Report: How Middle-Income Families Benefit When the Maximum Pell Award Is Increased

Report CoverIn a world of limited resources, should we focus on increasing the Pell Grant for current recipients or expanding eligibility to more middle-income students, meaning those with higher Expected Family Contributions (EFCs)? Put simply, it's not an either/or scenario. 

Because of the way the Pell Grant is structured in statute, and how Pell Grant tables are created, one cannot expand Pell Grant eligibility to more middle-income families without also increasing the maximum award, and one cannot increase the maximum award without also giving higher awards to existing Pell Grant recipients.

This report presents two ways to expand Pell Grant eligibility further into the middle class: 

  • Increasing the maximum Pell award amount.
  • Modifying the federal methodology formula.

Both expand access to Pell Grants for middle-class families, but they do it while also increasing Pell Grants to low-income families. 

Effects of Increasing the Maximum Pell Grant

When the Pell Grant maximum award authorized by Congress increases, the majority of currently Pell-eligible students see an increase to their award equal to the amount of the increase to the max award. 

  • Other current Pell recipients in the lower Cost of Attendance (COA) ranges also see an increase in their Pell award, but the increase is smaller than for the highest-COA students. Current Pell recipients in the lowest COA ranges see no change to their Pell award when the maximum Pell amount is increased.
  • Students in higher EFC ranges who were not previously eligible for the Pell Grant gain eligibility when the maximum award increases.

Expanding Pell Grant Eligibility via the Federal Methodology (FM) Formula

Another way of expanding Pell Grant eligibility into the middle class is by changing the federal methodology formula, as was done in the Consolidated Appropriations Act of 2021. 

  • Modifications to the formula, such as increasing the Income Protection Allowance, along with new automatic maximum and minimum Pell Grant awards, lowers the EFC (renamed the Student Aid Index, or SAI) for many applicants. 
  • A lower EFC results in a higher Pell award for many current recipients, and results in new Pell eligibility for those who do not currently receive a Pell Grant. The students whose EFCs were already zero receive no benefit from this approach.

Conclusion

While there may be other approaches to expanding Pell Grant eligibility to more middle class applicants without increasing the Pell award amounts of current recipients at all, they would involve a complete overhaul of the statute that determines how Pell eligibility is determined, an ill-advised endeavor to undertake while in the midst of implementing the revamped FM formula. The simplest, most predictable method of expanding Pell Grant eligibility further into the middle class is to increase the maximum Pell Grant award.

Download report (PDF)

Publication Date: 10/29/2021


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