Reconfiguring the Federal Pell Grant Program:
Effect of Selected Changes on Program Costs and on
Students in Different Income Groups
Summary
Every year Congress, institutions of higher education (IHEs), and relevant
higher education associations debate what changes, if any, should be made to the Pell
Grant program to increase its purchasing power and make college more affordable,
especially for low-income students. The most commonly discussed option -
increasing the maximum appropriated award per student - is also the most
expensive option. It is estimated that a $100 increase in the maximum appropriated
grant award would increase program costs by approximately $400 million. In light
of this, it is unusual for Congress to act to increase the maximum appropriated grant
award.
This report models selected changes in the Pell Grant program's award rules and
the need analysis formula to examine what impact, if any, the changes would have
on program costs as well as on the recipient population. Specifically, the report
examines the effect of the following changes: increasing the maximum appropriated
award; increasing the amount of the minimum award and dropping "the bump;"
eliminating the tuition sensitivity provision; and increasing the income eligibility
threshold for the automatic-zero expected family contribution provision. In addition
to analyzing each of these provisions separately, a final analysis combines some of
the provisions to examine the combined effect of changing groups of award rules
simultaneously.
This report will be updated as warranted by major legislation or other relevant
developments.