Lawmakers Considering Proposals to Reform Pell Grant Program

Congress is considering proposals to create a more sustainable maximum award level, roll back some of the need analysis changes enacted in previous legislation and set stricter lifetime time limits on eligibility for Pell Grant aid, according to a May 2011 Congressional Research Service (CRS) report.

The report examines the current state of the Pell Grant program and the funding challenges for the fiscal year (FY) 2012 budget caused by the growing number of applicants and expanded eligibility. In order to maintain the maximum Pell Grant for the 2012-13 award year, CRS estimates that Congress will need to increase discretionary Pell funding to $34.2 billion in FY2012 -- $11.2 billion more than the FY2011 discretionary spending level of $23 billion.   

"Despite a large increase in funding for the program in FY2011 and an amendment to the HEA that resulted in immediate and long-term savings, CBO estimates a discretionary funding shortfall in the program of $2.5 billion as of April 2011," the report states. "This shortfall estimate assumes the use of $3.2 billion in mandatory funds available in FY2012 for general use in the program."

The rapid increase in the Pell Grant program costs has made it a target of debate for Congress and the Obama administration as they look to cut federal spending. The FY2012 budget debate began with the House's passage of a budget resolution, which called for Pell levels to be pulled back to their FY 2008 levels.  The House budget resolution failed in the Senate, but Pell funding in the FY2012 budget is still being debated.

"The continuation of a base maximum award of $4,860 funded with annual discretionary appropriations could present funding challenges and difficult policy choices for Congress in future years," the CRS report states.  "Congress may choose to further evaluate, particularly within a fiscal environment that currently projects increased deficits, the effectiveness of and relative need for varied public investments in light of many competing priorities."

The CRS attributes the recent spike in program costs to "legislative changes that have led to increased benefits for more students, increases in the number of students enrolling in college and applying for Pell Grant aid, and a weakened economy." The Pell program has grown from roughly 6 million students in 2008 to an anticipated 9.4 million students in 2012-13.

Despite the increasing cost, the average purchasing power of the Pell Grant has declined over recent years. The total maximum award of $5,550 is expected to cover approximately 34 percent of the average tuition, fees, room, and board at public four-year institutions. The purchasing power of the Pell Grant was at its peak relative to average college costs during the 1970s, when the maximum covered nearly 80 percent of college costs at a four-year public institution. 

Though there is no absolute income threshold that determines who is eligible or ineligible for a Pell Grant award, Pell Grant recipients are primarily low-income. In FY2008 (AY2008-09), an estimated 62 percent of dependent Pell Grant recipients had a total family income at or below $30,000, according to the CRS report. An estimated 83 percent of independent Pell Grant recipients had a total income at or below $30,000. A small percentage of Pell Grant awards, though smaller than the average award, go to mid- and high-income families.

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