Cutting From the Pell Grant Reserve Fund Is Worse Than It Sounds

"For decades, the federal Pell Grant program has provided much-needed financial assistance to students around the country who struggle to pay for a college education. Each year nearly eight million students -- the majority of whom come from extremely low-income backgrounds -- benefit from those funds. Yet the program is again under attack in federal spending proposals," NASFAA's Megan Coval writes in an opinion piece for Inside Higher Ed.

"While it boosted the value of the maximum Pell Grant award, the Senate Labor, Health and Human Services, Education, and Related Agencies Appropriations Committee's funding bill for fiscal year 2018 proposes rescinding $2.6 billion from Pell Grant reserve funds, while the House FY 2018 bill proposes a cut of nearly $3.3 billion. The president proposed axing $3.9 billion in his FY 2018 budget proposal. Because of the way the program operates, cutting from the reserves could put the future of the program at risk and harm deserving college students down the road.

Pell Grants serve as a cornerstone of federal investment in the nation’s higher education system, helping low- and moderate-income students pursue an education after high school. The vast majority of recipients come from families making $40,000 or less each year.

Despite the important role Pell Grants play in helping make college more affordable, funding for the program hasn’t kept pace with the cost of college. In inflation-adjusted dollars, both the average award and the maximum award are at about the same levels today as in 1975, causing the purchasing power of the Pell Grant to plummet. While the maximum award covered more than 50 percent of the average cost of attendance at a public, four-year institution in the 1980s, today it covers less than 30 percent.

It is understandable why lawmakers would look to the Pell reserve funds -- currently at $8.5 billion -- in their attempts to balance the budget. On the surface, some may see it simply as an untapped resource that could be redirected toward other priorities within the pot of funds that higher ed shares with other education, labor and health programs. But while the surplus may look like “extra funds,” cutting it will almost certainly hurt the program in the long term. While it’s true that students might not immediately feel the impact of a cut to the reserve funds and the program would remain intact for the time being, it’s simply not true that rescinding those funds would come with no negative consequences.

The Pell reserve serves an important purpose -- to protect students and taxpayers should the program face a funding shortfall, as it has in the recent past. In times of economic hardship, such as during the Great Recession, enrollment in higher education also tends to increase. As enrollments grow, demand for Pell Grants also rises. And because the Pell Grant program essentially operates as an entitlement, all students who apply for federal financial aid are guaranteed the full amount of the Pell Grant for which they qualify."

Read the full piece online at Inside Higher Ed.


Publication Date: 9/18/2017

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