With plans to reduce Pell Grants and job-training programs in the 2012 federal budget, the initial student response toward aid cutbacks has been one of alarm. But some student financial aid experts argue that the pressure of aid reduction may prompt changes that could, in the long run, increase the overall cost-effectiveness of the Pell Grant program.
According to the College Board’s 2010 Student Aid Trend Report, Pell Grants make up about 18 percent of the total undergraduate aid. Other sources of undergraduate aid come from state grants, institutional grants, federal loans, private and employer grants, federal work study and federal education tax credits and deductions.
A significant fraction of Stanford students rely on the Pell Grant for aid; in the 2009-10 academic year, 17 percent of Stanford students received Federal Pell Grants.
Although financial aid provides does assist students who need it, School of Education associate professor Eric Bettinger said the amount of aid may not have as large an influence on students’ decisions to stay in college as previously thought.
“We do know money affects students’ decisions,” Bettinger said. “When we give aid to students, it increases the likeliness of students staying in college. However, the real issue that needs to be addressed is that the size of these effects is relatively small. About a $1,000 increase in aid correlates to a 3 percent [increased likelihood] that the student stays in college in just that one year. And that’s the best case scenario.”
One reason for the limited influence of the Pell Grant is that the grant fails to close the large college attendance gap between low-income and high-income students.
A tightened budget could motivate reforms of the Pell Grant program over a longer timeframe, despite current fears of cutbacks.
Bettinger outlined three strategies for tackling the issue of improving the cost-effectiveness of the program. The first strategy called for redefining the eligibility conditions for Pell Grant recipients.
“The current eligibility conditions don’t really push students towards graduation,” Bettinger said. “Redefining what exactly a full-time student is — perhaps having them take a certain number of units — this will help increase student retention and encourage students to graduate on time.”
In addition to revising the eligibility requirements for Pell Grant recipients, a second issue that must be addressed is re-appropriating the grants to give the most possible to those in greatest need.
“We have to find ways to target the grant better,” Bettinger said. “Even within the grant recipients, there is a large gap in incomes. We need to identify students with greater need and increase their awards accordingly while reducing superfluous funding going toward those who may not need it as much.”
In the 2008-09 academic year, 41 percent of Pell Grant recipients were dependent on their parents for support. Among this group, 61 percent of recipients came from families with incomes of $30,000 or less.
The final point Bettinger proposed was simplifying the Free Application for Federal Student Aid (FAFSA), an approach that has already been attempted but could be further streamlined.
“The financial data used to determine Pell Grant eligibility is quite small — only around six pieces of information,” Bettinger said. “And yet the FAFSA form requires the listing of about 120 items, making it difficult for families to fill out properly. Asking people for just those critical pieces of information would make it a lot easier for parents.”
As schools nationwide brace themselves for another onslaught of across-the-board budget cuts, Bettinger emphasized the importance of optimizing federal financial aid programs.
“It’s always easier to create a program than it is to change or destroy it,” Bettinger said. “We’re moving toward the era of political budgets that are going to cut back on spending. With tighter budgets, it’s more important than ever to push students — especially those at community colleges — and give them more incentive to finish college.”