Cutting Pell Grants Is Unnecessary and Unwise

December 21, 2011 at 11:18 am

The appropriations agreement for fiscal year 2012 that Congress finalized last weekend included some harmful changes to the federal Pell Grant program, which helps nearly 10 million low- and moderate-income students afford college.  While the deal omits the most severe Pell Grant cuts in an earlier House-approved bill, it will still make it harder for many low-income students to afford college.

The Institute for College Access & Success (TICAS) estimates that more than 100,000 students will lose their Pell Grant entirely next year because of a retroactive cut in the number of semesters for which a student can receive a Pell Grant; thousands more will lose part or all of their grant due to other provisions in the appropriations agreement.

Pell Grants have been under pressure in this year’s budget process, for two reasons.  First, the Budget Control Act placed restrictive caps on overall discretionary funding starting in 2012, forcing Congress to find savings among these programs.  Second, Pell Grants in 2012 require an additional $1.3 billion over the 2011 funding level in order to continue serving all of the students who qualify.

Responding to these pressures, lawmakers cut Pell Grant eligibility in ways that will reduce the level of annual appropriations needed for the program by an estimated $11 billion over the coming decade.  The Pell Grant changes contained in the new legislation, which will take effect July 1 (and thus affect students starting with the 2012-13 academic year), will:

  • Cut the number of full-time semesters for which a student can receive a Pell Grant from 18 to 12. This provision is retroactive, so any students who have received grants for 12 semesters will be ineligible for more, even if they’re just a semester away from graduation.  Pulling the plug on these students’ grants will impose additional hardships and likely prevent some of them from finishing college.
  • Make people who lack a high school diploma or equivalent ineligible for all federal student aid programs, including Pell Grants, even if they have completed the requisite testing or obtained the needed credits for their post-secondary program.
  • Cut the income ceiling below which students automatically qualify for the maximum Pell Grant from $32,000 to $23,000. The automatic qualification simplifies the complex financial aid application process — which can discourage low-income students from considering college altogether — by allowing very low-income students to bypass some of the more complicated and cumbersome parts of the application form.  With this change, students in the $23,000-$32,000 range will no longer be eligible for automatic qualification.
  • Make ineligible for Pell Grants any students who would otherwise qualify for only a very small grant, usually because their families’ incomes are near the program’s eligibility ceiling.  (This Congressional Research Service report provides detail on the “bump” award, which this provision eliminates.)

Cutting Pell Grants is unnecessary and unwise.  While Pell Grant spending has grown significantly in recent years, this reflects: eligibility expansions that Congress approved on a bipartisan basis to encourage more low-income students to get a college degree; increases in the maximum Pell Grant award that offset only a portion of the grant’s decline in purchasing power in the face of large increases in tuition charges (see graph); and the economic downturn, which has depressed family incomes and led many people to pursue college in order to improve their education and skills.

Pell Grants Have Lost Purchasing Power
*We revised this chart on March 13, 2012

Moreover, the Congressional Budget Office projects that Pell Grant costs would decline and then stabilize in real terms over the coming decade even if none of these cuts were made (and the maximum grant, now $5,550, increased with inflation through 2017, as current law prescribes).

Both to expand equality of opportunity and to improve the productivity of our workforce, the nation should make college more affordable, not less so.  Cutting Pell Grants is a wrongheaded step that is ill-advised both from the standpoint of promoting the well-educated workforce that we need for economic growth and from the standpoint of providing opportunity to all Americans.

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More About Kelsey Merrick

Kelsey Merrick

Kelsey Merrick is a research assistant with the Federal Budget and Tax team.

Full bio | Blog Archive | Research archive at CBPP.org

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