The Pell Grant Pendulum

President Obama’s recent commitment to raise the U.S. graduation rate to the highest in the world has left education policy experts conflicted on how to best increase college access and affordability.

At a panel discussion on the future of student financial aid hosted by the Brown Center on Education Policy at the Brookings Institution, the National Association of Student Financial Aid Administrators (NASFAA) and the Rethinking Student Aid Study Group (RSASG) presented differing proposals on steps the Obama administration can take to reform federal student aid.

The RSASG recommending that the maximum Pell Grant award be increased in conjunction with the Consumer Price Index (CPI) plus one percent, similar to the policy the Obama Administration is planning on implementing with the 2010-2011 school year, according to Obama’s student loan proposal for fiscal year 2010.

NSFAA President and CEO Dr. Philip Day disputed the RSASG’s proposal for Pell Grant increases, arguing that it was not enough to provide low income students with sufficient financial aid. “Consumer Price Index plus one [percent] is not going to get you there,” he said, pointing out that even with that increase the Pell Grant would still only cover 30 percent of the average college tuition.

“For most low income students, there is one bottom line: College costs too much,” Day told the panel. “No one should be denied access to higher education because of lack of resources.”

The NSFAA is calling for a maximum Pell Grant award that would cover 70 percent of the average price of a four-year public college.

But Dr. Sandy Baum, the College Board Senior Policy Analyst and co-chair of the RSASG countered that there is widespread concern of universities raising their prices if Pell Grants are indexed at a set percentage of average college costs. “We certainly don’t want federal student aid to be a driving force [in college tuition increases],” said Baum.

While the experts disagreed on Pell Grant award size, the entire panel—which also included Michael McPherson, Spencer Foundation President and co-chair of the RSASG; Robert Shireman, deputy undersecretary of the U.S. Department of Education; and Celia Simons, legislative assistant to Senator Richard Burr—agreed that the federal college loan system is in need of serious reform.

All of the participants seemed particularly concerned with the structure of the Free Application for Federal Student Aid (FAFSA). Day called the application “exceptionally complex” and “intimidating to families,” suggesting that the procedure be simplified by allowing the neediest applicants to qualify automatically for the maximum grant and allowing parents to “initiate the financial aid application process through the federal tax system.”

Baum and McPherson recommended the government simplify the FAFSA by discarding the financial aspect on the form and instead use IRS data to determine applicant eligibility.

Both the NSFAA and the RSASG also recommended that the government set up savings accounts for low income students while they are still in primary school in order to motivate children to prepare for college at a younger age. The NSFAA suggested that these accounts begin at $500 per student while the RSASG did not specify an exact amount.

In addition, the two groups proposed making the Pell Grant system more transparent so that students could find out how much aid they were eligible to receive before applying to college as well as ending supplemental government aid programs like Science and Mathematic Access to Retain Talent (SMART) grants. SMART grants are offered to students in their third or fourth years of math, science, or technology bachelor’s programs, and both the NSFAA and RSASG propose channeling these funds into the basic Pell grant budget.

Alana Goodman is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.