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Financial Aid

Pell Grant funding stability is key

College affordability depends on it
University Business, July 2013

Stable funding of federal Pell Grants, one of the nation’s main financial aid programs for low-income students, would increase affordability and accessibility, according to many groups with a stake in higher education. But despite its decades-long history of assisting financially needy students, the program also faces perennial threats to its funding.

Last year, 16 leading groups from the areas of public policy, business, higher ed, and civil rights were tasked with recommending scalable ways to improve financial aid and make earning a college degree affordable and accessible. The “Reimagining Aid Design and Delivery” (RADD) initiative, commissioned by the Bill & Melinda Gates Foundation, challenged the groups to come up with inventive ways to address the needs of today’s students even in the face of fiscal constraints.

The reports were released this spring, an opportune time given that the Higher Education Act—the overarching federal law that governs the administration of federal student aid programs, last rewritten in 2008—expires at the end of 2013.
The groups’ reports proposed a variety of changes, from tying campus-based funds to enrollment or graduation metrics, to converting to a “one-loan” system for borrowers. But the recommendation that received the most support from 11 of the 16 groups involved stabilizing or increasing Pell Grant funding.

The Pell Grant program has long been the backbone of federal financial aid for low-income students. In 2011-2012, $34.5 billion in federal funds helped approximately 9.4 million undergraduates pay for college. One RADD report by The Institute for College Access and Success (TICAS) notes that those funds improve the likelihood of low-income students to persist and graduate. For undergrads who receive Pell Grants, the uncertainty of whether funds will be available for another year creates a hazy future.

In its own RADD report, “Reimagining Financial Aid to Improve Student Access and Outcomes,” NASFAA noted that higher education is one of the only major expenditures in the United States that is financed on a year-to-year basis. “This model means very little predictability for students and families, as eligibility and funding may fluctuate from one year to the next,” the report says. “For low-income families, these changes can mean the difference between program completion and dropping out, often with the added burden of student debt.”

Stable, if not increased, federal funding of the Pell Grant program would alleviate concerns of funding shortfalls, according to the RADD group summary to the Gates Foundation. “[E]ven the best-designed program will not be effective if it is not adequately funded,” notes TICAS in “Aligning the Means and the Ends: How to Improve Federal Student Aid and Increase Access and Success.”

Several policy groups recommended a reinstitution of the short-lived year-round Pell Grant, which was eliminated in 2011 to save funds. Pell recipients could graduate faster if they get funding for summer classes, the New America Foundation notes in its report, “Rebalancing Resources and Incentives in Federal Student Aid.”

“Instead of eliminating year-round Pell, it should be redesigned so it works better for students and institutions,” the report states. “Allowing students to collect two grants in a single award year offers the neediest students, especially nontraditional students, the ability to speed up their studies by attending school year-round. This proposal would give them the financial support they need to get to a credential faster, allowing them at least one additional semester of funding each year.”

Though the recommendations in the RADD reports are only proposals, the purpose of each is to spark debate that may ultimately lead to positive change, says NASFAA President Justin Draeger.

“The RADD project provided an important forum for thought leaders in higher ed to examine federal student aid programs in new ways,” Draeger says. “It is important to think outside the constraints of the current system and to fully explore all possible approaches to strengthening and improving federal financial aid programs. I hope and anticipate that some of the innovations stemming from RADD will positively influence federal student aid policy in the months and years to come.”