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California Association of Private Postsecondary Schools

Pell Spending Levels Off

09/07/2012

Inside Higher Ed - September 7, 2012

Pell Grants might not be such an appealing target to federal budget cutters after all, because the program’s total cost decreased last year, surprising many.

The federal government spent $2.2 billion less on Pell Grants in the most recent fiscal year (which ended on July 1) compared to the previous year, according to newly released preliminary data from the U.S. Department of Education. That decrease, to $33.4 billion from $35.6 billion, fell well short of the department’s estimated $40 billion price tag for Pell.

The dip in spending also occurred while the number of Pell recipients increased by 58,000. That means more of the almost 9.7 million lower-income students who received the grants last year got smaller awards. One reason for that could be more students attending college part time, because part-time enrollment status reduces Pell award amounts.

Experts said another probable cause for the decrease in expenditures is the elimination of the year-round, or summer, Pell Grant, which allowed students to qualify for two awards in a year. But that cut, which went into effect in July 2011, was projected to save only $4 billion per year, and the program came in more than $6.5 billion under its estimated cost. So something else must also be at play.

Most of the decrease in Pell spending was for students who attended for-profit institutions, which accounted for $1.4 billion of the dropoff. For-profits have been battered by slumping enrollments, and the number of Pell recipients attending for-profits declined by 108,000 students, to roughly 2.1 million.

Other sectors, however, saw increases in total grant funds. Community colleges and public four-year institutions received slightly more in Pell revenue, while private colleges saw a small decline. The number of Pell recipients increased at public four-year and private colleges, while slightly fewer students at community colleges received the grants.

For-profit students’ average grant award is larger than that for students who attend community colleges, who are more likely to enroll on a part-time basis. So the flattening of Pell spending despite increasing numbers of recipients might be partially due to the for-profits' woes, but experts said it was too early to make that call based on the new numbers.

The $2.2 billion decrease surprised officials at the American Association of Community Colleges, said David S. Baime, the association’s senior vice president of government relations and research. “It’s really dramatic at a time that the program is growing.”

Pell is the cornerstone of federal financial aid, and the Obama administration and congressional Democrats have resisted budget cutting pressure to preserve the maximum grant award of $5,550. Obama’s advocates have touted that achievement at the party’s national convention this week in Charlotte, N.C.

But the administration made the “painful” decision to nix summer Pell in response to deep federal budget deficits and worries about rapid increases in spending on Pell Grants, which was $12.8 billion just five years ago. The Pell program was expected to be short $20 billion this year, and Republican lawmakers had proposed cutting the maximum grant award by $845.

That growth in Pell spending was due to big increases in college enrollments, much of it at for-profits, as well as the recession’s impact on the finances of students and their families. Changes to eligibility rules in 2008 also expanded student access to the grants.

Higher education advocates said the final Pell tally for last year is a welcome surprise.

“If there was ever a good year for Pell Grant expenditures to decrease, this is probably it,” said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education. But the new numbers are only “modestly good news,” Hartle said, because possible budget threats to Pell still loom large. “There still is going to be a mindset of across-the-board cuts.”

The federal government is facing a “fiscal cliff” next year, when lawmakers must decide whether or not to move forward with proposed tax hikes or spending cuts. And while Pell spending has increased in recent years, larger budget pressures are probably the main reason the program has been threatened.

“The real problem is the cliff next year,” said Baime. “Continued growth is not the problem.”

Hartle cautioned against making predictions about future Pell spending based on the new numbers, which might be either an emerging trend or an aberration. “Trends appear in retrospect,” he said.

Besides, it’s hardly the first time the Pell has taken an unexpected turn.

“We’re often surprised by what is happening to the Pell Grant Program,” Hartle said, noting that its “recipients are prone to making unpredictable decisions.”