Two Pell Grants?

So far, 2013 has been awash in proposals to reshape federal financial aid. Last week saw the release of the final reports in the Reimagining Aid Design and Delivery project, a $3.3-million effort from the Bill and Melinda Gates Foundation in its first major foray into financial aid policy. With the Higher Education Act, the main law governing the federal government’s investment in higher education, scheduled to expire at the end of the year, the policy proposals are likely to keep coming.

Many of those proposals, though, have advocated overhauling smaller grant programs, student loans and tax credits while largely leaving the Pell Grant alone. They would perhaps limit the amount of time that students can receive the grants, require recipients to attend full-time or offer extra money to students who move more quickly toward a degree -- but not radically transform the grant, considered the bedrock of federal financial aid.

A new proposal released today from a group convened by the College Board (and funded by the Gates and Lumina Foundations) takes a different tack, focusing solely on overhauling the Pell Grant to better meet the needs of a growing population of nontraditional students. While the report calls for preserving the Pell Grant Program, in some senses it would be in name only: for students over 25 in particular, the system the report’s authors envision differs sharply from the Pell Grant as it exists now.

The Rethinking Pell Grants Study Group, a group of 14 leading thinkers on financial aid -- some of whom also participated in the College Board’s broader effort to rethink federal financial aid in 2008 -- starts with a couple of assertions: that it’s time to consider postsecondary success, as well as access, in the grant program (a common refrain in financial aid proposals this year); and that an increasingly diverse student body, with widely varying educational goals, requires changes to a grant program intended for traditional college students.

They propose a system split into two tracks -- with one for recipients who begin their studies before turning 25, and another for those who do not. For students under 25, the grant would be renamed “Pell Grant Y” -- the Y stands for “young college students.” The application process would be simplified, with eligibility based on adjusted gross income and family size. Eligibility would also be based on three years of tax data rather than one. The maximum grant would increase each year by the percentage increase in the consumer price index plus 1 percent.

The amount of money that students receive would be tied to the number of credits they pursue in a given semester: students progressing more quickly toward a degree would receive more money than average. Grants would be limited to 150 credit hours. Given growing discussion of the death of the credit hour as more colleges explore competency-based learning, the group added that another “unit of progress” could be substituted for the credit hour.

“Students who know that their funding will end will have stronger motivation to complete their degrees more quickly,” the report’s authors wrote. “While there will always be individuals whose circumstances prevent them from accomplishing their goals, policies should be designed to help as many students as possible.”

For prospective students 25 and older, who make up about 44 percent of Pell Grant recipients, the program would look different. Those students have lower completion rates than their younger counterparts do (56 percent earn a credential within six years, compared to 74 percent of students who began their studies before 24). They’re more likely to pursue associate degrees and certificates -- 36 percent of Pell recipients age 25 and older are working toward a bachelor’s degree, compared to 52 percent of students 24 and younger. And they’re more likely to attend for-profit colleges: 31 percent attended for-profit institutions in 2007-8, compared to 16 percent of traditional-age college students.

For some of those students, the group argues, the Pell Grant is a form of work force development or job training, sensitive to fluctuations in the economy and more likely to go to students with specific career and occupational goals.

“We need to acknowledge that a big, important function of the Pell Grant program is to fund older students, and their needs are not identical to those of younger students,” said Sandy Baum, a senior fellow at the graduate school of education at George Washington University and an economist for the College Board, the chair of the study group.

They propose a different Pell Grant track named “Pell Grant A” for adult students. Students would apply once, before beginning their programs, and eligibility would be based on income -- with students eligible for a full grant, half a grant or nothing throughout their entire college careers. The size of the full Pell Grant would be set at a level that would allow community college students to pay for tuition, fees, books and supplies. As with the Pell Grant Y, the size of individual awards would be determined based on the number of credits a student is pursuing.

Since many adult students would have to stop working to attend college full-time, the group also calls for the government to require or provide incentives for states to give students access to child-care assistance, Section 8 housing subsidies, food stamps and other welfare programs. And recipients of the Pell Grant A would also be required to get career counseling, which would be provided by the One-Stop Career Centers -- which offer job training referrals, counseling and other employment services -- created by the Workforce Investment Act. The report calls for $900 million in new federal funding for the career centers to ensure high-quality counseling, but the Pell changes themselves are intended to be without what the report describes as "significant cost implications."

The Pell Grant for adult students is aimed more at vocational training than is the grant for traditionally aged college students. The change could be controversial: Many older recipients still choose to pursue bachelor's degrees, and some students would also begin college receiving a Pell Grant for younger students, but turn 25 during their studies and shift into the program for adult students.  And plenty of students younger than 25 pursue the vocational and technical degrees that the adult Pell Grant is meant to help with. But the report’s authors decided to differentiate based on age because it is a more clear-cut distinction than determining which programs are “occupational” and which are not. 

“There is no line that can clearly separate Pell Grant recipients following traditional educational paths from those seeking more specific occupational education,” the report’s authors wrote. “However, age is highly correlated with these different paths.”

New Federal Savings Accounts

The proposal also recycles one idea from the College Board’s Rethinking Student Aid group in 2008: creating government savings accounts for low-income students who are likely to be eligible for Pell Grants long before they enroll in college. The proposal calls for opening accounts for 11- and 12-year-old students whose parents’ financial situation would make them eligible for Pell Grants, and annually depositing 5 to 10 percent of the Pell Grant for which they would be eligible.

Money would be available once the students turn 17, and could be used only for education expenses. The benefit would expire when the student turned 24. Every year, students and their parents would receive a notification of how much money is in the account, as well as an estimate of the Pell Grant, state grants and tax benefits for which they would be eligible if they were already enrolled in college.

The group estimated the annual cost of the savings accounts at about $3.7 billion and argued that it “should be created when new funds become available” -- which, given the budget pressures alluded to throughout the report, could be a long time.