Unpacking the Effects of Increasing Pell Grants
The Pell Grant is America’s most prominent tool to promote college access and affordability for low- and middle-income students. With a substantial increase in the maximum Pell award under consideration by Congress, a natural question is how that increase is likely to impact the access and affordability goals of the program. The answer, it turns out, depends a lot on the college or university at which a Pell recipient uses the grant.
In a new issue brief, Ithaka S+R Managing Director Catharine Bond Hill describes and applies a conceptual model for assessing how institutions with different characteristics will respond to an increased Pell maximum. Key to the model is understanding what each institution is seeking to maximize through its admissions and financial aid policies, and what budget constraints it faces in pursuing those objectives.
Hill provides several generalized examples to illustrate application of the model:
- At the very few institutions that meet full need with grant aid, an increased Pell grant would substitute for institutional grant aid, relaxing the college’s budget constraint and allowing the institution to spend those dollars on something else (which may be, but is not necessarily related to access for lower-income students).
- At the slightly larger number of institutions that use subsidized loans to meet full need, increased Pell grants would allow the institutions to decrease the net price faced by students in a budget neutral way, by increasing the share of the aid package that is grants and decreasing the share that is loans.
- At the many institutions whose financial aid packages do not meet full need, increased Pell awards would similarly allow the institutions to improve affordability for lower-income students, by reducing the aid gap students have to fill with their own earnings or other forms of borrowing that are less financially sound. In addition to improving affordability, this would also likely improve retention and success by allowing students to focus more on their studies.
- And at the many institutions where Pell grants already cover (or come close to covering) tuition, an increase in the Pell award may lead those institutions to increase tuition. While this may frustrate policymakers focused on reducing prices, if those institutions are using the increased revenue to fund improvements in academic programs and student support, it will benefit students and improve retention and success.
Understanding these nuances in institutional responses based on their goals and constraints will help policymakers know what to expect, but also enable them to craft policies that better meet their aims.