Running head: INVESTING IN THE FEDERAL PELL GRANT PROGRAM

Investing in the Federal Pell Grant Program

Priyal R. Morjaria
Georgia Southern University

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

Introduction
Historically federal grant programs played a significant role in shaping higher education
in the United States. As a way to make higher education attainable to low income and middle
income families President Lyndon Johnson implemented the Higher Education Act of 1965.
Before this higher education was an opportunity affordable to a very small population of people
in the United States. The Higher Education Act was the first of its kind to include government
grant programs, low interest loans and other forms of federal financial aid. This act has been
amended many times over the years with new programs being added to the amendments. In 1972
the Higher Education Act was reauthorized to include the Pell Grant program. The Pell Grant is a
need based grant awarded to undergraduate students that show significant financial need and is
used to cover a percentage of tuition and fees. To this day the federal Pell Grant program is one
of the most beneficial educational grant programs created by the US government. The federal
Pell Grant is awarded to students based on the calculation of their expected family contribution.
For the 2014-2015 school year congress set the maximum amount a student can receive to
$5,730 (New America Foundation Federal Budget Project, 2015).
Along with other forms of educational funding the federal Pell Grant finds itself a part of
congressional debate on many occasions. In recent years higher education in the United States is
seeing significant change. Schools today face more and more pressure to increase graduation
rates, college tuition rates are on an all-time high, and the number of disadvantaged students
seeking federal financial aid has increased drastically. When it comes to educational funding
congress today finds itself in a dilemma to meet national needs while facing budgetary
constraints. With these constraints and dilemmas many questions arise with regards to the future
of the Pell Grant.

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

Problem Statement
This paper uses previous literature on the effectiveness of the Pell Grant Program and
critically analyzes current trends in federal financial aid and the impact it has on students or
institutions that rely on federal funding for overall student success. Through this critical analysis
the paper aims to answer these two imperative questions. If congress struggles to maintain the
Pell Grant program, makes significant budgetary decisions regarding the program or decreases
Pell based funding to disadvantaged students how will it impact higher education in the United
States? Does the Pell Grant Program continue to positively impact retention and completion rates
of students that show financial need?
Literature Review
Before understanding the impact of the Pell Grant Program its necessary to understand
how the federal government calculates financial need. Each year millions of students complete
the Free Application of Federal Student Aid also known as FAFSA. Throughout the application
students and sometimes parents answer questions and provide financial information to calculate
what is known as the EFC or expected family contribution. In his study on student financial need
Kelchen (2015) takes a closer look at how a zero EFC is calculated and if it changes year to year
impacting a students financial aid. The expected family contribution is the minimum amount a
family can contribute. A dependent student or independent student (with dependents) can receive
an automatic zero EFC if the household income for the 2014-2015 year is $24,000 or less.
Another reason a student can receive an automatic zero EFC is if someone in the household
relies on means-tested benefits such as food stamps. According to Kelchen (2015) Students
that fit in either of these two categories do not have to provide any additional information in the
FAFSA and they are automatically eligible to receive the maximum Pell amount.

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

A simplified need test can also qualify a student for automatic zero EFC. If a student
comes from a household with $50,000 or less income and meets any of the other requirements he
or she can also qualify for a zero automatic EFC without having to provide any additional
information regarding assets. Other students may complete the entire FAFSA application with
their income or their parents income information provided along with information regarding
assets and still qualify for a zero EFC based on financial circumstances and need. Through his
research Kelchen (2015) found that expected family need has increased significantly for both
dependent and independent students from the 1990s to now. Women are approximately eight
percent likelier to have a zero EFC. African American students and Hispanic students are
between 40%-60% likelier to have a zero EFC then the 29% of Caucasian students. Students
with automatic zero EFCs were 85% more likely to have a zero EFC in the next continuing
academic year. Students that completed a simplified FAFSA were 55% more likely to qualify
again for an automatic zero EFC the next year and students that completed a full FAFSA were
65% more likely to qualify for a zero EFC the next year (Kelchen, 2015, p. 191)
The Pell Grant program has seen a significant increase over the span of just a few years.
In the 2007-2008 award year $14.7 billion of federal aid went to the program. In the 2011-2012
award year the program saw an increase of $33.4 billion. An increase in expenditures continues
to occur each year causing the federal government to assess the program. In his paper, Mullin
(2013) assesses the future of the Pell Grant program and changes the program has seen since its
conception. The Pell Grant program was initially created to bring equality to education and
provide assistance to low income students that showed financial need. The US Department of
Education attributed the growth of the Pell Grant Program to increase in number or eligible
students, growth in legislative changes, year around Pell Grant program and increase in the

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

maximum Pell Grant award (Mullin, 2013, p. 9). Enrollment in for-profit institutions has also
seen a significant increase impacting Pell Grant expenditures.
The federal government is now focused on making changes to the program. Pell Grant is
no longer offered in the summer. Those students previously eligible to use Pell funding in the
summer are no longer eligible. Mullin (2013) also mentioned that the Consolidated
Appropriations Act of 2012 reduced the amount of time for eligibility from 18 full time
semesters to 12 full time semester (p. 11). The family income for students qualifying for a zero
EFC has also been lowered. In conclusion the author found that the future of the program stands
on uncertainty however the need for the program still remains stronger than ever.
Pell Grant allocations are impactful on many institutions of all sizes and characteristics
however community colleges typically enroll students that rely heavily on federal aid. In their
research Hicks, West, Amos, and Maheshwari (2014) examine the impact changes in the Pell
Grant program could have on graduation rates of rural community colleges in Virginia. Hicks et
al. collected data from 1996-2003 for 14 rural community colleges in Virginia. During that time
over 31% of students in rural Virginia used Pell Grants as means to pay tuition. Since
community colleges offer tuition at a much lower rate any federal financial aid cuts will have a
greater impact on their enrollment rates. Hicks et al. (2014) found that minority students at all
colleges represent over 40% of all Pell Grant recipients and it can be argued that any negative
impact on the revisions of Pell rules on Virginia Community Colleges will have a somewhat
similar impact nationwide (p. 150). Based on previous data from 1996-2003 Hicks et al. (2014)
concluded that that negative changes with the Pell Grant could impact VCCS graduation rates by
13%.
The Pell Grant program has shown to impact more institutions than just those that are

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

nationally known to enroll minority students or those that have a significantly diverse student
population. In the article Pell Grant Awards as a Measure of Student Diversity at Americas
Highest-Ranked Colleges and Universities (2002) the author takes a closer look at how the Pell
Grant impacts students at high achieving and well ranked institutions. University of California
Berkeley allocated Pell funding to about 28.2% of their undergraduate students for the 20002001 school year. Cornell University was a close second with around 27% of its undergraduate
students receiving Pell. Minority students from severe socioeconomic backgrounds saw a major
admission advantage and the vast majority of these low income students came from Asian,
Latino or White households (Journal or Blacks in Higher Education, 2002, p.104). African
Americans typically show the highest need for access to financial aid since they are three times
more likely to come from poverty stricken households than white Americans. Additional
research is necessary to see where these prestigious institutions rank now with regards to
enrollment statistics of minority students from low income families.
Critical Analysis
Since its conception in 1972 the Federal Pell Grant program has experienced many
changes due to the evolving environment of financial aid in America, increasing enrollment of
students with financial need and continuously increasing tuition rates. Previous research shows
how reliant minority, low income students are on federal financial aid. In recent times congress
has already made changes to the time limit students can receive Pell funding from 18 semesters
to 12 semesters, making it tough for students wanting to take summer classes. Based on prior
research of Virginia Community Colleges students will be negatively impacted by this slight
change from 18 to 12 semesters of Pell availability. With the changing nature of congressional

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

power each presidential election congressional appropriations to federal education grants could
see changes over the span of a few years.
The federal government continues to search for more ways to lighten the Pell budget.
According to Sawhill (2014) during the 2011-2012 school year over 173 billion dollars were
spend on federal loans and grants towards higher education (p. 59). Unfortunately national
graduation rates are not meeting the same demand that schools see for federal funding. College
enrollments continue to increase without much movement in graduation rates. Only 60% of
students enrolled in a 4 year instition graduate within 6 years and an even lower percentage of
students graduate within 4 years. The question here is are students enrolling in higher education
institutions prepared for college? Sawhill (2014) argues that now it the time to make federal
grants such as the Pell Grant conditional on how prepared a student is for college (p. 60).
Pell Grants are awarded to those students that show the highest amount of financial need.
These students have significantly different home environments in comparison to students from
financially stable households. According to Kelchen (2015) dependent and independent students
with an automatic zero EFC are typically from households with an income of $24,000 or less.
These students may be eligible for other federal programs such as food stamps and some
independent students are also supporting children while attending school. Previous research
shows students that rely on the Pell Grant are increasingly from African American or Hispanic
backgrounds. Many of these students are first generation college students and have never had the
support needed to create an academically successful background for themselves. If the Pell Grant
program ever transitions into a merit based program where academic preparedness is given
priority than a large amount of low income, minority students will greatly suffer and their access
to higher education could be minimalized. If the goal is to make education the great equalizer by

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

providing equal opportunity for education to all than making Pell Grants a merit based program
will not assist in meeting this goal.
Globally US graduation rates rank 12 among the 24 organizations for economic cooperation and development. To improve social mobility for individuals from lower
socioeconomic backgrounds it is necessary to push for improved graduation rates for those
students that are typically the least likely to complete their college graduation. For low income,
first generation, minority students, higher education may be the only means to economic security
and social mobility. According to Flores (2014) students from the least advantaged populations
earn degrees at a lower rate and are burdened with a greater portion of debt than their peers (p.
1). Nationally there is a struggle to increase graduation rates for these students however some
institutions prove that with increasing student support programs and providing disadvantaged
students with resources it is possible to improve retention and completion rates.
The University of California Riverside, University of South Florida Tampa and
University of North Carolina Charlotte have phenomenal graduation rates for both African
American and Hispanic students. All three institutions have a significantly large population of
students that are reliant on Pell Grants. Nationally graduation rates are typically higher for white
students at four year public institutions. All three high performing institutions are above the
national average for completion rates. At UCR black and Latino graduation rates were 6% and
3% higher than white graduation rates. At USF graduation rates for both black and Latino
students was approximately 2% higher and at UNCC the average graduation rate remained at
51% across all racial groups (Flores, 2014, p. 4). All three institutions relied heavily on need
based federal funding as a means to increase student diversity in enrollment as well as increase
graduation rates.

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

Conclusion
The Federal Pell Grant Program has played a significant role in implementing student
diversity in the American higher education system, providing students without financial means
an opportunity to attain a higher education degree and improving social mobility for many
students. Increasing tuition rates and along with increasing enrollment rates has placed a greater
burden on the program over the past few years. With this burden the federal government finds
itself in the position to implement changes in the Pell Grant Program. As the program continues
to evolve and more and more students continue to rely on it, federal fiscal constraints could lead
to a decrease in grand based funding in the future. Research shows that students are already
impacted by the minute changes in the program and any significant decrease in funding could
negatively impact college enrollment rates of low income, first generation, minority students.
The students most likely to rely on federal funding are also the least likely to progress
through their college degrees in a timely manner. Several institutions across the nation found
creative ways to use federal funding while increasing graduation rates for disadvantaged
students. University of California Riverside, University of South Florida and University of
North Carolina Charlotte have all implemented programs specifically catered towards student
success and initial first year intervention. These institutions are proof that with the creation of the
right student support programs and a commitment to diverse student populations it is possible to
improve graduation rates of disadvantaged students. However these institutions are able to meet
there goals because their students have access to federal funding and the Pell Grant plays a role
in overall completion rates. In conclusion the Pell Grant Program influences the overall academic
success and progress of low income students and any decrease in the program could have a
negative impact on graduation rates.

INVESTING IN THE FEDERAL PELL GRANT PROGRAM

10

References
Flores, A. (2014). How public universities can promote access and success for all students.
Center for American Progress, Retrieved from https://www.americanprogress.org/
issues/higher-education/report/2014/09/09/96689/how-public-universities-can-promoteaccess-and-success-for-all-students/
Hicks, N., West, L., Amos, J., & Maheshwari, S. (2014). The effects of Pell Grant changes on
the graduation rate and college finances: A study of rural community colleges in Virginia.
Journal of Business and Educational Leadership, 5(1), 142-155.
Kelchen, R. (2015). Financial need and aid volatility among students with zero expected family
contribution. Journal of Student Financial Aid, 44(3), 179-201.
Mullin, C.M. (2013). Past, present, and the possibilities for the future of the Pell Grant program.
Journal of Education Finance, 39(1), 3-14.
New America Foundation Federal Education Budget Project. (2015, March 10). Retrieved from
http://atlas.newamerica.org/federal-pell-grant-program
Pell Grant awards as a measure of student diversity at Americas highest-ranked colleges and
universities. Journal of Blacks in Higher Education. 37, 103-107.
Sawhill. I. (2014). Target aid to students most likely to succeed. Education Next, 14(2), 59-64.
Retrieved from http://educationnext.org/target-aid-to-students-most-likely-to-succeed/