Pell Grants at 50: loss of buying power has Congress rethinking ways of paying for college

Pell Grants at 50: loss of buying power has Congress rethinking ways of paying for college

USA News


President Joe Biden’s budget proposal to double Pell Grants by 2029 would help low-income families afford college but rising inflation and calls to cut spending make that goal difficult to achieve.

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  • The Pell Grant program, which helps low-income students afford college, turns 50 this year.
  • The program has helped millions attend college but its buying power has slipped over time.
  • In his proposed budget, Biden proposes to double the annual Pell Grant to roughly $13,00 by 2029.

WASHINGTON – Congress just approved the largest increase for Pell Grants in a decade to help needy students pay for college.

And it didn’t even keep up with inflation.

Such is the state of the popular student aid program enacted 50 years ago. Pell’s buying power keeps diminishing despite its bipartisan popularity because the modest increases lawmakers keep approving largely fail to keep up with the rising cost of higher education.

When it was enacted in the 1970s, the maximum annual Pell grant ($1,400) covered roughly 75% of the cost of a four-year public college for in-state students. Now, at nearly $7,000, it’s down to less than a third. That despite a $400 increase approved as part of the recently passed $1.5 trillion spending bill.

It’s left lawmakers on Capitol Hill reassessing what the best strategy is for funding college tuition and other expenses. Most still back Pell, but options such as free community college and student loan forgiveness that progressives are pressing for have emerged as more politically powerful messages.

“It’s time to change how we fund college,” Sen. Elizabeth Warren, D-Mass., told USA TODAY. “Young people need post high school educational opportunities. The federal government recognizes that, but instead of helping them get that education at low cost, (it) offers to lend the money and turn them into profit centers as they pay back with high interest rates over time.”

The $400 increase in the spending package means the maximum Pell Grant will rise from $6,495 to $6,895  – a robust 6.2% increase that still lags the 7.9% inflation rate for February. The increase also raised the minimum award from $650 to $690, or 10% of the maximum.

In his his just-released fiscal year 2023 budget, President Joe Biden has proposed doubling the maximum Pell Grant to roughly $13,000 by 2029. That would include a substantial $2,175 increase for the 2023-2024 school year.

But that ambitious goal is unlikely to happen any time soon, judging by recent history. The $400 increase that was just approved is considerably lower than the roughly $1,400 Biden and other key Democratic leaders had been pushing, despite their control of the White House and Congress. And previous legislation to double the maximum grant has not gone far.

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In addition, rising inflation that has renewed bipartisan concerns about too much government spending and the expected GOP takeover in November’s mid-term elections of at least the House makes a significant Pell increase seem remote. Republicans have backed increases in Pell Grants but generally back smaller federal budgets.

Still, Pell might turn out to be the only game in town for federal student aid, since Biden’s campaign pledges to make community college free and to act on federal student loan debt forgiveness by wiping out $10,000 for all borrowers are now long shots – at best.

The nearly $30 billion program is the most logical way of addressing college affordability, said Justin Draeger, president & CEO of the National Association of Student Financial Aid Administrators.

Doubling Pell, for example, would more than cover the average cost of community college, and would help address soaring student debt by paying for between half and two-thirds the price of an in-state public university and nearly 30% of the  average four-year private school price tag, he said.

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“And it’s a program everybody knows and is familiar with, and all of our federal and institutional systems are built around. That grant might be the most streamlined and efficient way to take a bite out of college affordability issues,” he said. “It’s just the simplest and easiest way to address college affordability.”

50 years, 100 million-plus grants

Congress enacted Pell Grants in 1972, naming the program after its driving force: Rhode Island Democratic Sen. Claiborne Pell.

More than 100 million grants have been awarded to low- and moderate-income students since its inception. In 2020, approximately $27 billion in Pell aid has been given to some 6.3 million undergraduate students

Unlike loans, students do not repay the grants, which can be used for a myriad of direct and indirect costs such as tuition, room and board, textbooks, student fees, technology, commuting expenses and health insurance provided through the campus.

Thousands of students in every state take advantage of the program, with Mississippi having the highest average grant per student ($4,499) and New Hampshire having the lowest ($2,757).

No income threshold determines who is eligible for Pell Grants, but almost every recipient – 95% – came from a family at or below $60,000 in annual income in the 2017-2018 academic year. Because grant awards are tied to a family’s ability to pay, some higher-income families qualify for aid because they have more than one student attending college at the same time.

From the 2013-14 academic year through 2017-18, the grants were tied to inflation as a way to prevent further loss of buying power. But that provision sunset and Congress has not renewed indexing. 

The program’s need-based format also means those who can least afford the price of tuition, textbooks and living expenses also would benefit most, Draeger said. The Gender Equity and Policy Institute, a nonprofit to advance equity through public policy, found doubling the Pell Grant would cut student debt by more than half.

‘The heart of college affordability’

Dixie Samaniego, a first-generation college student at California State Fullerton, told USA TODAY recently she would not be in her third year studying political science were it not for receiving a Pell Grant.

“When I was applying, I didn’t know if I was actually going to go to school because I was afraid that my parents would be expected to contribute to my education,” she said.

Despite receiving a Pell Grant, she struggled with the hidden costs of college from gas and transportation to books and food.

Tuition ($10,740) makes up less than half the average total cost ($27,330) for students of a four-year public university in the 2021-22 academic year, according to the College Board, a non-profit organization that tracks higher education costs as well as administering the SAT, PSAT and other standardized tests. Room and board ($11,950), books and supplies ($1,240) and transportation ($1,230) are among other components of the estimated price tag.

Groups like the American Council on Education, a trade group for colleges and universities, have pushed expansion of Pell as an equitable way to fund the cost of higher education.

“If what you’re concerned about is a targeted, focused program that provides the most aid to the students with the most need, and scales as the students’ needs decline, Pell does that,” said Jon Fansmith, assistant vice president for governmental affairs at ACE. “Pell really gets to the heart of college affordability, right? It’s determined by a relatively simple but pretty comprehensive accounting for a student’s individual financial circumstances, and then directs them mostly to those students.”

An issue of race and gender

“This is a generational issue as well as a racial and gender issue,” said Warren, adding that some of her more moderate Democratic colleagues have not been as supportive of Pell as she’d like.

Non-whites make up more than half of enrollment at community colleges and nearly half of four-year public institutions, according to Colle Board figures. And nearly six of 10 students in colleges overall are women, according to federal statistics.

“When I went to college a four year state university was $50 a semester. The reason for that was taxpayers invested in making a college education available to young people without forcing them into debt. That option is just not out there today,” she said. “I want to see us do more on higher ed. But we need the votes.”

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Colorado Democratic Sen. Michael Bennet said there’s no doubt the awards should be increased to prevent “strangling the next generation with student loan debt.”

But how?

“My office is thinking hard about this question. The system that we currently have – I’m not talking about the Pell Grants, but the student loans – really doesn’t do anything to incentivize universities to keep their costs low,” the former Denver Schools superintendent told USA TODAY. “The rates are higher than they should be and the burden, which could be spread out over time is not. And so I don’t know what the answer is.”

Contributing: Rachel Looker

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