Worth-Less Grants

Rising Pell grant awards are not keeping pace with rising tuition and a new report shows that they are depriving needy students of educational choice

WASHINGTON -- While the average Pell grant award has more than doubled between 1977 and 1997, the grant's actual worth has declined by approximately 50 percent. And that, said officials from the organizations that produced a recently released report on federal grants and college affordability, is particularly disturbing news for students from low-income families.

In 1977, the average Pell grant award was $759, and that covered 39 percent of the cost of a public four-year institution and 19 percent of the cost of a private four-year institution. Twenty years later, the average grant was $1,577. But that only covered 22 percent of the price of public and 9 percent of private four-year schools.

At the upper end of the spectrum, in 1977, the maximum Pell grant award of $1,400 paid for 72 percent of the cost of a public and 35 percent of a private four-year school. In 1997, the $2,470 maximum paid for 34 percent of public and 13 percent of private four-year institutions.

The average Pell grant award actually declined by 23 percent -- adjusting for inflation -- over two decades, but college prices rose by 49 percent while family incomes crept up by just 10 percent over the same period.

"The fact remains that the prices are still increasing, and the lower-income students and parents bear the brunt of that," said Jamie P. Merisotis, president of The Institute for Higher Education Policy (IHEP). The Washington, D.C.-based organization has produced the report -- Do Grants Matter?: Student Grant Aid and College Affordability -- with The Boston-based Education Resources Institute (TERI), a nonprofit guarantor of privately issued student loans.

The average net price -- the sticker price minus the total grant aid received -- of attending a private four-year college for a student from a family with income below $10,000, for example, rose from $8,178 in 1989-90 to $11,591 in 1996-98 -- an increase of 42 percent.

Although Congress has authorized maximum per-student increases up to $5,800 in 2003-04, it's unlikely that much money will actually be provided, Merisotis said.

Even with the recent Pell grant increases, the maximum award would need to double to more than $6,000 to pay for the same proportion of college prices that they did 20 years ago.

About 3.6 million of the nation's 14 million college students receive Pell grants, and more than half of Pell recipients in four-year schools qualify for the maximum amount of funding.

This problem is compounded by the rise in state grant aid for undergraduates that is distributed on a non-need basis as opposed to a need-basis. In 1995, for example, non-need-based state grants increased by more than 40 percent while need-based state awards increased by less than 10 percent. And making matters even worse, as public funds for higher education have dwindled, states have begun adding merit-eligibility requirements to their need-based grants.

"Virtually all states now have need-based student aid programs in which recipients must demonstrate merit to be eligible for the program or to continue their participation," the report notes.

"It is clear that, by definition, non-need-based forms of grant aid are not as effective at addressing the affordability gap as need-based grants ...," the report continues. "The attachment of merit criteria to need-based grants may be further detracting from this mission. Thus, the comparative growth of non-need-based aid and merit criteria provide cause for future concern."

A large part of that concern deals with access to institutions of choice. According to Thomas D. Parker, senior vice president of TERI, if low income students don't attend community college, they won't be able to afford to go to college at all.

"What we like to think is we have a system where people have both access and choice. But what we're rapidly developing is a system where people have access but not choice," Parker told The New York Times.

Additionally, there has been some grumbling about the higher education lobby's more concentrated efforts to get lower interest rates for federally backed student loans than more money for federal Pell grants. The feeling is that one segment of students was sacrificed so that another segment could benefit.

"[The higher education lobby] decided to put most of their effort behind federal college loans, which have a much bigger constituency -- the middle class," Parker complained. "The result is that many low income people can't even begin to think about going to a four-year college."

But noting that the maximum award for Pell grants increased by $425, or 14 percent, over the past two year, Terry Hartle, a spokesman for the American Council on Education, countered that needy students haven't been abandoned altogether.

"Increasing the Pell grant by $100 costs $350 million, which is a lot even by Washington standards -- especially when it competes directly with Head Start, biomedical research, and job training," he said.

To request a copy of Do Grants Matter?, contact The Education Resources Institute at (800) 255-TERI, extrusion 4762; or use the Web address <www.teri.org>.

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