both speak to the crisis we are facing in higher education to meet the needs of our students and to invest as wisely as possible the dollars we spend.

  • Greg says:

    you don’t have to be poor and on FA to do poorly on questionable placement tests. All students would benefit by the college designing reasonable acceptance standards and sticking with them. Being eligible for FA and eligible to go to college are not the same thing.

  • theta says:

    It’s just so darn inconvenient when you run out of other people’s money to give away :( The number of “free money” programs in this country is an embarrassment (yes I include corporate welfare in that statement)

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