The federal Pell Grant Program may not be the nation’s largest student aid program, but in recent years it has been one of the fastest growing. A new report from the John W. Pope Center for Higher Education Policy, Pell Grants: Where Does All the Money Go?, sheds some light on the past and current state of the grants. The study was highlighted in a June Wall Street Journal editorial.
The program started in 1972 to help poor students pay for college. While the amount of money given to each individual student largely has stayed flat over the program’s four decades of existence, the number of students in the program has grown so much that currently about 60 percent of undergraduate students nationally are receiving stipends from it. At some schools, nearly 80 percent of students receive the grants — meaning only one in five students at those schools does not get one. As a result, the nation is spending billions on the program — nearly $42 billion in 2012. Pell grants are the biggest expenditure of the Department of Education.
Much of that increase is recent. Between 2008 and 2010, Pell Grants roughly doubled, with total disbursements growing from $18 billion to $36 billion. The number of grant recipients grew from 4.1 million in 2000 to 9.6 million in 2010 (there were 16 million undergraduates in the country). Though not technically an entitlement program, it has become a de facto entitlement because everyone who qualifies gets a grant, regardless of budgeted funding.
Meanwhile, mounting evidence suggests the Pell Grant program is not producing the desired results.
The Pope Center study, co-authored by Jenna Ashley Robinson and Duke Cheston, contends there are two major problems with the program: It expanded to cover more than half of all students; and almost anyone — regardless of academic background — can qualify. Recipients must meet only a minimal academic standard: obtaining a high school diploma or the equivalent. There are no minimum SAT scores or GPA requirements.
Consequently, many grant recipients go to college but flunk out or lose interest, often going deeply into debt in the process.
The Pope Center’s review of existing research did conclude that Pell grants have helped to attract more poor students into college. But have they helped them graduate?
The federal government does not publish graduation rates for Pell recipients regularly. Thus, it remains unclear precisely how well recipients do.
Given the lack of information, the study looked at low-income students to see if their graduation rates have improved since the program began in 1972. Since 1970, the percentage of high school graduates from the bottom income quartile going to college has increased by about 60 percent — a substantial amount. However, the percentage of those students who received a bachelor’s degree by age 24 actually decreased from 21.9 percent to 19.9 percent.
Moreover, although available data suggest Pell grants are more effective when targeted to genuinely low-income students, the grants increasingly are going to middle-income families. In 2009-10, 6 percent of Pell recipients came from a family with income over $50,000, suggesting that the as the program expands it is losing its effectiveness.
Another potential downside explored by the study is that the Pell program’s expansion may be allowing colleges to raise tuition, undermining the program’s initial purpose. The idea that government aid to college students adds to rising costs is known as the “Bennett Hypothesis,” after former U.S. Secretary of Education William J. Bennett, and recent studies suggest the idea has some merit.
The scientific literature on the subject recently was collected and refined in a paper from the Center for College Affordability and Productivity titled “Bennett Hypothesis 2.0,” by Andrew Gillen. Gillen’s thesis is that programs targeting the genuinely poor usually don’t lead to higher tuition prices, but when money is given to everyone, such as with college savings tax shelters, colleges raise their tuition. They can capture more revenue without causing more students to seek an education elsewhere.
Pell began as a program of the first variety, targeted to the poor, but increases in grants to those in middle-income brackets suggest that it is becoming one of the second type, driving up the cost of college.
For these reasons, the study concludes with several suggestions for making Pell grants more effective. These include targeting the grants to low-income, well-prepared students, and requiring the federal government to track the performance of Pell recipients regularly.