College Board recommends changes to federal Pell Grant

U.S. Navy photo by Photographer’s Mate 2nd Class Daniel A. Jones.

U.S. Navy photo by Photographer’s Mate 2nd Class Daniel A. Jones.

The federal Pell Grant program has been around since 1972, and it’s designed to help low-income college students be able to afford college. But the program has its flaws, and a recent study from the Bill and Melinda Gates Foundation has led the College Board to make recommendations in changing how it is implemented: most notably, the subsidy would award money to students as young as 11 and turn it into an investment program. If you are looking for good research paper topics in economics, or classes in government funding or higher education, consider looking at the history of the federal Pell Grant and the reform ideas suggested by educators and economists alike.

What is the Pell Grant?

When the Pell Grant subsidy program first came into existence in 1972, its goal was to help recent high school graduates from low-income families afford a college education. The grant provides money directly to the university – not to the students – and assumes that colleges and universities are charging a flat rate per semester, which was the norm in the 1970s. But the one-size-fits-all program has had to expand to support a more diverse population of college attendees, who enroll not only in large universities, but in vocational schools, community colleges, and other alternative options. The program currently serves 9.4 million students to the tune of $35 billion – and because of the importance of the Pell Grant program to colleges, the subsidy was exempt from the spending cuts of the 2013 sequester.

But though it’s an important program in financing universities, there are problems with the structure. It’s hard for low-income students to graduate on time, especially since three quarters of the recipients enroll in programs that charge ala carte rates for credits, rather than a flat rate for a semester. According to researcher Judith Scott-Clayton, as reported in an article for TC Newsmakers,Scott-Clayton proposes changes to the Pell Grant system,” “graduation rates for recipients remain stubbornly low. Only about 45 percent of Pell recipients obtain a degree or credential within six years.” Scott-Clayton recommended that Pell participants receive not only financial aid, but also direction in choosing courses to steer them toward a timely graduation.

Pell Grant reform

One of the problems with the current structure, particularly for students who attend ala carte-style colleges, is that students receive a “refund” if their tuition is lower than the grant amount – which helps them to afford the cost of books for their courses. Because students who take only 12 credits receive a larger refund than students who take a full course load of 15 credits, Pell Grant recipients may end up being paid to take fewer classes – and take longer to graduate. And because some Pell students drop out of college, they are able to take the refund money and not invest it in their schooling, and if the students drop out before they are 60% of the way through the term, the colleges have to return the subsidy money to the government. President Obama has recommended that colleges with high dropout rates give those refunds in installments, like a paycheck, rather than all at once.

But other reforms, like the ones proposed through the Bill and Melinda Gates Foundation study, the “Reimagining Aid Design and Delivery” initiative (RADD), go farther. “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,” Katy Hopkins reported in University Business, in her article July 2013 article “Pell Grant funding stability is key: College affordability depends on it.” One of the ways RADD suggested that change might happen is to award the funding earlier – when students are in sixth grade rather than high school seniors or recent graduates – so that students learn about savings and compound interest. Because low-income students are more likely to attend college the earlier they believe that it is an option, putting money away for younger students could be a great encouragement to low-income families who might otherwise think college was out of reach.

In Huffington Post article “College Board challenges the Pell,” posted November 21, 2013, Bob Hildreth bemoans that in the suggested plan, the money is still left in the hands of the federal government, which limits personal engagement with the program. “The only role parents have in the College Board plan is to passively witness the creation and growth of their child’s account. Parents must save beyond what their child receives in Pell Grants or watch their children fall into debt.”

What changes would you make to the federal Pell Grant or other student aid initiatives? Tell us in the comments. 

For more on the economic aspects of student financial aid, higher education costs, or more topics in higher education, visit

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