PRESS RELEASE: New DFI Report Proposes Major Overhaul of Pell Grant Program to Pay for Living Expenses, Not Tuition

Says calls for ‘doubling Pell’ won’t fix college access or affordability; nor will it improve college completion rates

WASHINGTON—New policy proposals from the Defense of Freedom Institute for Policy Studies (DFI) aim to fundamentally reform the Pell Grant and other student aid programs to better serve low-income and minority college students. In a new report titled “Redesigning Pell Grants to Reflect New Realities,” DFI lays out a revolutionary plan that includes redesigning Pell to cover basic living costs, instead of tuition, for low-income students enrolled in any higher education or training program, including apprenticeships. The DFI report argues that focusing Pell Grants on living costs would change federal policy signals and incentives by shifting the primary responsibility for providing affordable tuition and aid packages to higher education institutions and states.

“Doubling Pell might sound nice, but, without fundamental reforms to how we pay for college, it will do little or nothing to fix the issues facing low-income or minority students,” notes Art Hauptman, the paper’s author. “We will still have the affordability issues, and we will still have the equity gaps concerning access and completion rates. If history is any guide, colleges and universities will raise tuition to gobble up the new maximum award, effectively eliminating the hoped-for increase in Pell purchasing power.” The report asks: wouldn’t it be better to decouple Pell from tuition so that low-income students could use that money for living expenses and give colleges and universities the incentive to keep the cost of tuition down?

“Doubling the maximum Pell Grant award would come at a significant expense to taxpayers, even though it won’t improve student outcomes,” explains Jim Blew, Co-Founder of DFI. “Because higher maximum Pell awards also increase the pool of eligible students, it would increase the cost of the program from roughly $30 billion to at least $75 billion.”

In addition to decoupling Pell awards from tuition and fees, Hauptman’s paper proposes the following reforms to other financial aid programs and services to better serve students and protect taxpayers:

• Congress should expand federal higher education tax credits to help students and middle-class families who pay federal income taxes.
  
• All institutions of higher education should be required to spend 5 percent of their endowments to maintain their tax-deductible charitable status, just as foundations have been required to do since 1969. It would be ideal if colleges used these additional funds to keep down their tuitions.
  
• States and postsecondary institutions could make college more affordable by tying tuition to the average family’s ability to pay, measured as a share of state GDP per capita. To make this work, states should also commit to providing enough grant aid to cover tuition and fees for students from families with below-average resources.
  
• Congress should redesign the Supplemental Educational Opportunity Grant (SEOG) so that funds are distributed based on the number of Pell Grant recipients enrolled in a college or university and the number who graduated in the previous year. This would have a far more positive effect on completion rates than the College Completion Fund.
  
• Congress should streamline the student aid application process by allowing parents and financially independent students to apply for aid simply by submitting their most recent tax return form, thereby replacing the FAFSA. Students from families that do not pay income taxes or are eligible to receive support from public assistance programs should automatically qualify for full Pell Grant awards.
  
• Congress should also create a new federal program that matches what states and community groups spend on early intervention efforts instead of funding programs like TRIO or GEARUP.

The proposals taken together would cost a small fraction of what it would cost to double the Pell Grant maximum award. And, unlike doubling Pell awards, they would help solve the college access, affordability, and completion problems. The report also suggests a series of changes in student loan policies that would produce savings that fully cover the additional costs of the proposals suggested in the report.  

To learn more about DFI’s proposed reforms to Pell and to read the full report, click here.  

The report was written by DFI contributor Arthur M. Hauptman, an independent higher education consultant who has written extensively on higher education finance reform.