College & Workforce Readiness

Pell Boost Mostly To Pay Off 2002-03 Deficit

By Sean Cavanagh — March 05, 2003 5 min read
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The federal Pell Grant program would see an infusion of cash under the Bush administration’s proposed budget for next fiscal year. But the bulk of that new money would be spent balancing the books, rather than raising the top-dollar awards for the poorest students.

President Bush’s spending proposal for fiscal 2004, released last month, calls for a total of $12.7 billion in spending on the awards, the federal government’s largest college financial-aid program for low-income families. That amounts to an increase of roughly $1.4 billion over the fiscal 2003 budget for Pell Grants, part of an omnibus spending bill Congress passed just weeks ago after a long partisan deadlock.

The new proposal for Pell Grants, which under the government’s budget schedule will be distributed in the 2004-05 academic year, seems likely to produce divisions of its own.

The administration’s budget would keep the maximum amount students could receive at $4,000, the same level as in the 2002-03 award cycle. The amount also is slightly lower than the final maximum amount of $4,050 Congress settled on for 2003, money that students would receive for the 2003-04 academic year.

Instead of putting the new money into raising the top grant, administration officials said in their budget document that they would retire the deficit that lingered from that 2002-03 award cycle.

At the time Mr. Bush released his 2004 spending plan, Congress had not yet settled on the 2003 budget, which covers the fiscal year that began last Oct. 1. Several observers said they believe Congress and the administration eventually will raise the fiscal 2004 maximum Pell amount at least to the $4,050 level.

Upon releasing the new budget plan, Secretary of Education Rod Paige said that the Pell Grant proposal would help guarantee access to a college education for nearly 4.9 million disadvantaged students.

And congressional Republicans such as Rep. John A. Boehner, the chairman of the House Education and the Workforce Committee, praised the administration for awarding the Pell program a billion-dollar-plus boost, given looming concerns about the poor economy and the costs of a potential war with Iraq.

“The Bush administration, working with Congress, has made it a priority,” Rep. Boehner said in a statement, “so that millions of students who depend on Pell Grants to help fund their dreams of a higher education can count on them.”

But several college and student-aid advocates said the new budget for the grants wouldn’t help needy families as much as it should. Several college and university lobbyists have recommended doubling the appropriated Pell Grant award to as much as $9,000 a year over the next five or six years. Earlier this year, congressional Democrats had sought to raise the top award to $4,500 in the short term.

Falling Behind

While retiring the shortfall is a fiscally prudent step by the administration, some observers said, it isn’t an acceptable rationale for freezing the top-dollar Pell total.

“To penalize the current generation of students for the sake of the previous generation of students seems, to us, to be very shortsighted,” said Richard L. Harpel, the director of federal relations for the National Association of State Universities and Land Grant Colleges, in Washington. “We definitely have a great deal of concern. It’s going to be a lively debate in the coming budget year.”

College costs across the country are climbing sharply, Mr. Harpel and others noted, even as state budget cuts are forcing both state governments and universities to reduce their own financial-aid programs. Against that backdrop, federal financial assistance like the Pell Grants is more vital than ever, Mr. Harpel said.

Shortfalls in the program have occurred periodically since its inception, and closing those fiscal gaps after the fact is also common. Federal officials are forced to try to gauge the demand for the awards almost 20 months ahead of time. When more students apply for Pell Grants than expected, the department weathers a shortfall rather than, for instance, cutting off funding for new applicants or other eligible students.

Pell Grants are awarded to students through a formula, based on family income, college costs, and other factors, with students from the poorest families, or the greatest need, generally getting the maximum.

When the federal government raises the maximum, that increase also results in a shift in the overall funding formula that allows more students, including those from families with slightly higher incomes, to become eligible.

Over time, the amount of money devoted to Pell Grants has increased steadily, from about $6.1 billion a decade ago to roughly $11.3 billion in fiscal 2003. But demand has surged, too, rising from 7.9 million applicants in 1995-96 to an estimated 10.4 million in 2002-03, with the strongest growth the past two years.

And the grants do not cover nearly the costs that they once did. In 1979, the maximum grant paid 77 percent of the average price of tuition, fees, and other costs at a four-year public institution, according to a 2000 report by the American Council on Education, a higher education policy organization in Washington. Today, the top award covers just 39 percent of that average cost.

Administration officials said their 2004 budget assumed the growth in applications would rise at a slower pace in the years ahead. If that doesn’t occur, the Pell Grant program’s costs could “significantly increase above estimates,” the administration’s budget document warned.

But several college and student advocates cast doubt on the assumption of slower growth. They said the ailing economy and college tuition hikes would keep demand rising at fast rate.

“People are going back to school,” said Chris Simmons, the assistant director of government relations for the American Council of Education.

President Bush’s plan also assumes that the Internal Revenue Service will be able to cut Pell Grant fraud and “overawards"—larger grants to students than their eligibility should allow—during the 2003 and 2004 fiscal years. Those steps could bring $638 million in savings, administration officials contend.

“In the near term, this program is just slated to go through a slugfest in the appropriations process,” said Lawrence E. Gladieux, a higher education consultant in Virginia, who advocates a higher maximum Pell Grant. “We’ve fought hard so far, and basically we’ve got level funding.”

Financial-aid issues, meanwhile, are likely to emerge as a central theme during the reauthorization of the Higher Education Act, a process expected to begin this year.

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